GST/HST Holiday Tax Break

Bill C-78, the Tax Break for All Canadians Act, has been adopted by the House of Commons and is now before the Senate. The Bill proposes a temporary GST/HST tax break on food, beverage, books, children’s supplies, toys, and holiday decorations. 

If passed by the Senate, the tax break would begin on December 14, giving little time for businesses to implement the point of sale and accounting system changes required to action the tax break. 

We’ve highlighted sections of the guidance most likely to impact organizations in our sector, and have provided our own guidance on how to implement changes to your accounting processes so you’ll be prepared when the tax break comes into force.

You can read the Government of Canada’s explainer through this link: GST/HST holiday tax break - Canada.ca 

Overview

The program requires businesses to stop charging GST/HST on qualifying goods at checkout as of December 14, 2024. It is set to run until February 15, 2025. Businesses are responsible for not charging GST/HST on qualifying goods during this period.

This measure temporarily zero-rates supplies of the qualifying goods and services, meaning the tax rate charged on these items during the specified period is 0%. Businesses registered for GST/HST can still claim back the tax they paid on expenses related to these exempted items, as long as the goods or services meet the qualifying criteria.

What is impacted?

The following types of items qualify for the GST/HST holiday tax break:

• Children's clothing and footwear

• Children's diapers

• Children's car seats

• Children's toys

• Jigsaw puzzles

• Video game consoles, controllers, and physical video games

• Physical books

• Printed newspapers

• Christmas and similar decorative trees

• Food and beverages and related services

We recommend everyone review each category in detail on the Government of Canada’s website: GST/HST holiday tax break - Canada.ca. 

The two categories our audience is most likely to be affected by are Physical books, and Food and beverages and related services. You can find a full list of details on what qualifies and what is excluded at the bottom of this email.

Qualifying items also must both be paid for in full and delivered/made available to the buyer during the period from December 14, 2024 to February 15, 2025.

When making purchases

Businesses will be responsible for implementing the tax break, and as a shopper, you will automatically receive this tax break on the qualifying things you buy. There will be no GST/HST charged on the item when you make your purchase.

If you receive an invoice or bill for a qualifying item during the period that includes GST/HST, we recommend contacting the supplier and requesting an updated invoice.

When making Sales

Make sure to use the zero-rated tax code when selling qualifying products during the holiday period.

If you are using a point of sale (POS) system like Square, Shopify, etc., you will need to make sure that the tax code assigned to each qualifying item is set to zero-rated.

Using the zero-rated codes will ensure that Input Tax Credits (ITCs) can still be applied against your total taxes payable for the period.

Books and Food & Beverage detailed breakdown

These items qualify as physical books and would have no GST/HST charged:

• Most published, printed books (hardcover or softcover)

• Updates of printed books

• Guide books, and atlases that do not mostly contain street or road maps

• Magazines and periodicals (that have no more than 5% of their printed space devoted to advertising) supplied by subscription, if all the consideration is paid during the relief period and only for those magazines or periodicals that are delivered during the relief period

• Physical audio recordings of printed books, if 90% or more of the recording is a spoken reading of a printed book, including abridged versions (for example, a cassette, compact disc, or reel-to-reel tape version of a published book)

• Physical recordings of a performance of a published play

• Bound or unbound printed versions of scripture of any religion, such as the Quran, the Bible, prayer books, missals, hymn books, and Torah scrolls

• Illustrated versions of religious scriptures (for example, comic book versions)

• Printed books that are wrapped or packaged for sale as a single item with a physical read-only medium that is made up of either a reproduction of the printed book or material that makes specific reference to the printed book

These items would not qualify as physical books and would still have GST/HST charged:

• E-books

• Downloadable audio books and e-audio books

• Magazines and periodicals that are not purchased by subscription or that have more than 5% of their printed space devoted to advertising

• Books designed primarily for writing on, such as address books, diaries, journals, and notebooks

• Colouring books, scrapbooks, sticker books, sketchbooks and albums for photographs, stamps or coins

• Brochures, pamphlets, catalogues and advertising material

• Warranty booklets and owner's manuals

• Agendas and calendars

• Certain directories and collections of street or road maps

• Cut-out and press-out books

• Collections of patterns, stencils, or blueprints

• Programs for events or performances

• Rate books

• Recordings of performances of musical scores

• Recordings of unpublished manuscripts

• CD-ROMs, DVDs, and Blu-ray discs with textual or visual information

These food and beverage related items would qualify and have no GST/HST charged:

• Restaurant meals, whether dine-in, takeout, or delivery (including meals at cafés, pubs, food trucks, and other food and beverage establishments)

• Prepared foods including sandwiches, salads, vegetable or cheese platters, and pre-made meals

• Snacks including chips, candy, baked goods, fruit-based snacks, and granola bars

• Non-alcoholic drinks, such as coffee, tea, carbonated drinks, juices, and smoothies

• Beer and malt beverages

• Wine, cider and sake (including fortified) that are 22.9% alcohol by volume (ABV) or less

• Spirit coolers and premixed alcoholic beverages that are 7% ABV or less

• Catered meals, including the catering fee for providing, preparing, or serving qualified food and beverages

These items would not qualify and would have GST/HST charged:

• Food or beverages sold from a vending machine

• Alcoholic beverages (other than beer, malt beverages, wine, cider, and sake) with more than 7% ABV

• Dietary supplements

• Cannabis products, even if they are food or beverages

• Other items that do not qualify as food or beverages for human consumption (for example, pet food)

If you have any questions, please feel free to reach out to us and we’d be happy to provide an advisory call to support you!

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The above is a version of a recent edition of Young Associates’ newsletter. Yu can sign up for our newsletter list at the link at the bottom of this page.

How to Access My Business Account and Authorize a Representative with the CRA

“My Business Account” is your organization's account page with the CRA. If your organization has a Business Number, it will automatically have a Business account. However, it can sometimes be difficult for organizations (charities especially) to register for or get access to My Business Account.

For businesses that have owners, the owner's SIN is automatically linked to the BN, which simplifies the process. Charities, of course, do not have owners -- but CRA considers the board of directors to be the "owner." This creates complexity for charities because as board members change, the owners list in My Business Account must be updated. If the list falls out of date, charities can have difficulties getting access.

When your Business Number is first set up, the owner of your organization will have their SIN automatically linked to your BN, and will be able to access My Business Account. For charities, the owner of the organization is typically the board of directors. If the board changes and new board members aren’t added to the owners list in My Business Account, it can lead to difficulties getting access.

Having access to My Business Account is very important, as it allows you, your accountant, or your bookkeeper to perform essential tasks related to GST/HST, payroll, and the administration of your charitable status.

We’ve seen a number of organizations run into roadblocks when adding a representative to My Business Account, so we’ve created the following instructions to help you along the way.

We’ve also addressed a number of common issues at the bottom of this page.

Adding a Representative

Before you start, you will need the following:

1. Your organization’s Business Number

2. The RepID, GroupID, or Business Number of the person or entity you’re adding as a representative

3. Make sure you can log into My Business Account as an owner, or to Represent a Client as a level 3 delegated authority (see: What is a “Level 3 delegated authority?” below for more information)

If you don’t have all of the above, see the bottom of this article for tips on how to get the process started.

Step 1: Log in through My Business Account using your regular CRA credentials

• Use whichever login information you use for your own CRA login. If you do not have a CRA login, follow the instructions through CRA sign-in services. 

• Note: Only business owners can authorize a representative through My Business Account. However, representatives with Level 3 delegated authority can also add new representatives through Represent a Client. 

  • If you have Level 3 access, log in to Represent A Client and enter your organization’s Business Number to access the Business Account. Start at step 2 below to complete the process of adding a representative.

Step 2: Go to “Profile” at the top of the page:

Step 3: Find “Manage authorized representatives” partway down the page:

Step 4: Click the “Authorize a representative” button

Step 5: Enter the RepID, GroupID, or Business Number (BN) of the entity you wish to authorize

• If you are a Young Associates client, you can use our Business Number: 818854564

Step 6: Click Next

Step 7: Select “Update and view (level 2)”. This allows your accountant or bookkeeper to view your information and submit filings on your behalf. For more information about the different levels of access, visit the CRA website.

Step 8: No expiry date is required

Step 9: Select “All accounts”

Step 10: Click Next

Step 11: Confirm and submit

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Common Issues, Questions, and Next Steps

• If you do not have a CRA login

  If you're not already registered with the CRA, follow the instructions through CRA sign-in services.

  If you already use your CRA “My Account”, you can use the same credentials to log into My Business Account and to Represent a Client.

• If have a CRA Login but have not signed in through My Business Account before

  If you're already registered for “My Account” with the CRA, you will also have access to My Business Account and Represent a Client. Use the CRA user ID and password (or sign-in partner) that you use for your personal CRA account to sign in to My Business Account or to Represent a Client.

• If you are able to log in to My Business Account but don’t see the BN of your organization or are seeing an error message

  Log in to My Business Account and navigate to “Manage profile – add BN to profile”.

  Enter your organization’s Business Number (BN).

  If your SIN or ITN is associated with the BN in the CRA’s records, you will now have access to My Business Account.

  If you encounter an error message with ref. code: MBA-001 when entering your organization’s Business Number in My Business Account, it means that your SIN is not associated with the BN in the CRA’s records.

  You will need to call the CRA at 1-800-959-5525 to request for your SIN to be associated with the BN. They will ask you to confirm your identity by responding to confidentiality questions that will require you to refer to recently filed tax documents and articles of incorporation. Have your files handy.

• If an owner at your organization already has access to My Business Account, and you also need access

  You can gain access as a level 3 delegated authority. Ask whoever currently has access to authorize you as a level 3 representative using your RepID.

  If you are an owner, partner, or director of the organization, you will want to be added to the CRA account as an owner. You will need to go through the process of adding yourself as an owner by following the instructions on this page of the CRA.

• If you do not have a RepID

  Visit the Represent a Client page and log in using your CRA login credentials. Once logged in, you will be prompted to set up a Represent a Client account and will receive a RepID.

  If you don’t have CRA login credentials, go to the Represent a Client page, scroll down to the link that says "CRA Register" and follow the instructions to log in.

• What is a “Level 3 delegated authority?”

  When an owner adds a representative to My Business Account, they can specify 3 levels of access (more information on this page of the CRA website). Level 1 is view-only. Level 2 can make certain changes to the account (this is the typical access you would grant your bookkeeper and accountant). Level 3 allows full access, including authorizing new representatives.

  Level 3 access can only be granted to an individual with a RepID, not an organization, and would typically be used to give access to Executive Directors or other high-level staff at an organization.

  If a delegated authority leaves their position, they should authorize another representative to fill their role. This ensures that owners or directors do not need to approve a new delegated authority.

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This tip sheet was created by the Young Associates team based on the best information available as of the date of posting.

The contents of this tip sheet comprise Young Associates’ views. They do not constitute legal or other professional advice. You should consult your professional advisor for advice relevant to your situation.

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2023), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Canada Recovery Hiring Program

Subsidy programs like the CEWS and CERS are ongoing, but a new program also recently began to help hire new staff as businesses start to recover from the pandemic shutdowns. 

Program Overview

The Canada Emergency Wage Subsidy (CEWS) was recently extended, and its end date is now set for October 23, 2021. Though there is a potential for further extension, the Canada Recovery Hiring Program (CRHP) may replace it come October.  

The CRHP and CEWS are currently both active and running on the same period schedule, but you may only receive subsidy from one program at a time. CRA has built CRHP calculations into the most recent CEWS calculator in order to identify the most beneficial program to claim for the period. 

Eligibility

Most of the eligibility criteria for the CRHP and CEWS are the same, including payroll account requirements and revenue drop thresholds. There are some rules that differ slightly for for-profit corporations and partnerships. Full eligibility criteria can be found here. 

Eligibility is based on revenue drop, using the same calculations as CEWS and CERS. For Period 17 (June 6 to July 3, 2021, the first period the CRHP is available), your revenue drop must be greater than 0%. For the following Periods 18-22 (July 4 - November 20), your revenue drop must be greater than 10% to qualify for the CRHP. 

Subsidy rates are fixed for all periods and are not dependent on % revenue drop. The subsidy rates are as follows:

Claim Period	Min. Revenue Drop Required	Subsidy Rate
17 (June 6 to July 3, 2021)	0%	50%
18 (July 4 to July 31, 2021)	10%	50%
19 (August 1 to August 28, 2021)	10%	50%
20 (August 29 to September 25, 2021)	10%	40%
21 (September 26 to October 23, 2021)	10%	30%
22 (October 24 to November 20, 2021)	10%	20%

Calculations

The CRHP is calculated using how much your overall pay (eligible remuneration) to your employees has increased from the time of the base period of March 14 to April 10, 2021, to the time of the claim period. Eligible remuneration amounts are determined using the same criteria as CEWS, and the base period dates are the same as CEWS claim Period 14.

Amounts for employees who were on leave with pay are not included in the CRHP calculation.

We strongly recommend using the CRA’s calculator to determine your subsidy amount. To use the calculator, you’ll need to know the amount you paid to active eligible employees for the claim period and how much you paid active eligible employees in the base period (March 14 to April 10, 2021). The calculator will use the increase in pay from the base period to the claim period to determine your subsidy amount. 

Disclaimer: The above explanation is based on information available as of July 30, 2021. The program is likely to change as the situation develops

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This info sheet was created by the Young Associates team based on the best information available to us as of the date of posting. We are happy to receive your comments at info@youngassociates.ca.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Charities Working with Intermediaries

Registered charities are held to high standards of behaviour. Through the T3010 and its compliance program (read: audits) the CRA’s Charities Directorate monitors how charities receive and spend money. As a charity manager, you need to be careful about how you work with non-charities. Of course charities work with nonprofits and other organizations all the time! It is your responsibility to ensure that your working arrangements are compliant.

The CRA recently issued a new guidance document concerning charities working with non-charities in Canada, and we wanted to draw your attention to this new version of the plain-language guide to help you clarify your internal policies. Specifically, the issue is charities accepting money for the purpose of passing it on to another organization. In these cases, charities are accepting money on behalf of non-charities — often in situations where the non-charity solicits the funds — and are transferring the funds to the non-charity to use in various projects. 

Sometimes people refer to this as a “charitable trusteeship” (not language that CRA uses), and an avenue whereby a charity can help a non-charity to attract donations. Be careful! If this is how you’re thinking about it, quite likely you are not complying with the regulations.

According to the CRA, the Income Tax Act allows a charity to operate in only two ways:

1. carrying on its own charitable activities

2. making gifts to qualified donees

Qualified donees include registered charities and other organizations that have been granted status by CRA.

The worst-case scenario is an arrangement whereby the charity acts as a conduit by simply passing on the funds with no meaningful oversight.  CRA states, “a conduit is a charity that funnels its resources to a non-qualified donee without direction or control. Acting as a conduit contravenes the Income Tax Act, and could jeopardize a charity's registration.”

The key to remaining compliant is a written agreement — an “intermediary agreement” — drafted specifically with reference to CRA’s guidelines. 

The intermediary arrangement brings the relationship under point 1, above, making clear that it’s part of the charity’s own activities, and that the activity falls within the charity’s mandate. The agreement must specify how the charity will exercise direction and control over the project. This includes monitoring and supervising the activity throughout the duration of the project.

In order to comply with the Income Tax Act, you need to state, first, that your organization is a registered charity, set out how the proposed activities further your organization’s charitable objects, and then how you will monitor and supervise the project as it unfolds.

When these criteria are met, it is possible to remain compliant when entering into the agreement. Failure to comply with the CRA guidelines can result in temporary or permanent revocation of your charitable status, and we want to make sure that that doesn’t happen. 

Part of our service to you is to be conversant with applicable CRA rules, and alert to possible non-compliance risks. If you have any further questions, we are happy to assist in your research and share resources that may help in your decision-making. 

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know going in how much our work will cost — and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

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This tip sheet was created by the Young Associates team based on the best information available to us as of the date of posting.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Budgeting with CEWS

One thing that is top of mind for our customers during the pandemic is budgeting and cash flow. Considering that earned revenues have largely been reduced and the Canada Emergency Wage Subsidy (CEWS) has been a major stabilizing factor during unstable times, projecting CEWS has become a priority for many. 

However, due to the ever-changing nature of the subsidy, as well as the estimation involved in the calculation and forecasting process, attempting to project CEWS is a much more difficult task than most would assume.

Here is some further detail to help you understand how challenging it is to forecast CEWS, and what your alternatives are when trying to project budget and cash flow.

Estimating Future Revenues

There are 2 steps to calculating CEWS. The first is to compare the current period’s revenues to a previous period to measure the revenue drop. This is where the first element of uncertainty lies. It is very difficult to forecast revenues with confidence. We don’t know what public health challenges lie ahead, so many organizations are struggling around programming decisions, what to charge for vs. offer for free, and what fundraising avenues to pursue.

Nonetheless, your bookkeeper needs your revenue estimates by month before they can make any further calculations. 

If you are accustomed to budgeting annually, you will need to pivot to a monthly budgeting process in order to generate estimates for CEWS.

Your bookkeeper will have evaluated the benefits of using the cash or the accrual method of reporting. If your company is filing using the cash method, your bookkeeper may need an up to date monthly cash flow forecast.

The Sliding Scale Factor

The second step is to calculate the subsidy rate. This tip sheet contains details on the base and top-up rates for Periods 8 to 10. 

Since the base subsidy rate is calculated on a sliding scale, any errors from step 1 will be multiplied by a factor of 0.8 for Periods 8 to 10. 

Additionally, if you have a greater than 50% revenue drop, a faulty revenue forecast will result in an inaccurate top-up subsidy estimate.

Estimating Future Payroll Costs

The second step to calculating your CEWS subsidy is to apply the rates to your payroll cost. Your bookkeeper will need your staffing costs by employee, by month in order to make the calculations. Employee detail is required because there is a maximum per employee.

Remember to allow for any anticipated changes — and any contingencies that should be discussed. For example, if you are considering a layoff under certain circumstances, your payroll will be reduced and your CEWS forecast needs to be reduced accordingly.

Government Policy

The government reserves the right to amend CEWS. We have seen a number of important changes to the program since it was first announced. We have also seen the rules confirmed very close to the implementation date. For instance, CEWS Period 8 arrangements were confirmed a few weeks after the Period start date.

The government has announced that CEWS will continue until June of 2021, but at this point we know the terms and conditions only until Period 10, which ends on December 19.

Risks

As you can see, there is a significant risk of inaccuracy in forecasting CEWS. The numbers involved are large. For many organizations, payroll is the single largest expense — and de facto CEWS has become one of the largest revenue sources.

Understandably, managers want to build CEWS into their budgets. For many organizations, CEWS has proven to be the single most stabilizing factor during the pandemic.

But, as you can see, a budget forecast for CEWS involves estimates on top of estimates — plus the “unknown” of future public policy changes.

Possible Approaches

The more conservative your estimates, the less likelihood you will wind up in trouble.

One important challenge with budgeting — in any situation — is that once the plan is on paper, people tend to feel “authorized” to proceed. This can mean that staff members forge ahead with planned expenses (which are in your control) while revenues (which are generally not in your control) remain uncertain.

One idea is to omit CEWS altogether. Define what revenues you’re able to count on, and what expenses you expect before even taking CEWS into account. This will give you a better idea of the state of your organization and your internal cash flow. 

Or, omit the top-up subsidy and prepare your budget forecast only on the base rate. 

If you are dependent on CEWS and therefore need to see it in the budget, prepare the best possible documentation for your revenue forecasts. Keep good notes! Review often. As each month elapses, re-evaluate your estimates for upcoming months. 

Lowball revenue forecasts, which will lowball the CEWS rate that you may claim. Highball expense forecasts, including salaries — but hold back as much as possible on actual spending.

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know going in how much our work will cost — and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

Contact us: info@youngassociates.ca

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This tip sheet was created by the Young Associates team based on the best information available to us as of the date of posting.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

CERS & CEWS Updates

2020-12-04 UPDATE: The 2020 Fall Economic Update on November 30 announced that the maximum CEWS rate will be raised to 75% (40% base subsidy, 35% top-up) for the period beginning December 20, 2020 and extending this rate until March 13, 2021. The current rate of the Canada Emergency Rent Subsidy and Lockdown Support will also remain in place until March 13, 2021. Official details about this have yet to be announced. 

Canada Emergency Wage Subsidy Updates (CEWS)

With the introduction of Bill C-9, the Federal Government provided more insight into the Canada Emergency Wage Subsidy (CEWS) and the newly announced Canada Emergency Rent Subsidy (CERS). This is the first major announcement since we were first informed of the extension that would allow the CEWS to continue through June of 2021. The new bill gives us information about Period 10 (Nov 22 - Dec 19), and comes with a few other adjustments. 

The maximum base subsidy rate of 40% for Period 8 will remain in place for Periods 9 and 10:

	Period 8:  Sep 27 – Oct 24	Period 9: Oct 25 – Nov 21	Period 10:  Nov 22 – Dec 19
Maximum weekly benefit per employee	Up to $452	Up to $452	Up to $452
Revenue drop: 50% and over	40% Maximum base subsidy rate	40% Maximum base subsidy rate	40% Maximum base subsidy rate
Revenue drop: 0% to 49%	0.8 x revenue drop (e.g., 0.8 x 20% revenue drop  = 16% base CEWS rate)	0.8 x revenue drop (e.g., 0.8 x 20% revenue drop  = 16% base CEWS rate)	0.8 x revenue drop (e.g., 0.8 x 20% revenue drop  = 16% base CEWS rate

Harmonization of revenue-decline test for both base and top-up subsidies: The top-up subsidy used to be calculated on the basis of a 3-month revenue decline. In order to align this calculation with the base subsidy calculation, the same revenue decline calculation will now be used for both the base and top-up subsidies. 

Under both the base and top-up subsidies, revenue decline will be determined using the general or alternative method as outlined in the table below.

Period	Revenue Drop Calculation Method (for Base Subsidy & Top-up Subsidy)
Period 8	General	October 2020 over October 2019 or September 2020 over September 2019
	Alternative	October 2020 or September 2020 over average of January and February 2020
Period 9	General	November 2020 over November 2019 or October 2020 over October 2019
	Alternative	November 2020 or October 2020 over average of January and February 2020
Period 10	General	December 2020 over December 2019 or November 2020 over November 2019
	Alternative	December 2020 or November 2020 over average of January and February 2020

Safe Harbour Rule: To ensure this change does not result in a lower wage subsidy for eligible employers than you would have received using the previous revenue decline test, a safe harbour rule will apply from 27 September to 19 December 2020 (i.e., from Periods 8 to 10). Under this rule, an eligible employer will be entitled to a top-up subsidy rate that is no less than the rate that would have applied under the three-month revenue-decline test, which you would have used in Period 7. 

Amendment of eligible employee definition: Now, eligible employee means someone who was employed primarily in Canada throughout the qualifying period. This amendment clears up some vagueness that was previously in the definition.

A summary of Bill C-9 can be found on this Government of Canada webpage. 

More info found at ey.com.

Canada Emergency Rent Subsidy (CERS)

In addition to updating the CEWS, Bill C-9 also introduces the Canada Emergency Rent Subsidy (CERS). 

As opposed to CECRA (Canada Emergency Commercial Rent Assistance), this subsidy provides relief directly to business tenants, and uses a sliding scale to determine eligibility. It is also aligned with the CEWS, using the same period start and end dates as well as the same initial revenue drop calculation. Similar to CEWS, it has been announced for September 27-December 19, but is expected to continue through June of 2021.  

What can the subsidy be used for? 

Eligible Expenses

• Commercial rent

• Property taxes (including school and municipal taxes paid by owners)

• Property insurance (paid by owners)

• Interest on commercial mortgages, less any subleasing revenues

• Must be based on agreements entered into before October 9, 2020, and continuations of those agreements 

• Must apply to real properties located in Canada

Ineligible Expenses

• Sales tax on any eligible expenses

• Expenses relating to residential property used by the taxpayer (eg: their house or cottage)

• Payments made between non-arm’s-length entities

• Mortgage interest expenses in respect of a property primarily used to earn, directly or indirectly, rental income from arm's-length entities 

Expenses for each qualifying period would be capped at $75,000 per location and be subject to an overall cap of $300,000 that would be shared among affiliated entities.

Who can get the subsidy? 

Eligibility criteria for the CERS is generally aligned with the CEWS. Eligible entities include individuals, taxable corporations and trusts, non-profit organizations and registered charities. Public institutions are generally not eligible for the subsidy. For a complete list of eligible entities, please visit https://www.canada.ca.

In addition, an eligible entity must meet one of the following criteria:

• Have a payroll account as of March 15, 2020 or have been using a payroll service provider

• Have a business number as of September 27, 2020 (and satisfy the Canada Revenue Agency that it is a bona fide rent subsidy claim)

• Meet other conditions that may be prescribed in the future

Calculations

There is both a base subsidy and a top-up subsidy available through the CERS. The revenue drop calculation method is the same as the CEWS and can be found in the table above. 

The Base Subsidy rate for the CERS is calculated on a sliding scale as follows:

Revenue reduction %	Base Subsidy Rate
> 70%	65%
50-70%	40% + ([revenue reduction %] − 50%) × 1.‍25
< 50%	0.‍8 × [revenue reduction %]

The top-up amount is only available for properties that have been temporarily shut down or had their activities significantly limited by a mandatory public health order for at least one week. The maximum top-up subsidy rate is 25%, and is calculated using the following formula:

0.25 × [# days in period for which the property is subject to a public health restriction]
[# days total in qualifying period]

Deadline

An application for the CERS must be filed no later than 180 days after the end of the qualifying period.

Various other rules that are relevant to the CEWS, such as the deemed government assistance rule, anti-avoidance rules, penalty provision, and notice of determination rules, also apply for purposes of the CERS.

CERS claims will be accepted retroactively for the period from 27 September to 24 October 2020. Similar to the CEWS, the new CERS program will be administered by the Canada Revenue Agency (CRA) as opposed to the Canada Mortgage and Housing Corporation, which administered the CECRA.

More information available from the Government of Canada Website.

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know going in how much our work will cost — and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

Contact us: info@youngassociates.ca

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This tip sheet was created by the Young Associates team based on the best information available to us as of the date of posting.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.