Updated Federal and Provincial COVID-19 Response for Small Businesses and Entrepreneurs
Article written by: Jared Behr
Updated April 1st
Each day new measures of economic relief are being announced by the government. Unfortunately, not all of the economic relief measures have been formalized yet and so we are often short on details.
We appreciate your patience with us as we respond to your questions with available information and help you through this economic and health crisis.
Wage Subsidy
On April 1st 2020 the Department of Finance Canada released details on the announced 75% wage subsidy available to qualifying businesses. We have linked to the details here: Government Announces Details of the Canada Emergency Wage Subsidy
The underlying purpose of the wage subsidy is to incentivize business owners to keep their employees through these tough economic times. In fact, the government hopes some businesses will re-hire workers previously laid off.
The 75% wage subsidy will be effective for 3 months (12 weeks), retroactive to March 15, 2020.
It is available to Eligible employers who suffer a drop in gross revenues of at least 30% in one or more of the months of March, April and May as compared with the same month of the prior year (2019). We expect the Canada Revenue Agency and department of finance will audit these claims at a later date.
The Canada Emergency Wage Subsidy would apply at a rate of 75 per cent of the first $58,700 normally earned by employees – representing a benefit of up to $847 per employee per week. There is no restriction on the number of employees covered.
The government hopes that employers will top up the other 25% of wages to employees. Eligible employers include employers of all sizes, except for publicly traded companies.
Eligible employers would be able to access the Canada Emergency Wage Subsidy by applying through a Canada Revenue Agency online portal. More details regarding how to apply for the program will follow.
Finance expects the funds to be available for companies in approximately 6 weeks. The funds will be sent to the businesses through the CRA via direct deposit. Consequently, we recommend you have your business set up with direct deposit if it isn’t already.
Those organizations that do not qualify for the Canada Emergency Wage Subsidy may continue to qualify for the previously announced wage subsidy of 10 per cent of remuneration paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
Taxes Payable - Deferred
The Canada Revenue Agency has deferred almost all taxes (personal and/or corporate) that become owing on or after March 18th 2020 to August 31, 2020. This applies to new balances as well as instalments.
For reference, a March 15th personal income tax instalment payable does not qualify for this tax deferral because it became payable before March 18th.
Interestingly, this does not include taxes payable by a corporation on dividend income under Part IV of the Income Tax Act.
If your company is a passive “holding company” with a December 31st year-end your company does not qualify for the tax deferral as corporate taxes would have become payable two months after year-end on February 29th 2020.
Businesses, including self-employed individuals, may also defer all Goods and Services Tax/Harmonized Sales Tax (GST/HST) payments until June 30th 2020, as well as customs duties owed for imports.
Businesses with over $500,000 of payroll in 2019 can defer their Employer Health Tax (EHT) payment owing to September 30, 2020.
Provincial business tax filing and payment deadlines have also been extended to September 30, 2020.
Canada Emergency Response Benefit (CERB)
If you have lost income because of COVID-19, the Canada Emergency Response Benefit (CERB) will provide you with $500 a week for up to 16 weeks. We strongly recommend you have a CRA MyAccount set up online for yourself in order to facilitate your application for this benefit.
In order to manage the influx of applications the CRA has detailed a schedule for individuals whose birthdays fall into different months of the year to apply on different days of the week. Applications begin on Monday April 6, 2020 for individuals with birthdays in January, February or March.
We recommend applying as early as you are eligible to do so, if you qualify. We have linked to the Full Schedule of Application Dates and Eligibility Details here.
There is also a British Columbia Emergency Benefit for Workers which is meant to provide a one-time $1,000 payment for BC residents who lost income due to COVID-19. The details of this provincial plan are not yet available, but some information can be found here: BC Emergency Benefit for Workers
Cash Flow
We recommend you to speak with your banker as soon as possible with reference to cash flow alternatives available to you and your business.
Payment terms on existing loans, new loans and deadlines for reporting options may need to be addressed.
If your total business payroll was between $50,000 and $1 million in 2019 (see your T4 summary) your business may qualify for a Canada Emergency Business Account (CEBA) loan up to $40,000. Ten thousand of this may be “forgiven” if certain criteria are met.
There are a lot of components to the Federal and Provincial relief packages announced. The items above and more may be relevant to you. We have linked to the list of support that the federal government is providing here: Canada’s COVID-19 Economic Response Plan.
We encourage you to review these options carefully and discuss any questions you might have with us, your banker and/or your corporate or employment lawyer.
Stay healthy and safe.
-Horizon CPA
Thank you to our friends at Horizon CPA 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 Horizon CPA by clicking here.
About Horizon CPA
Horizon Chartered Professional Accountants is known for providing specific and actionable tax planning advice to our clients. We work with small and medium-sized businesses and professionals. We offer a full range of accounting and tax compliance services including preparation of Notice to Reader, Review Engagement and Audited Financial Statements, as well as corporate, personal, trust tax returns and specialized tax returns and elections. We are also experienced in preparing business plans and cash flow projections, business merger and purchase due diligence and tax planning strategies.
Disclaimer: The information provided by Horizon CPA via happier IT on www.happierit.com (the”Site”) [and our mobile application] is for general informational purposes only. All information on the site [and our mobile application] is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information on the Site [or our mobile application].