CANADA EMERGENCY WAGE SUBSIDY (“CEWS”) – 75% WAGE SUBSIDY UP TO $847/WEEK
CRA application portal ready in 1-3 WEEKS [Sources say it may be ready April 27, 2020]
The legislation received royal assent late last Saturday night (April 11th).
It is a wage subsidy of up to $847 per employee per week if the business meets revenue decline and other eligibility tests.
The maximum per eligible employee is $10,164. See DMCL’s blog here.
Please contact us if you have questions calculating the pre- and post-crisis remuneration for each employee (e.g. they are on and off the payroll or not working but still being paid) or calculating pre- or post-crisis revenue for the decline test (e.g. whether to elect on a cash rather than accrual basis or whether to elect to file (i) on a consolidated basis or (ii) to pick up non-arm’s length revenue. There are special rules for measuring a non-arm’s length employee’s and pre- and post-crisis remuneration.
CANADA EMERGENCY RESPONSE BENEFIT (“CERB”) – $500/week – MORE WORKERS TO NOW QUALIFY (announced April 16 2020)
CERB is an income support payment for a “worker” of $500/week for any four-week period falling within the period beginning on March 15, 2020 and ending on October 3, 2020. Applications must be made before Dec 03, 2020.
The CERB is available to workers who meet all of the following conditions:
- live in Canada and are at least 15 years old
- stopped working because of COVID-19 or are eligible for EI regular or sickness benefits (However, see below for announced changes)
- have not voluntarily quit their job
- had income of at least $5,000 in 2019 or in the 12 months prior to the date of their application.
On Thursday, April 16th, to help more Canadians benefit from the CERB, the government announced the following changes to: NEW!
- Allow people to earn up to $1,000 per 4 week period while collecting the CERB.
- Extend the CERB to seasonal workers who have exhausted their EI regular benefits and are unable to undertake their regular seasonal work as a result of the COVID-19 outbreak.
- Extend the CERB to workers who have recently exhausted their EI regular benefits and are unable to find a job or return to work because of COVID-19.
- Allow artists to receive royalty payments for copyrighted works produced before March 1st while collecting the CERB;
These changes will be retroactive to March 15, 2020 . More details will be posted on the CRA portal shortly.
These expanded rules are in response to critics who pointed out the initial rules excluded too many people, including those working reduced hours. Previously, to qualify for CERB, an individual must have lost all income for 14 consecutive days in the 1st month and no income in subsequent months to continue qualifying. Therefore, those who make less than $1,000 a month due to reduced work hours should now qualify. As examples, Prime Minister Trudeau pointed to volunteer firefighters, contractors who can pick up some shifts, or people working part-time in grocery stores.
Prime Minister Trudeau also announced a wage boost for essential workers who make less than $2,500 a month, including those working in long-term care facilities for the elderly.
For more details and updates, click here.
CANADA EMERGENCY COMMERCIAL RENT ASSISTANCE – NEW! (announced April 16 2020)
Not available yet – On April 16, 2020, Prime Minister Trudeau announced a commercial rent support to assist small and medium sized businesses.
Finance Minister Bill Morneau later said the government would be offering loans, including forgivable loans, to commercial landlords who offer rent reductions to businesses.
No details were provided. Ottawa said it would have to collaborate with the provinces to set it up. It would be available for April, May and June rents. Stay tuned.
CANADA EMERGENCY BUSINESS ACCOUNT (“CEBA”) – $40,000 NO INTEREST BUSINESS LOAN: UPDATED (announced April 16 2020)
Now available – Last Thursday (April 9th), the CEBA support for small businesses was rolled out for a $40,000 no interest loan to December 31, 2022. A business can only apply for this program once through their primary financial institution.
$10,000 of the loan is forgiven if $30,000 is fully repaid on or before December 31, 2022. If the loan is not repaid by December 31, 2022, it will be extended for an additional 3 year term bearing an interest rate of 5% per annum. The loan can be repaid at any time without penalty and no principal payments are required until December 31, 2025 when the full amount of the loan is due. Monthly interest must be paid during the additional 3 year term.
The Borrower is (generally) required to attest that: (redacted from the loan agreement from one of the big banks)
- Minimum 2019 T4 payroll is $20,000 (April 16th announced change from $50,000). The maximum 2019 T4 payroll is $1,500,000 (was $1,000,000). NEW!
- The Borrower is a Canadian operating business in operation as of March 1, 2020.
- The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.
- The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as at March 1, 2020.
- The Borrower acknowledges its intention to continue to operate its business or to resume operations.
Watch: some things to watch for – these were contained in the bank’s loan agreement.
Cost & Expenses. You will pay the Bank all of the Bank’s reasonable costs and expenses (including the fees and charges of internal and external legal counsel, on a solicitor client basis and notarial fees), relating to enforcing the Loan and such costs and expenses shall constitute a debt payable by you to the Bank.
In addition to all of your other obligations in this Agreement you will: (i) pay all amounts outstanding to the Bank when due or demanded, (ii) maintain your existence as a corporation, partnership or sole proprietorship, as the case may be, (iii) pay all taxes, and (iv) continue to carry on the business now being carried on by you. Negative Covenants. You will not: (i) merge or amalgamate with any other entity or permit any change of ownership or change your capital structure, or (ii) sell, lease, assign, or otherwise dispose of all or substantially all of your assets.
Please speak to your DMCL advisor about your circumstances and to understand the tax impact on you or your organization.