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Updated: April 7, 2021
Canada Emergency Wage Subsidy (CEWS) [75% wage subsidy]
On March 3, 2021, the government of Canada announces changes to Canada Emergency Wage Subsidy, Canada Emergency Rent Subsidy and the Lockdown Support program.
The following changes are:
Choice to decide between the following periods:
The amount of eligible remuneration paid per week:
Qualifying periods added
(Added: qualifying periods 11 to 17 – details to follow)
The final period ends no later than June 30, 2021.
For the entitlement periods 5 and thereafter, if an employee has taken parental leave or other EI leave in accordance with paragraph 12 (3) of the EI Act for the entire period from 1 July 2019 to 15 March 2020, the reference period for that employee may be chosen as the period of 90 days prior to commencement of leave.
All eligible employers that experience any level of qualifying revenue decline may be eligible to claim a subsidy.
The subsidy rate of the revised CEWS varies depending on the level of decline in “qualifying revenues.”
The Revised CEWS is based on two components – a base rate and a top-up rate
A maximum base rate is available if a decline in revenue of at least 50% occurred during that period. If the decline is less than 50%, the base rate is reduced.
The maximum base rate for periods 5 and 6 is 60% and gradually decreases.
The maximum base rate for period 8 and 10 is 40%.
The maximum top-up rate is 25% in qualifying Periods 5 to 9. It is available if the qualifying revenue drop is 70% or greater.
The decline in qualifying revenue is computed by comparing either:
qualifying revenue in the preceding 3 months to revenue for the same months of the prior year,
average monthly revenue in the preceding 3 months to average monthly revenue in January and February 2020.
Rate Structure of the combined base CEWS and the top-up CEWS for the most affected employers
|Revenue drop in the current 1–month reference period||
Period 7: August 30 – September 26
Period 8 to 10: September 27 – December 19
Period 11 to 13: December 20 – March 13
Period 14 to 16: March 14 – June 5
|Maximum weekly benefit per employee||Up to $847||Up to $573||Up to $595||Up to $595|
|Revenue drop 50% and over||75% (50% base CEWS + 25% top-up)||65% (40% base CEWS + 25% top-up)||75% (40% base CEWS + 35% top-up)||75% (40% base CEWS + 35% top-up)|
|0% to 49%||
1.0 x revenue drop +25%
(e.g., 1.0 x 20% revenue drop + 25% = 45% CEWS rate)
0.8 x revenue drop+ 25%
0.8 x revenue drop+ 0%
0.8 x revenue drop+ 0%
The total available subsidy in respect of each week during a qualifying period in respect of an active eligible employee is computed by multiplying the applicable base rate plus the applicable top-up rate by total “eligible remuneration” of up to $1,129.
(Base Percentage + Top-up Percentage) x Eligible Remuneration (up to $1,129 per week)
The reference periods to determine the qualifying revenue decline in percentage are based on current monthly revenues compared to 2 options:
Note: An employer is not required to use the same revenue reference period approach used for the qualification of Periods 1 to 4. But they need to use the same approach to qualify for Periods 5 to 10.
For qualifying period 2,3, or 4, 70% (for qualifying period 5 to 17 – (any decline in qualifying revenue is sufficient).
The Safe Harbour Rule is used to ensure to qualify for periods 5 and 6 (July 5 to August 1 and August 2 to August 29).
A rate of 75% of the CEWS is available if the revenue decline is at least 30%. (i.e. the safe harbour rules ensure that for Qualifying Periods 5 and 10, employers will have access to a CEWS rate that is at least as high as the rate would have been under the initial CEWS).
The subsidy calculation for furloughed employees starting August 30 aligns with the benefits provided under the CERB and/or Employment Insurance. The employer portion of contributions in respect of the CPP, QPP, EI, and the QPIP continues to be refunded to the employer.
The amount of the subsidy given for furloughed employees relies on the claim period:
75% of the amount of remuneration paid, to a maximum benefit of $847 per week;
The CEWS is computed based on remuneration paid in respect of a week during a qualifying period; the remuneration may be paid at any time before January 31, 2021.
Deadlines to submit claims extended
Qualifying entities can still file for an application it must be received before February 2021.
1. Formal appeals applications: provide an appeal process based on the existing procedure for notices of determination that allows for an appeal to the Tax Court of Canada.
2. Asset Sales: provide continuity rules for the calculation of an employer’s drop in qualifying revenues in certain circumstances where the employer purchased all or substantially all of the assets of a business during a qualifying period.
Continuity rules provide for calculating an acquirer’s drop in revenues. These rules are subject to conditions, which include:
Where the conditions are met, the revenue from the acquired assets in both the past or current reference period is included in the buyer’s revenue for the qualifying period and excluded from the seller’s.
Asset Sales: Instead of having to acquire all or substantially all of the business property, the condition may be met by acquiring all or substantially all of the property of the seller, which can reasonably be considered necessary for the eligible undertaking to be able to operate a business of the seller or part of a business of the seller as a business.
4. New “baseline remuneration” definition to better accommodate seasonal employees and employees returning from extended leaves.
Bill C-20 adds two more alternative baseline periods:
5. Allowing prescribed organizations that are registered charities or NPOs to choose whether or not to include government-source revenue in “qualifying revenue” for the purposes of the CEWS program.
6. Allowing entities that use the cash method of accounting to elect to use accrual-based accounting to compute their revenues for the purpose of the CEWS program.
7. Consolidated vs. Non-consolidated Revenue – provide relieving CEWS computation measures for corporations that have amalgamated and for eligible entities that use a payroll service provider.
8. Trusts may be an “eligible entity”– which provides for the aligned treatment of trusts and corporations for the purposes of the CEWS.
New Qualifying Periods 11 to 17
The maximum CEWS rate for Qualifying Periods and reference periods 11 – 17 (Status: to be announced).
The “top-up rate percentage” – is replaced by the percentage determined by the regulation for the qualifying period. If there is no percentage determined, the lesser of 25% and the percentage determined by the formula.
“Top-up revenue reduction percentage” – to calculate the revenue decline test. Instead of the three-month revenue decline test for the top-up subsidy. Both the “top-up rate” and “base-rate” will be determined by the employer’s monthly revenues, the year-over-year basis for current or previous months.
Bill C-9: Other changes
Application deadlines: the deadline for application is January 31, 2021, and 180 days after the end of the specific period.
“Eligible employee: employees who did not receive a remuneration for 4 or more days do not qualify as an “eligible employee.” This applies for periods 1 to 4. The employee is required to be employed primarily in Canada.
Joint Ventures: all interest in an eligible entity is owned by all the participants in the joint venture. The revenues produced in this venture can be used to qualify for periods of revenue instead of its own, to qualify for the revenue decline test.
Asset purchase: the asset purchase rule has been extended to cover unlimited acquisitions. Instead of acquiring all or substantially all the business property, the condition may be met by acquiring all or substantially all the property of the seller, which can reasonably be considered necessary for the eligible undertaking to operate as an enterprise a business of the seller or part of a business of the seller.
Elections: the technical problem preventing elections under these paragraphs after the fourth period has been fixed.
Amending or revoking elections: a qualified entity may now amend or revoke an election made on or before the date that the application is due for the first qualifying period in respect of which the election is made.
Eligibility of employees: workers who are mainly employed in Canada, and this requirement is limited to the period in which the person is employed by the eligible institution.
Election: You may be eligible for both the TWS and the CEWS. Employers that are eligible for both subsidies can claim only a maximum total subsidy of 75% of the eligible remuneration that they pay. Therefore, if you are eligible for both subsidies, you must reduce your CEWS claim by all amounts you claim under the TWS for the payment dates in a specific CEWS claim period.
If an employer chooses, they may elect for the TWS to be equal to a lower percentage of the remuneration they pay. If you claim less than the total 10% amount you are eligible for, the CRA will consider that you elected to reduce your eligible subsidy.