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:
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.
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:
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
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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.
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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.
