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Important Information Related to COVID-19
Covid-19

Enhanced Access to the Canada Emergency Response Benefit

The government established the Canada Emergency Response Benefit (CERB) to support workers impacted by the COVID-19 pandemic. This taxable benefit provides $2,000 every four weeks for up to four months to workers who lose their income as a result of the COVID-19 pandemic.

The CERB covers Canadians who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19, as well as working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures. The CERB also applies to wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI) and are unable to work due to COVID-19.

CERB applies to workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19. This will help businesses keep their employees as they navigate these difficult times, while ensuring they preserve the ability to quickly resume operations as soon as it becomes possible.

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
  • 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.

The government has announced changes to the eligibility rules to:

  • Allow people to earn up to $1,000 per month 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.

These changes will be retroactive to March 15, 2020.

Owners Compensated by Dividends

The original CERB announced provided relief to individuals earning employment or self-employment income.  Many small business owners are compensated through the payment of dividends instead of salaries.  Non-eligible dividends received by a business owner will now qualify for the $5,000 threshold of employment and self-employment income. Other income that would be included in the definition of employment and self-employment income would include tips that have been declared as income, honoraria,  and royalties (such as those paid to artists). 

Expansion of the Canada Emergency Business Account

The federal government recently launched the Canada Emergency Business Account (CEBA). Interest free-loans of up to $40,000 are offered through banks and credit unions. For businesses that repay the full amount of the loan by the end of 2022, one-quarter of each loan will be forgiven – meaning it can become a grant of up to $10,000.

Prime Minister Justin Trudeau announced today that the CEBA will now be available to companies that had payroll between $20,000 and $1.5-million in 2019. Under the initial criteria unveiled last week, the loans were offered to companies that had payroll between $50,000 and $1-million last year.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Our Role and Responsibility Navigating through COVID-19

At Hilborn LLP our client’s needs remain paramount to our business. With the COVID-19 virus now deemed a pandemic by the World Health Organization (WHO), we understand the need for our firm to provide continuous and uninterrupted accounting services, and want to take this opportunity to update you on the proactive steps we are taking to be prepared for the evolving situation with COVID-19.

Our staff will not be attending clients’ premises to conduct field work. All documentation should be provided to the manager working on your engagement electronically. The same also applies to tax related documents which should be issued to our firm in electronic format. If you have a preferred secure email delivery method, please communicate this with the manager working on your engagement. Each of our team members is technology enabled to work remotely, and are able to collaborate effectively with other team members through our cloud software.

Out of an abundance of caution and to ensure the safety of all our employees, clients and visitors in our office, all client meetings will be conducted by telephone, skype or video conference. Client meetings will not be conducted at our premises or off-site for the time being.

Should the outbreak result in our office closure, we have contingency plans in place that enable us to provide you with uninterrupted service. Our plan includes enhancements to our remote work capabilities and technology to ensure our systems and data are available and secure. By modifying our operations and working remotely, our staff will continue to be responsive to your accounting and business needs.

We will continue to keep you informed of any changes we may implement as the situation progresses, with information provided via our website and e-mail updates.

We hope you understand our position as the safety of our staff and clients is extremely important to us. If you have any questions or comments, please contact the partner responsible for your engagement and we would be pleased to discuss this matter with you.

We wish everyone well as we collectively navigate this global health challenge.

The Partners of Hilborn LLP

COVID-19 - Firm Update

Due to the recent developments with COVID-19 within Ontario, and out of an abundance of caution to ensure the safety of all our employees, clients and visitors in our office, our office will be closed effective March 17, 2020.

Our staff will be working remotely during this time and will continue to provide you with efficient and effective assistance.

If you have any questions or comments, please contact the partner responsible for your engagement and we would be pleased to discuss this matter with you.

We wish everyone well as we collectively navigate this global health challenge.

The Partners of Hilborn LLP

To Our Personal Tax Clients

Due to the recent developments with COVID-19 within Ontario, and out of an abundance of caution to ensure the safety of all our employees, clients and visitors in our office, our office will be closed effective March 17, 2020.

Our staff will be working remotely during this time and will continue to provide you with efficient and effective assistance.

We ask that you please submit all tax related materials to our firm electronically to the attention of the partner responsible for your file or alternatively to our general mail box: reception@hilbornca.com. We would be happy to connect with your broker directly by way of email once you provide your approval for sending all tax related material to us directly.

If you have any questions or comments, please contact the partner responsible for your file and we would be pleased to discuss this matter with you.

We wish everyone well as we collectively navigate this global health challenge.

The Partners of Hilborn LLP

Personal Tax Deadline Update

Today the government released a COVID-19 Economic Response Plan.  In particular, the due date of 2019 personal tax returns, and related tax payments has been extended.

Flexibility for Taxpayers

In order to provide greater flexibility to Canadians who may be experiencing hardships during the COVID-19 outbreak, the Canada Revenue Agency will defer the filing due date for the 2019 tax returns of individuals, including certain trusts.

  • For individuals (other than trusts), the return filing due date will be deferred until June 1, 2020.
  • For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.

The Canada Revenue Agency will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

The entire announcement can be found at:

https://www.canada.ca/en/department-finance/economic-response-plan.html#individual

Delivery of your tax information to us:

For those clients that would like to send their information electronically, we have a secure facility to send information.  Please contact reception@Hilbornca.com and a member of the team will reach out to you to provide detailed instructions.

We wish everyone well as we collectively navigate this global health challenge.

The Partners of Hilborn LLP

Corporate Tax Update

Government Support for Businesses

On March 18, 2020, the Prime Minister announced a new set of economic measures to help stabilize the economy during this challenging period. These measures, delivered as part of the Government of Canada’s COVID-19 Economic Response Plan, will provide up to $27 billion in direct support to Canadian workers and businesses. The following items would be of particular interest to our clients:

Flexibility for Businesses Filing Taxes

The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020.  This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

The Canada Revenue Agency will not contact any small or medium (SME) businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.

Until further clarity is provided, there remains the requirement to continue to make GST/HST payments and filings.

Helping Businesses Keep their Workers

To support businesses that are facing revenue losses and to help prevent lay-offs, the government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.

The entire announcement can be found at:

https://www.canada.ca/en/department-finance/news/2020/03/canadas-covid-19-economic-response-plan-support-for-canadians-and-businesses.html#Extension_of_Deadline

As additional details are released, we will continue to keep you informed.

Tax Update: Temporary Wage Subsidy for Employers

Details of The Temporary Wage Subsidy for Employers

CRA has released a frequently asked questions page to provide more details on the Wage Subsidy that was announced last week. The details of who, when, how and most importantly, how much were provided.

Particular employers may claim this subsidy by keeping a portion of the income tax that has been withheld from employees.

Who is Eligible for the Wage Subsidy

You are an eligible employer if you:

  • are a non-profit organization, registered charity, or a Canadian-controlled private corporation (CCPC);
  • have an existing business number and payroll program account with the CRA on March 18, 2020;
  • and pay salary, wages, bonuses, or other remuneration to an employee.

CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.

Partnerships or individuals that are registered as employers are not be eligible for this subsidy.

When Does This Subsidy Begin

The subsidy begins for all remuneration and employer pays between March 18, 2020 and June 20, 2020.  All payroll paid during this period is eligible for the subsidy.

How Does the Employer Claim the Subsidy

You can start reducing remittance of federal, provincial, or territorial income tax, withheld from your employees in the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020.

For example, if you are a regular remitter, you can reduce your remittance that is due to the CRA on April 15, 2020.  You can continue with this subsidy until you have reached the maximum subsidy described below.

How Much is the Subsidy

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.

Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000

If you would like assistance with either the calculation of the subsidy or the manner in which to claim the subsidy, please do not hesitate to contact us.

The complete document may be found at the following address:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

The Partners of Hilborn LLP

Extension for Filing and Payment Deadline

Extensions for Filing and Payment Deadlines

Further information has been released by CRA in connection with the extension of filing deadlines and the payment of taxes. A summary of the extensions provided to date is as follows: 

Individuals:

The deadline to file your individual income tax and benefit return will be deferred until June 1, 2020.  The deadline to pay any balance due for your individual income tax and benefit return for 2019 has been extended from April 30, 2020, to September 1, 2020. This means you will not be assessed any penalties or interest if your balance due is paid by September 1, 2020.

Self-employed and their spouse or common law partner: 

The deadline to file your individual income tax and benefit return remains June 15, 2020.  The deadline to pay any balance due for your individual income tax and benefit return for 2019 has been extended from April 30, 2020, to September 1, 2020. This means you will not be assessed any penalties or interest if your balance due is paid by September 1, 2020.

Businesses:

The deadline for businesses to pay any income tax amounts that become owing or due after March 18, 2020 and before September 1, 2020 has been extended to September 1, 2020. This means you will not be assessed any penalties or interest if your balance due is paid by September 1, 2020. Any payments for corporate income tax  or corporate income tax instalments that become due during this period may be paid on September 1, 2020.

Trusts:  

For trusts with a taxation year end of December 31, 2019, the filing due date of March 31, 2020, will be deferred to May 1, 2020.   Furthermore, all trusts that have an upcoming income tax balance due date or an income tax instalment payment due date before September 1, 2020, will have their payment due date effectively extended to September 1, 2020.  Penalty and interest implications for upcoming trust tax obligations not covered by the relief described above will be considered by the CRA on a case-by-case basis.

Charities:

The Charities Directorate is extending the filing deadline to December 31, 2020, for all charities with a Form T3010,

Registered Charity Information Return due between March 18, 2020 and December 31, 2020.

We are waiting for guidance on the following matters:

  • No relief has been announced  for HST filing or payments.
  • No changes have been provided to the deadline for partnership returns
  • No guidance has been provided for the filing of corporate tax returns, and if any penalties would apply to any corporate tax returns filed after the normal due date of six months after year end
  • No guidance has been provided in connection with the extension for the deadline to file various foreign reporting forms such as T1135, T1134, T1141 and T1142

A chart of the changes to the tax-filings and payment deadlines can be found at:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html

As additional details are released, we will continue to keep you informed.

Update on Further Measures announced by the Federal Government

Update on Further Measures Announced by Federal Government
 

Yesterday, the Government of Canada announced several measures to support Canadian businesses during the COVID-19 crisis.

Increase to the Temporary Wage Subsidy

The Prime Minister announced a 75% wage subsidy for qualifying business, for up to 3 months, retroactive to March 15, 2020.  More details on the subsidy are to be released.  We will keep you informed of any announcements as they are made.

Deferral of Sales Tax Remittance

The government will allow businesses, including self-employed individuals, to defer until June 30, 2020 payments of Goods and Services Tax / Harmonized Sales Tax (GST/HST).

The deferral will apply to GST/HST remittances for the February, March and April 2020 reporting periods for monthly filers; the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

Deferral Customs Duty Payments

Imported goods by businesses are generally subject to GST at 5% and custom duties. These amounts were normally due to be submitted to the Canada Revenue Agency and the Canada Border Services Agency as early as the end of this month.   Amounts owing for March, April and May for GST and customs duty payments for imported goods, is deferred until June 30th.

The New Canada Emergency Business Account

This $25 billion program will provide interest-free loans of up to $40,000 to small businesses and not-for-profit organizations to help cover their operating costs during a period where their revenues have been temporarily reduced.  To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 per cent (up to $10,000).  Additional details on accessing this program will be available soon.

A New Loan Guarantee for Small and Medium-Sized Enterprises

Export Development Canada is working with financial institutions so that they can issue new operating credit and cash flow term loans of up to $6.25 million to small and medium enterprises. Businesses should contact their financial institution to determine whether this program is a good fit for their needs.

 

Additional Measures from The Canada Revenue Agency (CRA)

 

Trusts, Partnerships and NR4 Information Returns

The deadlines for trusts, partnership and NR4 information returns are all extended to May 1, 2020. 

Administrative Income Tax Measures

CRA announced that taxpayers may defer a number of actions required under the Income Tax Act that are due to be executed after March 18, 2020 until June 1, 2020.  This includes the filing of returns, forms, elections, designations, and responses to information requests.  Some common returns and forms that now have June 1, 2020 filing deadlines (if the original filing due date was after March 18, 2020 and before June 1, 2020) include: 

  • T2  Corporate Income Tax Return
  • T106  Information Return of Non-arm’s Length Transactions with Non-residents
  • T1134  Information Return Relating to Controlled and Non-controlled Foreign Affiliates
  • T1135  Foreign Income Verification Statement
  • T1141  Information Return in Respect of Contributions to Non-Resident Trusts, Arrangements or Entities
  • T1142  Information Return in Respect of Distributions from and Indebtedness to a Non-Resident Trust

Objections

CRA has confirmed that the deadline for filing a Notice of Objection, that would have otherwise been due after March 18, 2020 and before June 1, 2020, has also been extended to June 1, 2020. 

Collections

Collections activities on new debts will be suspended until further notice and flexible payment arrangements will be available.  Payment arrangements are also available on a case by case basis if you have difficulty paying your taxes, child and family benefit overpayments, Canada Student Loans, or other government program overpayments in full.  Collections staff will address pre-existing situations on a case-by-case basis to prevent financial hardship.

Audits

The CRA will not contact any small or medium businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks.  For the vast majority of taxpayers, the CRA will temporarily suspend audit interaction with taxpayers and representatives. Interaction with taxpayers will be limited to those cases where the legal deadline to reassess a tax return is approaching, and in cases of high-risk GST/HST refund claims that require some contact before they can be paid out.

As additional details are released, we will continue to keep you informed.

The Partners of Hilborn LLP

Temporary Wage Subsidy - expanded definition of ‘Eligible Employer' and Canada Emergency Response Benefit

Bill C-13, the  COVID-19 Emergency Response Act, received Royal Assent, on March 25, 2020. The following may be of particular interest to our clients.

Details of The Temporary Wage Subsidy for Employers –Definition of Eligible Employers Expanded

The eligible employers that qualify for this subsidy has been expanded to include individuals and partnerships whose members include individuals, Canadian-controlled private corporations (CCPC) or charities. The details of who, when, how and most importantly, how much have been updated:

Who is Eligible for the Wage Subsidy

An eligible employer is:

  •     a non-profit organization;
  •     a registered charity;
  •     an individual;
  •     a Canadian-controlled private corporation (a “CCPC”) that was eligible for the small business deduction (assuming that taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million); or
  •     a partnership all the members of which are described in (iii) or (iv).

To be eligible, the employer must:

  •     have an existing business number and payroll program account with the CRA on March 18, 2020; and
  •     pay salary, wages, bonuses, or other remuneration to one or more individuals employed in Canada during the relevant time period.

If you do not pay salary, wages, bonuses, or other remuneration to an employee between March 18, 2020, and June 19, 2020, you cannot receive the subsidy, even if you are an eligible employer.

When Does This Subsidy Begin

The subsidy begins for all remuneration and employer pays between March 18, 2020 and June 20, 2020.  All payroll paid during this period is eligible for the subsidy.

How Does the Employer Claim the Subsidy

You may reduce the remittance of federal, provincial, or territorial income tax, withheld from your employees in the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020. The subsidy cannot be used to reduce Canada Pension Plan contributions or Employment Insurance premiums.

For example, if you are a regular remitter, you may reduce the remittance that is due to the CRA on April 15, 2020.  You can continue with this subsidy until you have reached the maximum subsidy described below.

How Much is the Subsidy

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.

Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000

Related matters

The subsidy is considered government assistance and will be included in the employer’s income for the tax year in which it is received.  The subsidy does not affect the employees in any way.  Their T4 slip will report the gross amount of federal, provincial or territorial tax.

An employer claiming the subsidy will need to keep information to support the subsidy calculations.  This includes the following:

Total remuneration paid between March 18, 2020 and June 20, 2020;

  • The federal, provincial, or territorial income tax that was deducted from that remuneration; and
  • The number of employees paid in that period.

If you would like assistance with either the calculation of the subsidy or the manner in which to claim the subsidy, please do not hesitate to contact us.

The Partners of Hilborn LLP

Canada Emergency Response Benefit (CERB) to Help Workers

The government has announced the Canada Emergency Response Benefit (CERB). This taxable benefit would provide $2,000 a month for up to four months for workers who lose their income as a result of the COVID-19 pandemic. It would cover Canadians who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19, as well as working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures. The CERB will apply to wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI).

Workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19, would also qualify for the CERB. This is intended to help businesses keep their employees as they navigate these difficult times, while ensuring they preserve the ability to quickly resume operations as soon as it becomes possible.

The EI system was not designed to process the unprecedented high volume of applications received in the past week. Given this situation, all Canadians who have ceased working due to COVID-19, whether they are EI-eligible or not, would be able to receive the CERB to ensure they have timely access to the income support they need.

Canadians who are already receiving EI regular and sickness benefits would continue to receive their benefits and should not apply for the CERB. If their EI benefits end before October 3, 2020, they could apply for the CERB once their EI benefits cease, if they are unable to return to work due to COVID-19. Canadians who have already applied for EI and whose application has not yet been processed would not need to reapply. Canadians who are eligible for EI regular and sickness benefits would still be able to access their normal EI benefits, if still unemployed, after the 16-week period covered by the CERB.

The government will be establishing a portal for accessing the CERB that will rather be available in early April. It is intended that CERB payments would begin within 10 days of application. The CERB would be paid every four weeks and be available from March 15, 2020 until October 3, 2020.

COVID-19: Delivery of Tax Information

Canada Revenue Agency has extended the personal income tax filing and payment deadlines for individuals that are due April 30, 2020. Personal income tax returns that would have been due on April 30, 2020 have had their due date extended to June 1, 2020. Payments that would otherwise be due April 30, 2020 have had their due date extended to September 1, 2020.

We would like you to know that we have adapted to working in a remote environment without any significant complications. As such, we are staffed and technologically prepared to complete your personal income tax returns by the original due date of April 30, 2020. It is business as usual for us!
We encourage you to submit your 2019 tax information to us as soon as possible. If you are able to submit documents electronically and have not yet been set up on One Drive please email reception@hilbornca.com so we may receive your documents securely.

We have also set up a locked drop box outside our office to receive your information should you prefer to mail or courier it to us. Please provide special instructions to the courier to leave the package in the drop box as no one will be available to sign for the package. To reduce our handling of paper, we ask you to limit the use of staples, paper clips and envelopes when organizing your documents.

We are committed to ensuring timely delivery and quality service to our clients during this time.

If you have any questions or comments, please contact the partner responsible for your file and we would be pleased to discuss this matter with you.

Please do not hesitate to reach out to us if you have any questions or concerns.

The Partners of Hilborn LLP

The Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy

More details were released April 1, 2020, providing employers with additional information to determine whether they are eligible for the new Canada Emergency Wage Subsidy. The new program provides a 75 per cent wage subsidy to eligible employers for up to twelve weeks. it is anticipated that additional details will be forthcoming from the government.

How to Apply

Eligible employers would be able to apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers would be required to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. More details about the application process will be announced at a later date. At this time, the application process is not available.

Who are Eligible Employers

Eligible employers include individuals, taxable corporations, and partnerships consisting of eligible employers as well as nonprofit organizations and registered charities.

Public bodies would not be eligible for this subsidy. Public bodies include municipalities, local governments, Crown corporations, public universities, colleges, schools and hospitals.

This subsidy would be available to eligible employers that see a reduction of at least 30 per cent of their revenue in any of the Eligible Periods.

Eligible Periods

Eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. The amount of wage subsidy received by the employer under the COVID-19 Economic Response Plan in a given month would be ignored for the purpose of measuring year-over-year changes in monthly revenues.

  • For example, if revenues in March 2020 were down 50 per cent compared to March 2019, the employer would be allowed to claim the Canadian Emergency Wage Subsidy on remuneration paid between March 15 and April 11, 2020.

The table below outlines each claiming period and the reference period for eligibility in which a reduction of 30% or more in revenue must have been experienced.

Eligible Periods Claiming period Reference period for eligibility
Period 1  March 15 – April 11  March 2020 over March 2019
Period 2  April 12 – May 9  April 2020 over April 2019
Period 3  May 10 – June 6  May 2020 over May 2019

 

For eligible employers established after February 2019, eligibility would be determined by comparing monthly revenues to a reasonable benchmark.

Calculating Revenues

An employer’s revenue for this purpose would be its revenue from its business carried on in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method and would exclude revenues from extraordinary items and amounts on account of capital.

For non-profits and charities, the government will continue to work with this sector to ensure the definition of revenue is appropriate to their specific circumstances.

Amount of Subsidy

  • The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
    75 per cent of the amount of remuneration paid, up to a maximum of $847 per week; and
  • the amount of remuneration paid, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less.

Further guidance with respect to how to define pre-crisis weekly remuneration for a given employee has not been provided at this time. In effect, employers may be eligible for a subsidy of up to 100 per cent of the first 75 per cent of pre-crisis wages and salaries of existing employees. These employers would be expected where possible to maintain existing employees’ pre-crisis employment earnings.

Employers will also be eligible for a subsidy of up to 75 per cent of salaries and wages paid to new employees.

Eligible remuneration includes salary, wages, and other remuneration. Other remuneration would be amounts for which employers would generally be required to withhold or deduct amounts to remit to the Receiver General on account of the employee’s income tax obligation. However, it does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle.

A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration.

There would be no overall limit on the subsidy amount that an eligible employer may claim.

It is expected that employers will make their best efforts to top-up employees’ salaries to bring them to pre-crisis levels.

Interaction with 10 per cent Temporary Wage Subsidy

For employers that are eligible for both the Canada Emergency Wage Subsidy and the 10 per cent temporary wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period.

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.

Government Assistance

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.
We continue to monitor and will  inform you as more information becomes available.

The Partners of Hilborn LLP

Support for Canadian Businesses Amid COVID-19 - From the Federal and Ontario Governments

The federal and provincial governments have announced a number of programs and subsidies during the current COVID-19 crisis. The details of these measures are changing regularly. We thought that it would be useful to summarize the information that is known at this time.

We will continue to update you as further information becomes available.

SUPPORT AVAILABLE DESCRIPTION QUALIFICATION REQUIREMENTS HOW TO OBTAIN BENEFIT?
Canada Emergency
Wage Subsidy 

Up to 75% wage subsidy for qualifying businesses, for up to 3 months, retroactive to March 15, 2020. The subsidy will be on the first $58,700 earned, meaning up to $847 a week per employee, with no limit as to the amount to which the employer may be entitled. The program would be in place for the 12 week period beginning March 15 and ending June 6, 2020. The government is also proposing that eligible employers for the CEWS be entitled to a 100% refund of employer-paid contributions to EI, CPP and QPP. 
 Employers of all sizes and across all sectors are eligible, with certain exceptions including public sector entities. Eligibility is applicable if monthly revenue has decreased by 30% or more, however, for March, eligible employers only need to incur a revenue loss of 15% in order to be eligible for the CEWS. Revenue loss is measured by either comparing revenue of March, April and May to that same month in 2019, or to an average of revenue earned in January and February 2020.  Eligible employers will be able to apply through the Canada Revenue Agency's My Business Account. Details will be made available soon.  
Temporary Wage Subsidy Organizations that do not qualify for the Canada Emergency Wage Subsidy may qualify for the previously announced wage subsidy of 10 per cent of remuneration paid from March 18 to before June 20, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer.
 
Employers who are individuals, partnerships, non-profits, charities or Canadian- controlled private corporations, other than large corporations.  No application necessary. The subsidy is calculated when you remit payroll source deductions to the Canada Revenue Agency. 
Business Credit Availability Program  Canada Emergency Business Account will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.

Canada Emergency Business Account
To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019. 

Interested businesses should work with their current financial institutions. 
  Loan Guarantee for Small and Medium-Sized Enterprises
Financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million to SMEs. 
  Interested businesses should work with their current financial institutions  
  Co-Lending Program for Small and Medium-Sized Enterprises
Financial institutions to co- lend term loans to SMEs for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program.
  Interested businesses should work with their current financial institutions 
Deferral of Federal Income Taxes All businesses to defer until August 31, 2020, the payment of any income tax amounts that become owing on or after March 18 and before September 2020 All businesses
 No application necessary
Extending the Work- Sharing Program The federal government is extending the maximum duration of the Work-Sharing program from 38 weeks to 76 weeks. It has also made the application process easier.  Work- Sharing Eligibility requirements are here. Employers in Ontario can email completed applications here.
Deferral of Provincially Administered Tax Beginning April 1, 2020, until August 31, 2020, all businesses to defer payment of the majority of provincially administered taxes  All businesses No application necessary
Deferral of Sales Tax Remittance and Customs Duty Payments All businesses, including self- employed individuals, to defer until June 30, 2020 payments of the Goods and Services Tax / Harmonized Sales Tax (GST/HST), as well as customs duties owing on their imports.

The deferral will apply to GST/HST remittances for the February, March and April 2020 reporting periods for monthly filers; the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

For GST and customs duty payments for imported goods, deferral will include amounts owing for March, April and May.
All businesses
No application necessary
Deferral of Workplace Safety and Insurance Board Payments Workplace Safety and Insurance Board will allow employers to defer payments for a period of six months.

Schedule 1 employers with premiums owed to the WSIB will be allowed to defer reporting and payments until August 31, 2020. The deferral will also apply to Schedule 2 businesses that pay WSIB for the cost related to their workplace injury and illness claims.
All employers covered by the WSIB’s workplace insurance are automatically eligible for the financial relief package. No application necessary
The Canada Emergency Wage Subsidy - Legislation Passes

Further details were released April 11, 2020, providing employers with additional information to determine whether they are eligible for the new Canada Emergency Wage Subsidy (CEWS). The program provides a 75% wage subsidy to eligible employers for up to twelve weeks, retroactive to March 15, 2020.

Eligible Employers

Eligible employers include individuals, taxable corporations, partnerships consisting of eligible employers, nonprofit organizations and registered charities.

Public bodies are not eligible for the subsidy. Public bodies include municipalities, local governments, Crown corporations, public universities, colleges, schools and hospitals.

The subsidy is available to eligible employers that see a reduction of at least 15% of their revenue in March and a reduction of 30% of their revenue for the following months.

Eligible Periods

The eligibility of an employer would generally be determined by the change in their monthly revenues, year-over-year, for the calendar month in which the claiming period began.

Alternatively, employers may compare their revenue using an average of their revenues earned in January and February 2020. Employers may select either the year-over-year approach or this alternative approach when first applying for the CEWS. Thereafter, employers are required to use the same approach for the duration of the program.

The individual with principal responsibility for the financial management of the employer will be required to attest to the decline in revenue.

The table below outlines each claiming period, the required reduction in revenue and the reference period for eligibility.

Eligible Periods Claiming period Required reduction in revenue Reference period for eligibility
Period 1 March 15 to April 11 15% March 2020 over:
  • March 2019 or
  • Average of January and February 2020
Period 2 April 12 to May 9 30% April 2020 over:
  • April 2019 or
  • Average of January and February 2020
Period 3 May 10 to June 6 30% May 2020 over:
  • May 2019 or
  • Average of January and February 2020

 

Eligible employees

An eligible employee is an individual who is employed in Canada, other than those who have been without remuneration for 14 or more consecutive days in the eligibility period.

This rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a four-week period for which the employee is eligible for the Canadian Emergency Response Benefit.

Calculating Revenues

An employer's revenue for the purpose of the subsidy is defined as the revenue earned by the employer in Canada from arm's-length sources. Revenue may be calculated using normal accounting methods and excludes revenues from extraordinary items and those on account of capital.

Employers may calculate their revenues using either the accrual method or the cash method, but not a combination of both. Employers select an accounting method when first applying for the CEWS and are required to use that method for the duration of the program.

Special rules for the computation of revenue are provided to take into account certain non-arm's length transactions, such as where an employer sells all of its output to a related company that in turn earns arm's length revenue. As well, affiliated groups are able to compute revenue on a consolidated basis.

Amount of Subsidy

The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:

  • 75% of the amount of remuneration paid, up to a maximum of $847 per week; and
  • the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.

Employers may be eligible for a subsidy of up to 100% of the first 75% of pre-crisis wages and salaries of existing employees.

Employers are also eligible for a subsidy of up to 75% of salaries and wages paid to new employees.

A special rule applies to employees that do not deal at arm's length with the employer. The subsidy amount for such employees is limited to the eligible remuneration paid, up to a maximum benefit of the lesser of $847 per week and 75% of the employee's pre-crisis weekly remuneration. The subsidy is only available in respect of non-arm's length employees employed prior to March 15, 2020.

There is no overall limit on the subsidy amount that an eligible employer may claim.  Employers are required to keep records demonstrating their reduction in arm's-length revenues and remuneration paid to employees.

Pre-crisis remuneration of an eligible employee means the average weekly eligible remuneration paid to the employee by the employer from January 1 to March 15, 2020. Any period of seven or more consecutive days for which the employee was not remunerated can be excluded from the calculation.

Eligible remuneration includes salary, wages, and other amounts including fees, commissions and certain taxable benefits, for the services of an eligible employee. Eligible remuneration is typically amounts for which employers are required to withhold or deduct amounts to remit to the Receiver General on account of the employee's income tax obligation. However, it does not include severance pay, or items such as stock option benefits and the personal use of a corporate vehicle.

How to Apply

Eligible employers will be able to apply for the CEWS through the Canada Revenue Agency's My Business Account portal or if they do not have a My Business Account, there may be a web-based application that will be available to use. More details about the application process will be made available by the government shortly.

Interaction with 10% Temporary Wage Subsidy

For employers that are eligible for both the CEWS and the 10% temporary wage subsidy for a claiming period, any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the CEWS in that same period.

Government Assistance

The typical taxation treatment of tax credits and other benefits provided by the government will apply. The wage subsidy received by an employer will be considered government assistance and will be included in the employer’s taxable income. Assistance received under either wage subsidy will reduce the amount of remuneration expense eligible for other federal tax credits calculated using the same remuneration.

Refund for Certain Payroll Contributions

Included in the same legislation was a new 100% refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. The refund covers 100% of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim the CEWS for those employees.  
An employee is considered to be on leave with pay throughout a week if that employee is remunerated by the employer for that week but does not perform any work for the employer in that week. The refund is not be available for eligible employees that are on leave with pay for only a portion of a week.

The refund is not subject to the weekly maximum benefit per employee of $847 that an eligible employer may claim in respect of the CEWS.

Employers are required to continue to collect and remit employer and employee contributions for each program as usual. Eligible employers apply for a refund, as described above, at the same time that they apply for the CEWS.

Ensuring Compliance

Employers will be required to repay amounts received under the CEWS if they do not meet the eligibility requirements. Penalties may apply in cases of fraudulent claims. The penalties may include fines or even imprisonment. In addition, antiabuse rules will be put in place to ensure that the subsidy is not inappropriately obtained and to help ensure that employees are paid the amounts they are owed.

Employers that engage in artificial transactions to reduce revenue for the purpose of claiming the CEWS will be subject to a penalty equal to 25% of the value of the subsidy claimed, in addition to the requirement to repay in full the subsidy that was improperly claimed.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy (CEWS) program provides a 75% wage subsidy, subject to certain limitations, to eligible employers for up to twelve weeks, retroactive to March 15, 2020.

CRA announced today that applications will be open for the CEWS beginning April 27, 2020.

Details of the application process and an example of the calculation are available at https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html. CRA has provided a spreadsheet to assist employers in the calculation of the CEWS they will be eligible for. The spreadsheet is designed to calculate a total amount that will be entered in the Employers Payroll Program (RP) section of My Business Account.

The calculation of the CEWS will be reduced by the amount of the 10% Temporary Wage Subsidy for Employers (TWS) that was recovered by the employer for the claim period. In the case of an employee that earned $2,000 per week, where a $200 TWS had been claimed, the weekly maximum CEWS of $847 will be reduced by the $200 TWS. This layering of the rules may reduce the value of the CEWS for employees earning more than $58,700.

For employers that meet the decline in revenue criteria, we would suggest they complete the CEWS spreadsheet for the first claim period of March 15 to April 11, 2020 prior to the April 27th filing.

The CEWS will be processed at the payroll program (RP) account level, so you will have to file a separate application for each RP account.

If you are not already signed up please Register now for CRA’s My Business Account. This will ensure that you may apply as soon as the applications open.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Support for Students and Recent Graduates Impacted by COVID-19

Canada Emergency Student Benefit

For post-secondary students and recent graduates who are not eligible for the Canada Emergency Response Benefit or for Employment Insurance, and are unable to find full-time employment or are unable to work due to COVID-19, the government proposes to introduce the Canada Emergency Student Benefit (CESB). The CESB would provide $1,250 per month for eligible students from May through August 2020, and $1,750 for students with dependents and those with permanent disabilities.

This new grant would provide income support to post-secondary students who will experience financial hardship over the summer due to COVID-19. The CESB will be delivered by CRA and more details will be provided by the government at a later date.

Canada Student Service Grant

While the COVID-19 pandemic will limit employment opportunities for students, it presents an opportunity for students and youth to mobilize and take part in national service activities that can provide valuable labour market and skills development experiences, while giving back to their local communities.

To encourage students to participate in the COVID-19 response, the government will launch a new national service initiative to recognize students' significant contributions to the COVID-19 efforts, and provide support through a new Canada Student Service Grant which will provide up to $5,000 to support student's post-secondary education costs in the fall.

More details will be made available on the “I Want to Help” platform over the coming weeks, including more detailed information about eligibility, the levels of funding available under the grant, how to apply for a national service position, and how applications will be assessed.

International students

The Government will remove the restriction that allows international students to work only a maximum of 20 hours per week while classes are in session, provided they are working in an essential service or function, such as health care, critical infrastructure, or the supply of food or other critical goods.

International students and their employers should consult Public Safety and Emergency Preparedness Canada's Guidance on Essential Services and Functions in Canada during the COVID-19 Outbreak to determine if the work the student is doing would allow them to work more than 20 hours per week during the academic session. This temporary rule change will be in place until August 31, 2020.

Statistics Canada reported that in 2017–2018, more than 11,000 international students were enrolled in health-care programs at Canada's universities and colleges, representing about 4 per cent of health-care students at that time.

Supporting Students through Expanded Student and Youth Programming

The government is creating and connecting students to meaningful employment and service opportunities, with:

  • The launch of the "I Want to Help" Platform. The new platform will provide helpful information about available service opportunities and ways to get involved and support efforts of young Canadians to pursue service positions.
  • $153.7 million for the Youth Employment and Skills Strategy to help youth develop the skills and gain the experience they need to successfully transition into the labour market. Funding will support a range of measures in high-demand sectors such as agriculture, technology, health and essential services, creating over 6,000 additional job placements.
  • Changes to the Youth Employment and Skills Strategy's Canada Summer Jobs program, including increased wage subsidies, expanded eligibility and new flexibilities for employers, to ensure it can continue to support up to 70,000 student job placements in 2020-21. These new measures are being supported by a reallocation of existing resources.
  • $80 million for the Student Work Placement Program to support up to 20,000 post-secondary students across Canada to obtain paid work experience related to their field of study.
  • $15 million for the Supports for Student Learning Program to serve an additional 14,700 youth through support to complete high school and transition to post-secondary education in order to help ensure that vulnerable children and youth do not become further marginalized as a result of COVID-19.
  • Additional support for the Canada Service Corps to expand support for meaningful youth service projects that have positive impacts in communities across Canada, including increasing the number of microgrants from 1,800 to 15,000, and providing stipends to participants.
  • $40 million to Innovation, Science and Economic Development to support Mitacs in order to create 5,000 new job placements. The Business/Higher Education Roundtable (BHER) will also create a further 5,000 to 10,000 new student placements, by reorienting existing federal support and building online tools.
  • $75.2 million to provide additional distinctions-based support to First Nations, Inuit and Métis Nation post-secondary students.
  • $291.6 million to support up to 40,000 student researchers and post-doctoral fellows through the federal granting councils. Funding would support a one-semester extension for eligible students whose research scholarships or fellowships end between March and August 2020 and who intend to continue their studies. It would also provide a 3-month extension in funding for holders of federal research grants to support eligible trainees and staff paid out of these awards. These extensions cannot be combined with other income supports.
  • $7.5 million to support student and post-doctoral research placements within the National Research Council.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Canada Emergency Commercial Rent Assistance Program

The Federal government has announced significant rent relief for businesses that cannot afford to pay their rent at a time when their operations are shut down due to the COVID-19 pandemic.

The federal help, expected to lower rent by 75 per cent for affected small businesses, will be provided in partnership with the provinces and territories, which have jurisdiction over rents.

The Canada Emergency Commercial Rent Assistance for small businesses will provide forgivable loans to qualifying commercial property owners to cover 50 per cent of three-monthly rent payments payable by eligible small business tenants experiencing financial hardship during April, May and June.

The loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75 per cent for the three corresponding months under a rent forgiveness agreement, which will include a pledge not to evict the tenant while the agreement is in place.

The small business tenant would cover the remainder, up to 25 per cent of the rent.

Affected small business tenants are those paying less than $50,000 per month in rent and who have temporarily ceased operations, or have experienced at least a 70 per cent drop in pre-COVID-19 revenues.

The federal Canada Mortgage and Housing Corp. will administer and deliver the program.

Provinces and territories have agreed to cost share total costs and ensure implementation of the program. They will cover up to 25 per cent of costs, subject to terms of agreements with Ottawa.

It is expected the new program will be operational by mid-May, with commercial property owners lowering the rents of their small business tenant’s payable for the months of April and May, retroactively, and for June.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Government of Canada Launches Applications for the Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy (CEWS)  is an economic measure that provides a subsidy of 75% of an eligible employee's weekly earnings, to a maximum of $847 per employee per week, to eligible employers, for up to 12 weeks. Retroactive to March 15, 2020, the CEWS is designed to prevent further job losses and encourage employers to re-hire workers previously laid off as a result of COVID-19. The Canada Revenue Agency (CRA) is administering the CEWS.

Today CRA launched the application process for the CEWS. As of today, employers can apply for the CEWS through My Business Account or through the CRA’s online application portal, and their representatives can apply through Represent a Client.

All applications that are approved through CRA’s automated verification process will be sent for payment on May 5. Payments being made through direct deposit should begin to appear in employers’ bank accounts as of May 7.  Certain applications will require a secondary verification, done manually, and in these cases the CRA may contact employers to verify information.  It is expected that these secondary verifications will take no more than 72 hours.

To ensure speedy receipt of funds, employers should consider registering for direct deposit to enable employers, whose applications are approved, to receive their CEWS payments quickly and securely.  Employers may sign up for direct deposit with their financial institutions.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Additional Financing for Large and Medium Size Businesses

Today, the government announced that it will offer support to large and medium-sized businesses affected by COVID-19.

Large Employer Emergency Financing Facility (LEEFF)

This program is intended to provide bridge financing to Canada’s largest employers whose needs during the pandemic are not being met through conventional financing. The objective of this support is to protect Canadian jobs, assist Canadian businesses weather the current economic downturn and to avoid bankruptcies of otherwise viable businesses where possible. This support will not be used to resolve insolvencies or restructure businesses nor will it provide financing to businesses that otherwise have the capacity to manage through the crisis. The additional liquidity provided through LEEFF will allow Canada’s largest businesses and their suppliers to remain active during this difficult time and position them for rapid economic recovery. The government is in the final stages of establishing the program and further information about the application process will be provided shortly.  The key principles in providing support through the LEEFF, will include:

  •  Businesses seeking support must demonstrate how they intend to preserve employment and maintain investment activities. Recipients will need to commit to respect collective bargaining agreements and protect workers’ pensions. The LEEFF program will impose strict limits in terms of dividends, share buy-backs and executive pay. In considering the eligibility of a business for assistance under the LEEFF program, an assessment may be made of its employment, tax, and economic activity in Canada, as well as its international organizational structure and financing arrangements. The program will not be available to businesses that have been convicted of tax evasion. In addition, recipients will be required to commit to publish annual climate-related disclosure reports consistent with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, including how their future operations will support environmental sustainability and national climate goals.
  • To ensure support across the Canadian economy, the financing is intended to be applicable to all eligible sectors in a consistent manner.
  • To ensure timely support, the LEEFF program will apply a standard set of economic terms and conditions.

Business Credit Availability Program (BCAP)

The government announced that it will expand the BCAP to mid-sized companies with larger financing needs. Support for mid-market businesses will include loans of up to $60 million per company, and guarantees of up to $80 million. Through the BCAP, Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) will work with private sector lenders to support access to capital for Canadian businesses in all sectors and regions.  Contact your financial institution to determine if you qualify.

Canada Emergency Wage Subsidy (CEWS) to be Extended

The federal government has announced that the CEWS will be extended beyond June. More details are expected next week.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Canada Emergency Wage Subsidy Extended to August 29, 2020

The Canada Emergency Wage Subsidy (CEWS)  program provides a 75% wage subsidy to eligible employers, subject to certain limitations.   

The Government of Canada announced that it will extend the CEWS by an additional 12 weeks to August 29, 2020. The Government will consult with key business and labour representatives over the next month on potential adjustments to the program to incent jobs and growth, including the 30 per cent revenue decline threshold. Any potential changes following the consultation will have as key objectives the maximization of  employment and ensuring the CEWS reflects the immediate needs of businesses and supports the post-crisis economic recovery.

Eligibility for Canada Emergency Business Account Expanded

The Canada Emergency Business Account (CEBA) provides an interest free loan of up to $40,000 to small businesses and not-for-profit organizations to cover operations costs during the period where revenues have been reduced.  The government has announced that it intends to expand the criteria of organizations that qualify for the CEBA.

The program will now be available to a greater number of businesses that include sole proprietors receiving income directly from their businesses, businesses that rely on contractors, and family-owned corporations that pay employees through dividends rather than payroll.  To qualify under the expanded eligibility criteria, applicants with payroll lower than $20,000 would need:

  • a business operating account at a participating financial institution
  • a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return
  • eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance

Expenses will be subject to verification and audit by the Government of Canada. Funding will be delivered in partnership with financial institutions. More details, including the launch date for applications under the new criteria, will be released by the government at a later date.

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP

Canada Emergency Commercial Rent Assistance Application Opens May 25th

The Canada Emergency Commercial Rent Assistance (CECRA) for small businesses will help eligible commercial property owners reduce or forgive rent for impacted small business tenants for the months of April, May, and June 2020.  

Canada Mortgage and Housing Corporation (CMHC) will administer and deliver the CECRA to small businesses.

The program will provide forgivable loans to qualifying commercial property owners to cover up to 50% of gross rent for the three monthly rent payments payable by eligible small business tenants experiencing financial hardship as a direct result of COVID-19. The interest free loans will be forgiven on December 31, 2020, if the mortgaged property owner complies with all applicable program terms and conditions, including the agreement not to seek to recover rent abatement amounts after the program is over.

The small business tenant would be required to cover the remainder of the gross rent payments, up to a maximum of 25%.

In essence, the government pays for 50%, the tenant pays for 25% and the landlord assumes 25% of the gross rent.

Who is eligible? 

To qualify for CECRA for small businesses, the commercial property owner must:

  • own commercial real property which is occupied by one or more impacted small business tenants
  • enter (or have already entered) into a legally binding rent reduction agreement for the period of April, May and June 2020, reducing an impacted small business tenant’s rent by at least 75%
  • ensure the rent reduction agreement with each impacted tenant includes:
    • a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds; and
    • a declaration of rental revenue included in the attestation

What is an Impacted Small Business Tenants?

Impacted small business tenants are businesses, including non-profit and charitable organizations, who:

  • pay up to $50,000 per month in gross rent per location, as defined by a valid and enforceable lease agreement;
  • generate no more than $20 million in gross annual revenues, calculated on a consolidated basis; and
  • have temporarily ceased operations (that is, are generating no revenues), or have experienced at least a 70% decline in pre-COVID-19 revenues. 

To determine the extent of the decline in revenues, a small business can use a comparison of revenues earned in April, May, and June 2020 to the same months in 2019, or to an average of revenues earned over the months of January and February 2020.  

Revenues for this purpose must consist of revenue earned from ordinary activities in Canada. A small business will be required to calculate revenues using its normal accounting method and exclude revenues from extraordinary items. Registered and non-profit organizations will be required to include most forms of revenue in this calculation, other than revenues from non-arm’s length persons, and will be permitted to decide whether to include revenue from government sources as part of this calculation. 

How to apply?

The application process will be open to eligible property owners on May 25, 2020. The deadline to apply for the CECRA is August 31, 2020.

According to Canada Mortgage and Housing Corporation (CMHC), each applicant must:

  • provide the rent reduction agreement, including the moratorium on eviction
  • provide evidence of small business tenant financial hardship (i.e. attestation of 70% decline in revenue)
  • agree to the terms and conditions of the loan agreement in order to be eligible for the program. 

CMHC has provided samples for the rent reduction agreement, landlord and tenant attestation, and loan agreement on their website. The legal version of these application documents will be available in the portal when it opens at 8:00 a.m. EST on May 25, 2020. To view the sample document, please follow the link attached below and click the section for “What You Need to Apply”. 

https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business

To manage the large volume of applications, property owners must register on the following days once the application process has opened. Once registered, the portal will be available 24/7 for applicants to input data and upload documents. 

Day

Who should register?

Monday

Property owners who are located in Atlantic Canada, BC, Alberta and Quebec, with up to 10 tenants who are eligible for the program

Tuesday

Property owners who are located in Manitoba, Saskatchewan, Ontario and the Territories, with up to 10 tenants who are eligible for the program

Wednesday

All other property owners in Manitoba, Saskatchewan, Ontario and the Territories

Thursday

All other property owners in Atlantic Canada, BC, Alberta and Quebec

Friday
(May 29)

All

We continue to monitor and will inform you as more information becomes available.

The Partners of Hilborn LLP