The 75% Canada Emergency Wage Subsidy (CEWS)
**UPDATED AS OF JULY 5**
The updates include the following:
Extended until November 21, 2020. Eligible employers who had any drop in revenue can now qualify for the wage subsidy, starting with claim periods that began July 5.
A wider range of employers can now qualify including:
- Sole proprietorships and taxable corporations
- Certain Indigenous government-owned corporations
- Non-profit organizations
- Partnerships consisting of 50% or more eligible employers
- Registered charities
Accessible Base Subsidy:
All eligible employers who’ve experienced a revenue drop can now qualify for a base subsidy. Your subsidy amount is based on your revenue drop.
Employers who are especially hard-hit can qualify for a top-up of up to 25%.
You can calculate your revenue drop in different ways, and choose the way that works best for your situation.
To provide certainty as you make business decisions, you can calculate your base subsidy using your revenue drop in the current period or the previous period – whichever is greater. Also, if your revenue drop is 30% or more in Periods 5 and 6 (July – August) you are entitled to a CEWS rate of at least 75% – what you’d get under the previous CEWS rules – or potentially even more if you qualify for a higher rate under the new rules.
As a Canadian employer whose business has been affected by COVID-19, you may be eligible for a subsidy of 75% of employee wages for up to 24 weeks, retroactive from March 15, 2020, to August 29, 2020. This wage subsidy will enable you to re-hire workers previously laid off as a result of COVID-19, help prevent further job losses, and better position you to resume normal operations following the crisis.
What’s the CEWS?
The CEWS will provide a subsidy to “enable employers to re-hire workers previously laid off, and to keep those who are already on the payroll.” The benefit is equal to 75% of “eligible remuneration” paid by “eligible employers” for up to three months, retroactive to March 15, 2020.
What is an eligible employer?
Eligible employers include individuals, taxable corporations, partnerships whose partners are eligible employers, non‑profit organizations, and registered charities. Employers would have to attest that their monthly revenues have dropped by at least 15% in the month of March 2o20, and a revenue decrease of at least 30% in the months of April or May 2020, compared to the same month(s) in 2019, or the average of January and February of 2020. If a business qualifies for the month of March (15% decrease) then they will automatically qualify for the month of April, regardless of their revenue decrease. They will, however, have to demonstrate a decrease of 30% or more to qualify for the month of May.
Please note that public bodies, such as municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals, don’t qualify.
How do you measure a revenue decrease?
To qualify for one of the three eligible periods, revenues must have decreased by 15% or more in March and 30% or more during the months of April and May. If you qualify/claim the CEWS for the month of March (having at least a 15% decline in revenues) you will automatically qualify for the subsidy in April, regardless if you have a decrease of 30% or more in revenues. You will, however, have to have at least a 30% decline in revenues for the month of May to qualify for that period.
The first eligible period is for remuneration paid from March 15 to April 11 and the relative reference period is revenues from March 2020 over March 2019 or the average revenues from January and February 2020. The second period is for remuneration paid from April 12 to May 9, with a measurement period for revenue of April 2020 over April 2019 or the average revenues from January and February 2020. The final period for remuneration runs from May 10 through June 6, with the third revenue measurement period being May 2020 over May 2019 or the average revenues from January and February 2020. It is important to note that the comparison method you choose to use for the first period in which you apply must be followed for all subsequent periods, so you must decide if you are going to use the month to month comparison or the month to an average of Jan/Feb 2020 comparison to calcite your revenue loss.
The revenue used to determine if there has been a decrease of 30% or more (15% or more in the month of March) includes amounts from business carried on in Canada that are earned from arm’s-length sources; extraordinary items and revenue arising from the sale of capital assets are excluded. Revenue would be calculated using the employer’s normal accounting method.
For non-profits and charities, the government said it would continue to consult with the sector to ensure the definition of revenue is appropriate to their specific circumstances.
What is eligible remuneration?
Eligible remuneration includes salary, wages, and other remuneration but does not include items such as severance pay, employee stock option benefits or the personal use of an employer’s vehicle.
How much is the subsidy worth?
The subsidy is generally equal to 75% of the amount of eligible remuneration actually paid, up to a maximum benefit of $847 per week; however, employers may be entitled to a subsidy of up to 75% of pre-crisis wages of existing employees (if, for example, wages or hours have been reduced), up to the actual amount paid, with the same maximum of $847 per week for each employee. Employers may also claim the CEWS for eligible remuneration paid to new employees. Employers can retroactively pay their employees back to March 15 and claim the subsidy, but if the employee claimed and received EI or CERB benefits during the time they will be retroactively paid for, they will be required to pay the government back the money from the benefit they received.
Is the benefit taxable?
The CEWS is considered government assistance and will be included in the employer’s income and taxed in the year it’s received.
How do you apply?
Eligible employers will be able to apply for the CEWS through the CRA’s My Business Account portal, the Represent a Client Portal, as well as a web-based application. Employers must keep records demonstrating their reduction in revenues and remuneration paid to employees.
The government warned employers that if they don’t meet the eligibility requirements of the CEWS or fail to pay their employees accordingly, the employer would be required to repay amounts received under the CEWS. In addition, penalties may apply in cases of fraudulent claims and anti-abuse rules will be introduced to ensure that the CEWS is not inappropriately obtained. The penalties would apply to individuals, employers or business administrators who provide “false or misleading information to obtain access to this benefit or who misuse any funds obtained under the program.” The penalties could include fines or possible imprisonment.
Interaction with the Canadian Emergency Response Benefit
An employer would not be eligible to claim the Canada Emergency Wage Subsidy for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.
Employers who are not eligible for the Canada Emergency Wage Subsidy would still be able to furlough employees who will receive up to $2,000 a month.
The usual treatment of tax credits and other benefits provided by the government would apply. As a consequence, the wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income.
Assistance received under either wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
10% Wage Subsidy
What about the Temporary Wage Subsidy (10%)?
This program remains unchanged. Under the TWS, an “eligible employer” can claim an amount equal to 10% of the remuneration paid between March 18, 2020 and June 19, 2020. If no remuneration was paid to employees during this period, then no subsidy is available. The maximum amount of the subsidy is $1,375 per employee and $25,000 per employer. There is no required drop in revenues needed to qualify for the TWS.
Eligible employers that qualify for the TWS include individuals (sole-proprietors), certain partnerships, non-profit organizations, charities and certain Canadian-controlled private corporations (CCPCs). A CCPC is essentially a private corporation whose shares are not listed on a stock exchange, and that is owned and controlled by Canadian residents. Large CCPCs that have taxable capital of more than $15 million among their associated corporations in the previous year won’t qualify for the TWS.
Employers are only eligible if they had a payroll program account with the CRA on March 18, 2020.
The TWS is calculated manually and the employer can choose to reduce its payroll income tax remittances to the CRA by the amount of the TWS. Although the TWS is based on remuneration paid to employees between March 18 and June 19, there is no deadline for claiming the TWS (through reduced income-tax remittances.) In other words, if the amount of the TWS exceeds the income tax that the employer would normally have to remit up to June 19, 2020, the employer can continue to reduce subsequent income tax remittances to claim remaining TWS after this date.
Just like the CEWS, the TWS is taxable and will be included in the employer’s income and taxed in the year it is received.
Can you claim both the 75% CEWS and 10% TWS?
Sort of. Some employers will be eligible for both the 75% CEWS and the 10% TWS. The government has stated that any benefit from the TWS paid in a specific period will reduce the amount available to be claimed under the 75% CEWS for that same period.