Updated as of April 21st, 2020.
In the midst of the current extraordinary situation, Canadian companies and business owners of all types are at the mercy of their government for economic support.
On April 1st, a small national sigh of relief was had when Prime Minister Justin Trudeau, announced that the COVID-19 financial assistance measures were going to see a multimillion-dollar expansion, making it the largest economic program yet in Canadian history.
Considering the overall uncertainty of what is to come for businesses Canada-wide in the following months, knowing what to do to protect your company and truly benefit from all aid is essential to overcoming the aftermath of the steps taken to flatten the curve.
With an overwhelming amount of information circulating in the media, it is hard to know what information is accurate and even more so how to obtain and/or apply for the economic response plan announced by our government officials.
Here are the most up-to-date processes provided by the Canadian government:
Many companies in the industries that were subsequently deemed non-essential such as retail, food service, accommodation and even transportation have had to either temporarily or permanently lay off their staff due to non-optional closures. Statistics Canada reports that nearly 6 million Canadians that are employed by such business have seen the hardest hits.
In an effort to keep companies from having to take these measures and rehire their employees, the Canadian Emergency Wage Subsidy offers two options. This is done to position companies properly for a smoother transition into normality when the time comes.
The 75% Wage Subsidy
Upon eligibility, companies of all sizes and through all sectors are to see a 75% wage subsidy of their salaries for up to 3 months, up to a maximum of $847 a week, paid as of March 15th, 2020 and before June 6th, 2020.
The employer will receive for each employee:
• 75% of their previous salary, up to a maximum of $847 per week.
• The amount the employee was receiving on a weekly basis up to $847 a week OR 75% of the employee’s weekly remuneration before the crisis, whichever is found to be of a lesser amount.
Employers that may be eligible for a subsidy of up to 100% of 75% of their employee’s pre-crisis salaries are expected to maintain the salaries & wages of existing employee’s pre-crisis monthly earnings. In terms of new employees, employers may also be eligible to receive a subsidy of equal terms and earnings.
These amounts also include any quantities that employers generally withhold or deduct from salaries or wages to pay to the Receiver General as the employee’s income tax responsibility.
Other items such as nonessential company benefits are not included in the subsidy received.
If your employees are not directly involved in the immediate place of work, there exists a limit to the remuneration they are entitled to be paid anywhere between March 15th, 2020 and June 6th, 2020 to a maximum of $847 per week or 75% of the employee’s pre-crisis wage or salary.
As there exists no overall limit on the subsidy for employers, they are expected to fulfill their employees’ salaries to match their pre-crisis earnings.
Are you eligible?
Companies eligible are those that experience a decrease of at least 30% of their revenue, which would have to be properly attested in the application process.
Companies eligible for the generous subsidy are as follows:
• Individuals
• Taxable corporations
• Partnerships of eligible employers
• Non-profit organizations
• Registered charities
Opposingly, Public bodies not eligible for the generous subsidy include:
• Municipalities
• Local governments
• Crown corporations
• Public Universities & Colleges
• Schools
• Hospitals
Attesting the decrease in revenue would be done so using your company’s regular accounting method from revenue obtained in Canada earned from arm’s-length sources. This would be done excluding any irregular items and any amounts on account of capital.
To apply please please see below:
When are you eligible?
This would be determined by the change in an employer’s monthly revenue in a year-over-year comparison from when the period began.
The amount of subsidy provided under the COVID-19 Economic Response Plan would be ignored when it comes to calculating YoY changes in monthly revenues.
In summation, you would be able to claim what is stated as your previous year’s monthly revenue as it is your most accurate pre-crisis income.
Please see the chart below that outlines the claiming periods that will be selected if the employer’s current months have seen a decrease of over 30% of their revenue or more:
If you established your business after February 2019 and therefore do not have a fully accurate depiction of your revenue year-over-year, your eligibility would be determined by comparing your month-over-month revenue instead.
Where do I apply?
If you are eligible you may apply, with records stating the affected revenues & payments made to employees, through the Canada Revenue Agency’s My Business Account Portal.
For more details, please visit the official Canadian government announcement and discover the How To Apply section to begin your process on April 27th, 2020.
The 10% Wage Subsidy
In early March, the Prime Minister announced a 10% wage subsidy for a three-month period (March 18th, 2020 to June 19th, 2020) that holds a limit of up to $1,375 for each employee and a maximum of $25,000 per employer to divide amongst their employees.
Calculating your subsidy is done manually or as per usual by the employer and their resources based on the number of eligible employees that are employed at any time within the three-month period (March 18th, 2020 – June 19th, 2020).
Once remitted to the Canada Revenue Agency, you may reduce your current payroll remittance by the amount of the provided subsidy.
Are you eligible?
As an employee, you must simply be employed in Canada but employers must be:
• Individuals
• Partnerships that consist exclusively of individuals, registered charities or Canadian controlled private corporations eligible for the small business deduction.
• Non-profit organizations
• Registered charities
• An employer with an existing business number and payroll program with the CRA on March 18th, 2020
• An employer who pays wage, salary, bonuses or other remunerations to eligible employees.
To see if you are eligible for the Small Business Deduction press here.
To establish whether your business is a Canadian Controlled Private Corporation please press here.
Where do I apply?
If you are eligible you may apply, with records stating the affected revenues & payments made to employees, through the Canada Revenue Agency’s My Business Account Portal.
Can you claim both 75% & 10% Wage Subsidy?
For employers that are eligible for both the Canada Emergency Wage Subsidy and the 10% Wage Subsidy, any benefit you receive from the 10% wage subsidy would diminish the amount you can then claim under the Canada Emergency Wage Subsidy within the same period.
Basically, if you claim the 10% wage subsidy, it will be deducted from whatever amount you are eligible to receive from the 75% wage subsidy to even out accessing both benefits and to keep you from receiving an excessive amount.
Business Credit Availability
This program was set in place to provide financial assistance for Canadian businesses of all industries across the country. Export Development Canada (EDC) & the Business Development Bank of Canada (BDC) will be providing $65 billion in financial support to provide structure and aid in this time of uncertainty.
These financial crown corporations work closely with private-sector lenders to improve access to financing for Canadian businesses to stay strong and continue to expand despite the current situation.
The optional programs are as follows:
The Canada Emergency Business Account (CEBA)
This program provides funds so that small businesses can cover payroll, rent, utility insurance, property tax or debt service and is 100% covered by the Canadian government. Applying for CEBA must be done so through your business’ primary lender and contacted by phone or email to inquire further about the process.
In order to qualify for this aid the following is required:
You must be a Canadian employer, operating as of March 1st, 2020 and who in 2019, had $20,000 to $1.5 million in total payroll spend. This can include micro-businesses & not-for-profits.
Once approved, your designated financial institution can provide up to $40,000 in interest-free credit facilities.
Additionally, 25% of said loan, or up to $10,000, can be forgiven if repaid by December 31st, 2022. If not paid in full then the remaining balance will then become a three-year term loan at 5 percent interest.
EDC Loan Guarantee for Small and Medium Enterprises
Financial Institutions may issue operating credit and cash flow terms of up to 6.25 million to existing clients with 80% guaranteed by Export Development Canada (EDC). This is done in an effort to provide financial support to companies that were generating revenue and were financially viable previous to the impact of the COVID-19 outbreak.
Similarly, the loan must strictly be used for operational expenses and not the following:
• Dividend payouts
• Shareholder loans
• Bonuses
• Stock buyback
• Option issuance
• Increases to executive compensation
• Repayment or refinancing of other debt
BDC Co-lending Program for Small & Medium Enterprises
This program is available to businesses that were financially viable and revenue-generating before the impact of the COVID-19 outbreak that require term loans for operational and liquidity needs. Such loans would be interest-only for the first 12 months with a 10-year repayment period.
The program is segmented to fit the needs of three different business sizes:
• Loans of up to $312,500 to businesses with revenues of less than $1 million.
• Up to $3.125 million for businesses with revenues between $1 million and $50 million.
• Up to $6.25 million for businesses with revenues in excess of $50 million.
Please contact your primary lender for further details of your eligibility and more information on how to apply.
