Update to the CKL – the Canada Emergency Wage Subsidy, per Bill C-14, the COVID-19 Emergency Response Act, No. 2, passed April 11, 2020:
NEW SOURCE DEDUCTION/REMITTANCE REFUND:
- a new 100% refund for certain employer-paid contributions to Employment Insurance and the Canada Pension Plan, covering 100% of employer-paid contributions for eligible employees for each week in which the eligible employer receives the 75% CEWS - employers are required to continue to collect and remit employer and employee contributions to each program, as usual; and
- employers may apply for the new refund at the same time that they apply for the 75% CEWS.
NOT-FOR-PROFITS AND CHARITIES:
- not-for-profits may include membership fees; and
- not-for-profits and charities may include or exclude (by election) revenue from government funding – whatever decision is made will continue to apply for the entire 75% CEWS period.
CALCULATION OF “ELIGIBLE REMUNERATION” AND THE SUBSIDY:
- subsidy is 75% of the amount of “eligible remuneration” paid to an employee;
- a maximum benefit of $847 per week per employee;
- applies to individual employee salaries up to $58,700 annually;
- no cap on the total subsidy an employer may claim;
- subsidy is taxable to the employer at year end (as “government assistance”);
- “eligible remuneration” includes salary, wages and other remuneration, like taxable benefits paid to an eligible employee, but does not include severance pay or stock options benefits, etc.; and
- no guidance on whether commissions, bonuses and pay incentive plans may be included.
- system expected to be operational in May, 2020;
- employers now able to apply for the CEWS through the Canada Revenue Agency's My Business Account portal here: https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/business-account.html;
- reportedly the funding will flow within two to five weeks;
- more details about the application process are forthcoming;
- what you select for your comparative calculation will apply for the full CEWS period (i.e., current month or the same month in 2019 OR the average in Jan. and Feb. 2020);
- if you apply and are later held to be ineligible for the 75% CEWS, you will be required to repay the subsidy, plus an additional 25% penalty - penalties for fraudulent claims are severe and may also include additional fines and possible imprisonment; and
- Note: to calculate your revenues for the 75% CEWS, you may use either the ‘cash accounting’ method (i.e., when payments are actually received by you) or the “accrual accounting” method (i.e., when you issue an invoice), which may offer more flexibility for your qualification application – whatever you elect, you must continue with that approach for the duration of the program.
- APPLICATION FOR THE 75% CEWS:
- entitlement to the subsidy will be based entirely on the salary or wages actually paid to employees - employers will need to pay the salary or wages to their employees, and, if eligible, will be repaid for those salaries or wages by the government through this subsidy program;
- eligible employers will be able to access the subsidy by applying through the Canada Revenue Agency (CRA) My Business Account portal as well as a web-based application expected to be available in the next three to six weeks;
- employers will need to keep records demonstrating their reduction in arm's-length revenues and remuneration paid to employees;
- the government has indicated that funds will be available in approximately three to six weeks - for those employers not currently signed up for direct deposit, it will be beneficial to sign up for quicker access to funds through this program;
- all employers will be expected to make best efforts to top up salaries to pre-crisis levels;
- the government will consider implementing an approach to limit duplication between the two programs (CEWS and the CERB) in order to encourage all eligible employers to quickly rehire employees - according to the government, this could include a process to allow individuals rehired by their employer during the same eligibility period to cancel their CERB claim and repay the CERB payment for the relevant period;
- if you have claimed the 10% Temporary Wage Subsidy before claiming the 75% CEWS, you will be required to reduce the latter claim by the amount previously received; and
- municipalities do not qualify.
THE 10% TEMPORARY WAGE SUBSIDY:
The 10% Temporary Wage Subsidy remains (“TWS”) available to employers:
- employers who do not qualify for the CEWS may still qualify for the TWS;
- no revenue threshold;
- maximum cap available to businesses; and
- application for the subsidy is not required (unlike the 75% CEWS).
- the subsidy is equal to 10% of remuneration paid during the eligible period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer in total (i.e., all employees, full period of eligibility);
- the eligible period is March 18, 2020 to June 19, 2020, inclusive;
- eligible employers may reduce the amount of payroll deductions required to be remitted to the CRA;
- can be accessed as soon as April 15, for quarterly and regular (monthly) payroll remitters;
- eligible businesses must have had an existing business number and payroll account with the CRA on March 18, 2020 – a new corporation cannot be established, nor can an existing corporation apply for a payroll account after March 18, 2020 to take advantage of this subsidy;
- example: the March subsidy can be calculated for your payroll remittances due on April 15 or, alternatively, you can defer your claim to a lump sum amount later on or year end for the specific eligibility period only – if so, the Canadian Revenue Agency will pay that amount to you or, alternatively, transfer it to you as a source deduction/remittance credit; and
- municipalities do not qualify.
More information about the CEWS is here: https://www.canada.ca/en/department-finance/economic-response-plan/wage-subsidy.html