Canada Emergency Business Account

IMPORTANT: This post is specific to Canada. If you are not a Canada business/taxpayer then it is probably not applicable to you.

The Canadian Federal government has announced a 75% wage subsidy designed to help businesses retain (and even rehire) staff during the lockdown.

The video was recorded on 10 April. Here’s what’s changed since then (updated 9 Dec):

  • Payroll account must have been created before March 15
  • For employees that are on leave for the entire week the employer may include in the rebate the amount of employer’s contribution to CPP and EI (subject to the same $847/week limit)
  • Once you have qualified for one period, you automatically qualify for the following period (e.g., if you qualified for March then you get April, but need to re-qualify for May based on April or May revenue)
  • Penalty of 25% of the amount claimed (in addition to repaying the amount claimed) if you attempt to inflate your claim
  • Application is for any wages paid IN RELATION to the weeks in question – you don’t have to have paid them in that week.  This means you can claim for re-hired staff paid after the fact – as long as you have paid them by the time you make the application.
  • This programme has been extended through to June 2021.
    • Remember that you need to qualify each month, so as things improve you may lose the subsidy (you get one free month after you cease qualifying).
    • For July 2020 and onwards the rules change, but the criteria no longer requires a 30% decline in revenue – ANYONE WITH A DECLINE of any amount may be eligible for a subsidy, but at a lower amount.  The calculations are quite complicated, so we recommend you ask for assistance.

Here’s the outline from the video (* updated)

  • Eligibility Criteria
    • * Must have had a 15% drop in revenue for March or 30% for April to June (each month); lower declines required after that
      • Compared against same month last year
      • Or against average of Jan/Feb 2020 (but if you choose this option you must apply it for all subsequent applications in periods 1-4 and 5+)
    • * For July following any reduction of income will qualify, but the subsidy amount is based on a sliding scale (the smaller the decline, the lower the subsidy)
    • Choose Accrual or Cash basis (consistently)
    • Revenue excludes non-arms length, extraordinary and capital income
    • * Payroll account must have been created before March 15
  • Benefits
    • For April to June the subsidy is 75% of wages paid to a max of $847/week per employee or 75% of pre-crisis wages paid to a max of $847/week per employee
    • * For July to December the subsidy depends on the amount of decline in sales
    • No need to top up staff wages as long as you are paying them the full amount you receive
    • * For employees that are on leave for the entire week the employer may include in the rebate the amount of employer’s contribution to CPP and EI (subject to the same $847/week limit)
  • Application
    • CRA My Business Account
    • Apply by 4-weekly period
  • Other conditions
    • Non-arms length employees (owners & family) max is the lowest weekly amount paid between Jan 1 and June 30, and must have been on payroll prior to March 15
    • Reduced by any amount claimed in the 10% Wage Subsidy (* you must deduct what you are eligible to claim, even if you don’t/can’t claim it.  Therefore it is important to claim this on your monthly remittance, despite what I said in the video)
  • Issues
    • Sole Proprietors (non-incorporated businesses) can’t pay themselves on payroll and therefore are ineligible for this subsidy – they may have to rely on the CERB instead
    • You may qualify for one period but not for others – creates uncertainly (* if you qualify for the first period you automatically qualify for the second, but will have to re-qualify for the third)
    • Can’t claim for contractors
    • Some staff will be better off on CERB than on the Wage Subsidy
    • * Penalty of 25% of the amount claimed (in addition to repaying the amount claimed) if you attempt to inflate your claim
  • Recommendations
    • Test your income every month

Need more advice?