Government COVID-19 Relief Programs Frequently Asked Questions
Article written by: Gigi Poon
With the significant amount of information released by our Federal Government along with the periodic revisions and addendums, there have been many questions surrounding the details of the COVID-19 Relief Programs. Our friends at Provision have put together a set of frequently asked questions to help you further understand how the programs can apply to you and your business.
Frequently Asked Questions
How do I register for direct deposit?
Register as a Business
Register or login to your existing CRA My Business Account.
If you have given someone Power of Attorney and they have a Represent a Client account they can register on your behalf.
Note that we do not have the ability to register for Direct Deposit on your behalf at this time. If CRA changes the rules around this we will provide you with an update.
I paid myself dividends in 2019, do I qualify for CERB?
Yes, as long as the dividends were non-eligible dividends (dividends on low rate taxable income) and you meet the other criteria. This was a recent announcement from Service Canada that was not clearly communicated last week. We will update this post once more information becomes available.
I am working part-time during the crisis, can I still qualify for CERB?
The government recently announced that working 10 hours or less a week will not disqualify a worker from receiving benefits. Also, if the income earned is less than the CERB benefits, a worker can still qualify for the benefits. More details will be released as to how this will be implemented and if benefits will be reduced while working part-time.
What will happen to my CERB payments if I start working again before June 15?
Each month, CERB recipients will be required to attest that they are still out of work. If the recipient starts working (in excess of 10 hours per week), they will report this to CRA and the benefits will stop.
Does my business qualify for the $40,000 Canada Emergency Business Account loan?
A business must have $50,000 to $1,000,000 of 2019 salary expenses (as reported on the 2019 T4 summary) to qualify. This program is being operated by the banks not directly by CRA. If you have questions on qualifications, please contact your corporate banker. The banks will get the information on the program first.
Can I apply for CEWS benefits personally?
No, CEWS is a business benefit, not a personal benefit. If a business owner was paid a salary by their business before the crisis, the business can claim CEWS benefits on the owner’s salary from March 15 – June 6, similar to other employees.
I'm not eligible for CEWS because my business revenues haven't dropped by -30%. Am I eligible for any other benefits?
The government has announced that the required reduction in revenue is actually 15% for the period of March 15 to April 11 and 30% for the remaining periods (see chart below). If you are still not within the criteria for CEWS eligibility, you may still be eligible for the Temporary Wage Subsidy Program which we have written about in a previous post. Application details for this program will be released by the government at later date.
PERIOD 1: Claiming Period: Mar 15 – Apr 11, Required Reduction In Revenue: 15%, Reference Period For Eligibility: Mar 2020 over March 2019 or Average of Jan & Feb 2020.
PERIOD 2: Claiming Period: Apr 12 – May 9, Required Reduction In Revenue: 30%, Reference Period For Eligibility: April 2020 over Apr 2019 or Average of Jan & Feb 2020.
PERIOD 3: Claiming Period: May 10 – Jun 6, Required Reduction In Revenue 30%, Reference Period For Eligibility: May 2020 over May 2019 or Average of Jan & Feb 2020.
We have laid off our employees and they are on the CERB. Our last payroll was paid out on March 16th. The CEWS eligibility period is for any renumeration paid out on March 15 and later. Does this would mean that we are eligible for CEWS for that March 15 payroll?
CEWS coverage is available for individual employees employed in Canada who have been with remuneration from their employer for more than 14 consecutive days in the applicable eligibility period. As the 1st period is March 15 to April 11, this means that you are not eligible for CEWS.
I received dividends in 2019, can I add myself to my corporation’s payroll to receive CEWS benefits on my salary?
No, while a business can hire new employees during this time, wages and salary paid to new employees ‘not dealings at arm’s length’ (family members of the shareholders) do not count towards the CEWS.
My business closed completely due to COVID-19. Should I rehire my employees to get the CEWS?
There is no simple answer to this question. If the employee(s) were rehired and paid the maximum government benefit (the lower of 75% of their pre-crisis salary or $847/week), the business would receive a subsidy equal to the amount paid. So, the business would net $0 in long-term cash flows and the employees would likely receive greater benefits than those of the CERB program. The major issue with this plan is the timing of the subsidy. It is not expected that the CEWS benefits will be paid until mid to late May 2020. If cash reserves and financing are an issue, paying employees for the next 6 weeks while the business waits for the subsidy may not be possible.
Do I need to rehire all my employees to get the CEWS benefits?
No, some or all of the employees can be rehired. The benefit is based on the wages and salary actually paid to employees for the period of March 15 – June 6.
Do I need to pay employees 100% off their pre-crisis wages and salary to get the CEWS benefits?
No, the government requests that businesses make every effort to pay the full amount if they can afford it. If the business is completely closed or the revenues are severely reduced, this is not possible and paying just the amount to get government benefits is sufficient to qualify.
Will the CEWS benefits be taxable to the business?
Yes, this is a taxable subsidy. Since it is tied to paying tax-deductible wages and salaries the net taxable income will be $0.
As an example: A business has a monthly payroll of $100,000. The business was forced to close due to COVID. The owner decides to pay the employees 75% of their pre-crisis wages (which are all under the $847 threshold).
On April 30, the business pays the employees $75,000 (75% of regular pay) less standard CPP, EI, and income tax withholdings (approximately $25,000). The employees collectively receive $50,000.
On May 15, the business remits the standard payroll withholdings to CRA of $25,000
In mid to late May, the business will receive $75,000 in CEWS benefits.
Taxable CEWS benefits: $75,000
Less: net salary (50,000)
Less: payroll remittance (25,000)
Net taxable income: $0
Income Taxes: $0
Net Income: $0
Will there be more changes to these programs in the future?
Yes, there will be more changes! These programs are very complicated and constantly evolving. Due to the quick announcement of the programs, many business owners and workers were inadvertently overlooked in the initial benefits. Changes have been made and will continue to be made to account for these situations. As more details are announced, our team of experts will keep you up to date on all the changes.
Thank you to our friends at Provision Chartered Professional Accountants for contributing this article. If you have questions or would like to talk to an expert about how this may affect your Canadian business during the COVID-19 pandemic, please reach out to Provision Chartered Professional Accountants by clicking here.
About Provision Group
Our team at Provision Chartered Professional Accountants are passionate about helping businesses succeed through offering advisory, accounting and tax expertise so that owners can focus on the things that matters most to them. Set up a call with one of our relationship managers to see how we can help your business and ideas grow.