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Canada Emergency Wage Subsidy (CEWS)

From tax expert Gerry Vittoratos
April 8, 2020

The federal government recently announced a wage subsidy to help businesses keep their staff working during the COVID-19 pandemic. What is it, and how does it work? Let’s find out.

What is the Canada Emergency Wage Subsidy (CEWS)?

The federal government is offering a wage subsidy of 75% for qualifying businesses, for up to 3 months, retroactive to March 15, 2020. The wage subsidy will be the greater of:

  •  75 per cent of the amount of wages paid, up to a maximum benefit of $847 per week;
  • Lesser of:
    • the amount of wages paid, up to a maximum benefit of $847 per week;
    • 75 per cent of the employee’s pre-crisis weekly wage.

Employers may be eligible for a subsidy of up to 100 per cent of the first 75 per cent of pre-crisis wages or salaries of existing employees.

The program will be in place for a 12-week period, from March 15 to June 6, 2020.

Who is eligible for the subsidy?

All employers, regardless of size (income or number of employees) who suffer a drop in gross revenues of at least 30 per cent in March, April or May, when compared to the same month in 2019, would be able to access the subsidy.

The criteria of the 30% drop in revenues will be measured through specific eligibility periods. The table below shows each claiming period and the period in which it has a decline in revenue of 30 per cent or more.

 

Claiming Period

Reference period for eligibility

Period 1

March 15 – April 11

March 2020 over March 2019

Period 2

April 12 – May 9

April 2020 over April 2019

Period 3

May 10 – June 6

May 2020 over May 2019

Source: Ministry of Finance

The employers can be individuals, taxable corporations, and partnerships consisting of eligible employers as well as non‑profit organizations and registered charities.

Employers cannot claim this emergency subsidy for an employee who is collecting the Canada Emergency Response Benefit (CERB).

Employers who are currently receiving the previously announced temporary 10% wage subsidy are still eligible for this subsidy; however, the amount received under the CEWS will be reduced.  

To continue to receive the subsidy, employers must do everything in their power to ensure payment of 25% of remaining earnings.

Tax implications for employers

The amount of the subsidy received by employers will be considered as government assistance, and therefore will be taxable.

The subsidy will also reduce the credits claimed on salaries expenses (such as credits related to R&D expenses) by reducing the expense used in the calculation for such claims.

Where to apply?

Eligible employers can apply for the subsidy through the CRA’s My Business Account portal. Employers have to keep detailed records of their revenues to prove the reduction in revenues.

For more detailed information on the CEWS, please click on the link below:

https://www.canada.ca/en/department-finance/economic-response-plan/wage-subsidy.html

 

 

 

 

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