March 26, 2020
Canada Emergency Response Benefit Act – Summary
This benefit was passed into law on March 25, 2020 and there is limited regulations or guidance available.
Please consult you professional advisor before taking action based upon the information below.
- Will provide a benefit of $2,000 for every 4 week period.
- An individual can receive this benefit a maximum of 4 times.
- The benefit will be paid for periods beginning Sunday, March 15, 2020, and ends Saturday, October 3, 2020.
- The benefit is based upon rolling week-by-week periods, beginning Sunday – it appears the individual can choose the beginning period.
- The benefit is an all-or-nothing benefit, an individual either qualifies for an entire 4 week period or does not qualify at all.
- The individual must meet the following requirements at the time of the application
- At least 15 years of age
- Is a resident of Canada
- Earned at least $5,000 from employment, self-employment, maternity or paternity EI benefits or similar provincial benefits:
- This income was earned in the calendar year 2019, or in the 12 months preceding the application
- The individual ceases working for reasons related to COVID-19 for at least 14 consecutive days within the four-week period and the individual cannot receive, in respect of the 14 days, income from employment, self-employment, or EI
- People who quit voluntarily are not eligible
- It is unclear if income means gross revenue before expenses, or net income after expenses.
- An individual who was a self-employed person and needed to shut down their business on March 27, 2020, would be eligible for the benefit for the period from March 15 to April 11, because the individual has at least 14 consecutive days during the period (March 28 – April 11) during which they had ceased working. They would continue to be eligible for the benefit every four-week period as long as their business remained shut down.
Salary from controlled corporation
- An individual owns 100% of the shares of a corporation which operates a business in Canada.
- The business was forced to close down on March 20, 2020.
- The individual’s only source of income historically was from dividends paid to the individual from the company.
- The individual paid themselves a wage of $5,000 on March 20, 2020. Generally the payroll withholdings in respect of this wage would be due April 15.
- As the individual has ceased working as of March 21, 2020, and has not received any income in respect of their work after March 21, 2020, they would have 14 consecutive days during which they had ceased working prior to April 11, 2020.
- The individual should be eligible for the $2,000 income support for the period March 15 – April 11, 2020
- If a business owner that historically remunerates themselves through dividends or capital gains is required to close their business due to COVID-19, they must pay themselves a salary of at least $5,000 before they are eligible to claim this benefit.
- To claim the credit an individual first chooses a consecutive four-week period beginning on Sunday, and then the individual must be able to identify 14 consecutive days within the 4 week period that they have ceased working (and have not received income with respect to this period). It is irrelevant weather or not the individual is working the other days within the 4 week period.
- Individuals can claim this benefit even if they are eligible to receive EI, however they cannot benefit from this benefit if they have received an EI benefit with respect to the 14 days that they have ceased working.
- Based upon statements from the government, it appears that individuals that have applied for EI but have not received EI due to delays in the system are eligible.
Temporary Wage Subsidy for Employers (Revised)
Bill C-13 was passed into law on March 25, 2020, which provides legislation with respect to the Temporary Wage Subsidy for Employers. The legislation further clarifies our post of March 23, 2020, with respect to the Temporary Wage Subsidy by providing the following:
The subsidy is equal to 10% of the remuneration paid to an eligible employee during the eligible period, up to $1,375 per employee and to a maximum of $25,000 total per eligible employer.
Please note that the legislation passed into law has expanded the definition of eligible employer.
Eligible employee means an individual who is employed in Canada
Eligible period means the period beginning on March 18, 2020, and that ends on June 19, 2020
Eligible employer means a person or partnership that:
- Employs one or more eligible employees
- has, on March 18, 2020 a payroll account established with CRA
- is any of
- a Canadian-controlled private corporation that has more than $0 of small business limit (ignoring the passive income grind) in its last taxation (taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, must be less than 15 million dollars)
- an individual
- a partnership, all of the members of which are described in i, ii, iii or v
- non-profit organization
- registered charity
- The recent legislation has added individuals and partnerships to the list of eligible employers
- Joint ventures may have some uncertainty with respect to claiming the wage subsidy as they do not appear to be an eligible employer
- The $25,000 limit is on a corporation by corporation basis (not an associated group basis)
March 23, 2020
Temporary Wage Subsidy for Employers (Revised on March 25, 2020, click here for revisions)
The Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).
- The subsidy is only eligible for non-profits, registered charities, and Canadian Controlled Private Corporations (“CCPCs”). Partnerships, self-employed persons, joint ventures, and trusts do not seem to qualify.
- In order for CCPCs to qualify, their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, must be less than 15 million dollars.
- A corporation is only qualified if it has an existing business number and payroll program account with CRA on March 18, 2020.
- The subsidy is on the basis of wages paid during the period March 18, 2020 – June 20, 2020. It appears to be irrelevant whether the employee worked on those date.
Example: If a business closed its doors to the public on March 17, 2020, and had its final pay cheque to its employees on March 20, 2020, the wages paid on March 20, 2020, would qualify even though no portion of the wages were earned after March 18, 2020.
For more information, please visit: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html