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Government support measures for businesses during the COVID-19 pandemic

From tax expert Gerry Vittoratos
May 11, 2020

The Federal government has announced support measures for businesses affected by the COVID-19 pandemic.

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. We wrote a detailed blog article ( https://www.thomsonreuters.ca/en/dtprofessionalsuite/blog/canada-emergency-wage-subsidy.html) on this subsidy previously.

Canada Emergency Business Account (CEBA)

The CEBA provides interest-free loans of up to $40,000 for eligible small businesses and non-profit organizations (NPO) to help cover their operating costs during a period where their revenues have been temporarily reduced, due to the economic impacts of the COVID-19 virus.

The program was implemented by financial institutions and Export Development Canada as of April 9, 2020. Eligible borrowers will apply with their financial institutions to receive these loans.

Eligible businesses and NPOs must meet all the criteria below to be eligible:

·        The Borrower is a Canadian operating business in operation as of March 1, 2020.

·        The Borrower has a federal tax registration.

·        The Borrower’s total employment income paid in the 2019 calendar year was between $20,000 CDN and $1,500,000 CDN.

·        The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020, and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as of March 1, 2020.

·        The Borrower has not previously used the Program and will not apply for support under the Program at any other financial institution.

·        The Borrower acknowledges its intention to continue to operate its business or to resume operations.

·        The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

Eligible businesses and NPOs can have 25% of the loan forgiven if it is paid off on or before December 31, 2022.

For more information, please consult the link below:

https://ceba-cuec.ca/

Canada Emergency Commercial Rent Assistance (CECRA)

The CECRA offers forgivable loans to eligible commercial property owners so that they can reduce the rent owed by their impacted small business tenants by at least 75% for the months of April, May and June 2020.

Eligible property owners must meet the following criteria:

·        They own property that generates rental revenue from commercial real property located in Canada.

·        Must be the owner of the commercial real property where the impacted small business tenants are located.

·        You have a mortgage loan secured by the commercial real property, occupied by one or more small business tenants.

·        Owner has entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, that will reduce the impacted small business tenant’s rent by at least 75%.

·        The rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May and June 2020.

·        Declared rental income on the tax return (personal or corporate) for tax years 2018 and/or 2019.

For property owners who do not have a mortgage, an alternative mechanism will be implemented in the future by Canada Mortgage and Housing Corporation (CMHC).

“Impacted small businesses” are businesses, which include NPOs and charitable organizations, that must meet the following criteria:

·        pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement),

·        generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level), and

·        have temporarily ceased operations (i.e. generating no revenues) or have experienced at least a 70% decline in pre-COVID-19 revenues.

To measure revenue loss, small businesses can compare revenues in April, May and June of 2020 to that of the same month of 2019. They can also use an average of their revenues earned in January and February of 2020.

The loans will cover 50% of the gross rent owed by impacted small business tenants during the 3-month period of April, May and June 2020. The property owner will be responsible for no less than half of the remaining 50% of the gross rent payments (paying no less than 25% of the total). The small business tenant will be responsible for no more than half of the remaining 50% of the gross rent payments (paying no more than 25% of the total).

The deadline to apply for the CECRA is August 31, 2020, through the CMHC. However, applications are not open as of the writing of this article.

For more information, please consult the link below:

https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business

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