Federal Programs and Initiatives for Canadian Businesses

 

 

 

New Loan Programs for Businesses

Canada Emergency Business Account (CEBA)

This program is designed for small businesses to have access to capital. It will be implemented by eligible financial institutions in cooperation with Export Development Canada (EDC). This $25 billion program will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, 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. Small businesses and not-for-profits should contact their financial institution to apply for these loans.

To qualify, these organizations will need to demonstrate they paid between $20,000 to $1.5 million in total payroll in 2019, verifiable by Canada Revenue Agency documentation (a T4 summary of remuneration paid, or T4SUM). Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).

Business Credit Availability Program (BCAP)

The federal government has established a Business Credit Availability Program (BCAP) to provide $40 billion of additional support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). BDC and EDC are working with private sector lenders to coordinate on credit solutions for individual businesses, including in sectors such as oil and gas, air transportation, exports and tourism.

This program includes two elements, the Loan Guarantee for Small and Medium Sized Enterprises, and the Co-Lending Program for Small and Medium Sized Enterprises.

Loan Guarantee for Small and Medium-Sized Enterprises

This program provides credit and cash flow term loans to small and medium-sized enterprises. Canadian businesses in all sectors that were otherwise financially viable and revenue generating prior to the COVID-19 outbreak are eligible to apply. It allows financial institutions to issue operating credit and cash flow term loans of up to $6.25 million to existing clients, with 80 per cent guaranteed by EDC. This money is to be used for operational expenses, not for dividend payouts, shareholder loans, bonuses, stock buyback, option issuance, increases to executive compensation or repayment/refinancing of other debt. This program is now available at various financial institutions and credit unions.

Co-Lending Program for Small and Medium-Sized Enterprises

This program provides term loans for operational and liquidity needs of businesses, which could include interest payments on existing debt. Similar to the EDC program, this program is available to businesses that were financially viable and revenue-generating prior to the COVID-19 outbreak.

The program is designed in three segments to target support to different business sizes.

Loans of up to $312,500 to businesses with revenues of less than $1 million.
Up to $3.125 million for businesses with revenues between $1 million and $50 million.
Up to $6.25 million for businesses with revenues in excess of $50 million.

Loans would be interest-only for the first 12 months, with a 10-year repayment period. Applications details will be made available in the days to come by financial institutions.

New Business Subsidy Programs

The Canada Emergency Wage Subsidy (CEWS)

The goal is to help businesses keep and return workers to their payroll through the challenges posed by the COVID-19 pandemic. This would provide a 75 per cent wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020. Applications will be open April 27th and first payments coming the week of May 5th.

Eligible Employers

Eligible employers would include individuals, taxable corporations, partnerships consisting of eligible employers, non-profit organizations and registered charities.

This subsidy would be available to eligible employers that see a drop of at least 15% of their revenue in March 2020 and 30% for the following months (see Eligible Periods). In applying for the subsidy, employers would be required to attest to the decline in revenue.

Calculating Revenues

An employer’s revenue for this purpose would be its revenue in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method.

Employers would be allowed to calculate their revenues under the accrual method or the cash method, but not a combination of both. Employers would select an accounting method when first applying for the CEWS and would be required to use that method for the entire duration of the program.

For registered charities and non-profit organizations, the calculation will include most forms of revenue, excluding revenues from non-arm’s length persons. These organizations would be allowed to choose whether or not to include revenue from government sources as part of the calculation. Once chosen, the same approach would have to apply throughout the program period.

Amount of Subsidy

The federal government has a CEWS calculator to provide approximate revenues companies can expect from the subsidies: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html

The subsidy amount for a given employee on eligible remuneration paid for the period between March 15 and June 6, 2020 would be 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week. Employers will also be eligible for a subsidy of up to 75% of salaries and wages paid to new employees. Eligible remuneration may include salary, wages, and other remuneration like taxable benefits. However, it does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle.

A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of the lesser of $847 per week and 75% of the employee’s pre-crisis weekly remuneration. The subsidy would only be available in respect of non-arm’s length employees employed prior to March 15, 2020. There would be no overall limit on the subsidy amount that an eligible employer may claim.

Emergency Wage Subsidy Example: Bruno and Tisha run a floral shop in Winnipeg, Manitoba. They have four full‑time employees, each earning $800 per week, and 6 part-time employees, each earning $400 per week, for a total weekly payroll of $5,600. Bruno and Tisha have closed their shop and are only fulfilling online orders during this challenging period. They are keeping all of their employees on the payroll, paying them their full regular wages, despite their revenues being down by 30 per cent. Bruno and Tisha would be eligible for a weekly wage subsidy of $4,200 ($600 for each of their full-time employees and $300 for each of their part-time employees).

Eligible Periods

Eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. All employers may calculate their change in revenue using an alternative benchmark to determine their eligibility. This would provide more flexibility to employers for which the general approach may not be appropriate. Under this alternative approach, employers would be allowed to compare their revenue using an average of their revenue earned in January and February 2020.

Employers would select the general year-over-year approach or the alternative approach when first applying for the CEWS and would be required to use the same approach for the entire duration of the program. The amount of wage subsidy received by the employer in a given month would be ignored for the purpose of measuring year-over-year changes in monthly revenues.

• For example, if revenues in March 2020 were down 20% compared to March 2019, the employer would be allowed to claim the CEWS on remuneration paid between March 15 – April 11, 2020.
• Alternatively, this employer could use its average revenue from the months of January and February 2020, instead of March 2019, to determine if it is eligible for the CEWS.
• Once an approach is chosen, the employer would have to apply it throughout the program period.
The table below outlines each claiming period, the required reduction in revenue and the reference period for eligibility.

Here is a link to the CEWS calculator: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html

Periods for CEWS Calculation

Claiming period Required reduction in revenue Reference period for eligibility

 

Eligible Employees

An eligible employee is an individual who is employed in Canada.
Eligibility for the CEWS of an employee’s remuneration, will be limited to employees that have not been without remuneration for more than 14 consecutive days in the eligibility period (i.e., from March 15-April 11, from April 12-May 9, and from May 10-June 6). This rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.

How to Apply

CEWS application and guide can be found here:

https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html

Eligible employers would be able to apply for the CEWS through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees.

Interaction with 10% Wage Subsidy

On March 25, 2020, the COVID-19 Emergency Response Act, which included the implementation of a temporary 10% wage subsidy, received Royal Assent. For employers that are eligible for both the CEWS and the 10% wage subsidy for a period, any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the CEWS in that same period.

 

Interaction with the Work-Sharing Program

On March 18, 2020, the Prime Minister announced an extension of the maximum duration of the Work-Sharing program from 38 weeks to 76 weeks for employers affected by COVID-19. This measure will provide income support to employees eligible for Employment Insurance who agree to reduce their normal working hours because of developments beyond the control of their employers. For employers and employees that are participating in a Work-Sharing program, EI benefits received by employees through the Work-Sharing program will reduce the benefit that their employer is entitled to receive under the CEWS.

Ensuring Compliance

Employers will be required to repay amounts paid under the CEWS if they do not meet the eligibility requirements. Penalties may apply in cases of fraudulent claims. The penalties may include fines or even imprisonment. In addition, anti-abuse rules would be put in place to ensure that the subsidy is not inappropriately obtained and to help ensure that employees are paid the amounts they are owed. Employers that engage in artificial transactions to reduce revenue for the purpose of claiming the CEWS would be subject to a penalty equal to 25% of the value of the subsidy claimed, in addition to the requirement to repay in full the subsidy that was improperly claimed.

Government Assistance

The usual treatment of tax credits and other benefits provided by the government would apply. As a consequence, the wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income. Assistance received under either wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

Refund for Certain Payroll Contributions

The Government is proposing to expand the CEWS by introducing a new 100 per cent refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. This refund would cover 100 per cent of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees.

In general, an employee will be considered to be on leave with pay throughout a week if that employee is remunerated by the employer for that week but does not perform any work for the employer in that week. This refund would not be available for eligible employees that are on leave with pay for only a portion of a week. This refund would not be subject to the weekly maximum benefit per employee of $847 that an eligible employer may claim in respect of the CEWS. There would be no overall limit on the refund amount that an eligible employer may claim. For greater certainty, employers would be required to continue to collect and remit employer and employee contributions to each program as usual. Eligible employers would apply for a refund, as described above, at the same time that they apply for the CEWS.

Canada Emergency Commercial Rent Assistance (CECRA)

The federal government has reached an agreement in principle with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. This program will result in lowering rent by 75% for small businesses that have been affected by COVID-19.

The program will provide forgivable loans to qualifying commercial property owners to cover 50% of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.

The loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75% under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25% of the rent.

Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID revenues. This support will also be available to non-profit and charitable organizations.

It is expected that CECRA will be operational by mid-May, and further details will be announced soon.

Here is a link to the Prime Minister’s announcement from April 24, 2020: https://pm.gc.ca/en/news/news-releases/2020/04/24/prime-minister-announces-partnerships-provinces-and-territories

CRA Deferrals – Income Tax Filing & Payment

Deferral of GST Sales Tax Remittance

Deferral of Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittances and customs duty payments to June 30, 2020. CRA will extend until June 30, 2020 the time that:

Monthly filers have to remit amounts collected for the February, March and April 2020 reporting periods;

Quarterly filers have to remit amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and

Annual filers, whose GST/HST return or instalment are due in March, April or May 2020, have to remit amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

Deferral of Customs Duty and Sales Tax for Importers

Imported goods by businesses are generally subject to the GST, at a rate of 5 per cent, as well as applicable customs duties, which vary by product and country of origin. While most imports enter Canada duty-free, some tariffs remain, especially on consumer goods.

Payment deadlines for statements of accounts for March, April, and May are being deferred to June 30, 2020.

Individuals – Due dates
Filing date for 2019 tax year June 1, 2020 extended
Payment date for 2019 tax year September 1, 2020 extended
Includes the June 15, 2020, instalment payment for those who have to pay by instalments.

Self-employed and their spouse or common law partner – Due dates
Filing date for 2019 tax year June 15, 2020 unchanged
Payment date for 2019 tax year September 1, 2020 extended
Includes the June 15, 2020, instalment payment for those who have to pay by instalments.

Corporations – Due dates
Filing date for current tax year June 1, 2020 extended
Applies to corporations that would otherwise have a filing due date after March 18 and before June 1, 2020.
Payment date for current tax year September 1, 2020 extended
Applies to balances and instalments under Part 1 of the Income Tax Act due on or after March 18 and before September 1, 2020.

Trusts – Due dates
Filing date for current tax year (including the associated T3 information return) May 1, 2020 extended
Applies to trusts with a tax year end date of December 31, 2019
June 1, 2020 extended
Applies to trusts that would otherwise have a filing due date in April or May.
Payment date for current tax year September 1, 2020 extended
Applies to income tax balances and instalments due on or after March 18 and before September 1, 2020

Charities – Due dates
Filing date December 31, 2020 extended
Applies to charities with Form T3010 due between March 18, 2020 and December 31, 2020
Payment date Not Applicable

Part XIII non-resident tax – Due dates
Filing date for the 2019 NR4 information return May 1, 2020 extended
Payment date The 15th of each month following an amount paid or credited by residents of Canada to non-resident persons. unchanged

Payroll remittances – Due dates
Payment date See Payroll page for filing deadlines. unchanged

Information returns
Filing date for the 2019 T5013 Partnership Information Return May 1, 2020 extended
Filing date for the 2019 NR4, Statement of Amounts Paid or Credited to Non-Residents of Canada information return May 1, 2020 extended
Other information returns June 1, 2020 extended
Applies to other information returns that would otherwise be due after March 18, 2020, and before June 2020.

CRA Administrative Measures

Collections activities on new debts suspended until further notice, and flexible payment arrangements will be made available. CRA will generally not contact SME businesses to initiate any post assessment GST/HST or income tax audits until further notice, and interaction with taxpayers will be limited to high risk and exceptional cases. Objections related to Canadians’ entitlement to benefits and credits have been identified as a critical service and should not experience any delays.  For objections related to other tax matters filed by individuals and businesses, the CRA is currently holding these accounts in abeyance. No collection action will be taken with respect to these accounts at this time. For objections that are due March 18, 2020 or later, CRA is are effectively extending the deadline to June 30, 2020.  Appeals before the Tax Court of Canada (TCC) have been ordered an extension of all timelines. More information can be obtained directly from TCC.  Taxpayers unable to file a return or make a payment by the tax-filing and payment deadlines because of COVID-19 can request the cancellation of penalty and interest charged to their account. Penalties and interest will not be charged if the new deadlines that the government has announced to tax-filing and payments are met.