COVID-19 – Canadian Tax and Business News, release #13
Our COVID-19 Canadian Tax and Business News updates are our way of informing our clients, friends and business associates with recent information that may help businesses and individuals while coping with the outcomes from the COVID-19 pandemic.
Our goal is to monitor the news and release relevant information as it becomes available.
“The best way out is always through.”
– Robert Frost
The summary below is based on our understanding and interpretation of the announcements made by the government. The information below is in summary form and subject to change until the proposals are passed as legislation. Contact one of our professionals to discuss these matters in the context of your situation before acting upon such information.
Canada Emergency Wage Subsidy
On May 15, 2020, Finance Minister Bill Morneau announced the government will be extending the Canada Emergency Wage Subsidy (CEWS) program by an additional 12 weeks to August 29, 2020, in an effort to provide continued support to workers during these difficult times.
Regulatory changes were also made to extend eligibility to the following groups:
- Partnerships that are up to 50% owned by non-eligible members;
- Indigenous government-owned corporations that are carrying on a business, as well as partnerships where the partners are Indigenous governments and eligible employers;
- Registered Canadian Amateur Athletic Associations;
- Registered Journalism Organizations; and
- Non-public colleges and schools, including institutions that offer specialized services, such as arts schools, driving schools, language schools or flight schools.
The government intends on proposing amendments to the legislation to ensure CEWS continues to meet its objectives. The proposed amendments include:
- Allowing employers to calculate the baseline remuneration for its employees using an alternative approach. The general approach requires the baseline to be calculated as the average weekly remuneration from January 1, 2020, to March 15, 2020. The alternative approach would allow employers to calculate the baseline as the average weekly remuneration from March 1, 2019, to May 31, 2019. Employers would be able to choose which period to use on an employee-by-employee basis which includes employees not dealing at arm’s length with the employer. No details have been provided if employers must elect to use this approach or if it can be automatically applied. This proposed change will be retroactive to the first qualifying period beginning on March 15, 2020. Employers who have already filed for the first two qualifying periods and would like to use the alternative approach would likely have to amend their CEWS applications. The Canada Revenue Agency will be launching an amendment portal in early June 2020.
- Allowing corporations formed on amalgamation to calculate the benchmark revenue for purposes of the revenue decline test using their combined pre-amalgamation revenues. This proposed change will also be retroactive to the first qualifying period.
- Better aligning the tax treatment of trusts so that trusts with employees could continue to be eligible for CEWS. This proposed change will apply to the third qualifying period from May 10, 2020, to June 6, 2020, and any subsequent qualifying periods.
The items proposed above would require legislative amendments to be enacted.
Although not proposed at this time, the government announced it will review the 30% revenue decline threshold over the next month for potential adjustments to allow the program to be made available to more employers. We will provide additional details once they become available.
Regional Relief and Recovery Fund
On April 17, 2020, Prime Minister Trudeau announced $675 billion will be delivered to Canada’s six regional development agencies to provide financial support to small and medium-sized enterprises (SMEs) that cannot access other COVID-19 relief measures.
The program aims to provide interest-free loans to businesses that didn’t qualify for any of the other programs offered by the government such as the Canada Emergency Wage Subsidy, Canada Emergency Business Account, the Business Credit Availability Program through BDC or EDC and the Canada Emergency Commercial Rent Assistance program.
The funding support is to help with fixed operating costs such as capital leases, rent, salary, property taxes, utilities, etc. Priority in this program will be given to the manufacturing, technology and tourism sectors.
FedDev Ontario will administer the program for Southern Ontario and has $213 million available for SMEs facing financial pressure and $39.4 million for rural businesses.
There are two funding options available:
- Option 1 – $40,000 with $10,000 of this amount forgivable if $30,000 is repaid by December 31, 2022.
- Option 2 – $50,000 to $500,000 with no forgivable portion. The amount businesses are eligible for will depend on their 2019 revenue.
For both options, no repayments are required until December 31, 2022. On January 1, 2023, a fixed repayment schedule will come into effect.
Application details are available on the FedDev Ontario website. Eligible employers are encouraged to apply as soon as possible as the program is expected to be quite popular.