COVID-19 Updates for Small Business Owners
Pathway would like to share the information about the government programs to help you understand what initiatives apply to you. Please see below for more detailed information.
Tax filing and payment deadline changes
Personal tax filing deadline: June 1, 2020
Personal income tax payment deadline: Aug 31, 2020
Instalment payment deadline: Aug 31, 2020
Trusts (with Dec 31 year-end) filing deadline: Sept 1, 2020
Corporate tax return filing deadlines: If the deadline falls between Mar 18 and Sept 1, 2020 then Sept 1, 2020 is the filing deadline.
Corporate income tax payment deadline: Sept 1, 2020 (for amounts that became owing after March 17, 2020)
Corporate income tax instalment deadline: Sept 1, 2020
GST return filing deadlines: If the deadline falls between Mar 18 and June 1, then June 1 is the filing deadline.
GST payment deadline: June 30, 2020
Annual GST filers: The amount owing from your 2019 fiscal year (as well as 2020 instalments) are not due until June 30, 2020.
Quarterly GST filers: The payment for Jan 1 to Mar 31, 2020 is now due June 30, 2020 instead of April 30, 2020.
Payroll remittances: Unchanged
Canada Emergency Reponse Benefit (CERB) $2,000/month
Government provides a taxable benefit of $2,000 every 4 weeks for up to 16 weeks to eligible workers who have lost their income due to COVID-19.
Who is eligible
The Benefit is available to workers:
Residing in Canada, who are at least 15 years old;
Who have stopped working because of reasons related to COVID-19 or are eligible for Employment Insurance regular or sickness benefits or have exhausted their Employment Insurance regular benefits or Employment Insurance fishing benefits between December 29, 2019 and October 3, 2020;
Who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and,
Who have not quit their job voluntarily.
When submitting your first claim, you cannot have earned more than $1,000 in employment and/or self-employment income for 14 or more consecutive days within the four-week benefit period of your claim.
When submitting subsequent claims, you cannot have earned more than $1,000 in employment and/or self-employment income for the entire four-week benefit period of your new claim.
How to Apply
1. Log in to CRA MyAccount (If you have not opened one yet, it's good time to open your account with CRA)
2. Click 'Apply' button for COVID-19: Canada Emergency Response Benefit (CERB)
3. Select the period you are applying for.
4. Declare that you qualify for the benefit.
5. Enter your direct deposit info and confirm.
Canada Emergency Wage Subsidy (CEWS) - 75% wage subsidy
The Canada Emergency Wage Subsidy (CEWS) supports employers that are hardest hit by the pandemic, and protect the jobs Canadians depend on.
The subsidy generally covers 75% of an employee's wages – up to $847 per week - for employers of all sizes and across all sectors who have suffered a drop in gross revenues of at least 15% in March, and 30% in April and May of 2020.
The program will be in place for a 12-week period, from March 15 to June 6, 2020.
Employers who are eligible for the CEWS are entitled to receive a 100% refund for certain employer contributions to Employment Insurance, the Canada Pension Plan.
Who is an eligible employer
To be eligible to receive the 75% wage subsidy, you must:
be an eligible employer
have experienced an eligible reduction in revenue, and
have had a CRA payroll account on March 15, 2020
Types of eligible employers:
Individuals (including trusts),
Persons that are exempt from corporate tax (Part I of the Income Tax Act), other than public institutions,
Partnerships consisting of eligible employers.
What is an eligible revenue reduction
You must determine if your reduced revenue makes you eligible to apply for the wage subsidy in a particular period.
If you determine that you qualify for the CEWS for one claim period, you will automatically qualify for the following claim period.
Calculate your reduction by comparing your eligible revenue for the starting month of the claim period with your baseline revenue. Your baseline revenue is either:
the revenue you earned in the corresponding month in 2019, or
the average of the revenue you earned in January and February, 2020
You must choose one of the above baseline revenue options for your method of comparison and will not be able to change it
for your subsequent calculations for the other 2 periods.
Who are eligible employees
An eligible employee is an individual employed in Canada by you (the eligible employer) during the claim period, except if there was a period of 14 or more consecutive days in that period in respect of which they were not paid eligible remuneration by you.
Employee eligibility is based on whether the person is employed in Canada, not where they live.
Retroactively hiring and paying employees
Employees who have been laid off or furloughed can become eligible retroactively, as long as you rehire them and their retroactive pay and status meet the eligibility criteria for the claim period. You must rehire and pay such employees before you include them in your calculation for the subsidy.
Calculate your subsidy amount
When you apply for the Canada Employment Wage Subsidy (CEWS), you will be asked to enter amounts such as the number of employees and gross payroll. You can determine these amounts and preview your subsidy claim, based on information you enter.
There is a calculator tool available to download from CRA website
Step 1: Determine which employees are eligible for the 75% wage subsidy.
For each employee, you will need to determine their baseline wages, which are the average weekly wages paid to the employee during the period of January 1, 2020, to March 15, 2020. The baseline wages are used to determine the following:
Arm's length employees: For employees whose wages were reduced because of COVID-19, the subsidy can still be determined based on the pre-COVID wages (January 1 to March 15, 2020).
Non-arm's length employees: Owners might try to increase their wages to try to claim a higher wage subsidy. To prevent this, the subsidy would be calculated based on pre-COVID wages (January 1 to March 15, 2020).
*Arm's length means they are a shareholder, or a family member of a shareholder.
Step 2: Complete the wage subsidy calculator prior to completing the application.
Here are the pieces of information you will need for each employee prior to completing the calculator:
Wages paid to each employee between January 1 and March 15, 2020
Wages paid to each employee during the period you're applying for (e.g. Period 1 is March 15 to April 11, 2020)
Amount of employer portion of CPP and EI paid for each employee during the period
Name and social insurance number (SIN) of each employee and whether they are arm's length to the business
The amount claimed under other programs like the 10% wage subsidy or the Work-Sharing Program.
There is a limit per employee, but no limit per business (or employer).
After you apply for the wage subsidy, your claim will be subject to verification. This includes providing a full list of your employees and their social insurance numbers, and their payroll records for January 2020 through June 6, 2020.
So remember to keep detailed records and calculations for the CRA audit in the future.
How to Apply CEWS
When to expect your payment
You can generally expect to receive your payment within 10 business days if you are registered for direct deposit on your payroll account. In some cases, the CRA may need to delay your payment if additional review is required or we need to contact you.
Temporary 10% Wage subsidy
The temporary 10% wage subsidy is still available for business owners that do not qualify for the 75% Canada emergency wage subsidy(CEWS).
This program will cover 10% of the gross wages you pay from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer.
When determining your next payroll remittance (due April 15), you determine the Gross Payroll between March 15 and March 31, and calculate 10% of it. Then you would reduce the Income Tax portion of your payroll remittance by that amount. You still need to pay the full amount of CPP and EI, so this is only a reduction to the income tax portion of the payroll remittance.
Keep record of total wages paid between March 15, 2020 and June 20, 2020, and the number of employees paid during that time. You (or your payroll provider) will be responsible for calculating your own subsidy — the CRA will not do this for you.
The subsidy will be considered taxable income to your business which you will have to file with your 2020 corporate tax return.
For businesses that moved on the 10% wage subsidy and reduced their March payroll remittance (due April 15) and are now wanting to apply for the 75% wage subsidy (which is a refund cheque), your refund cheque will be reduced by the amount claimed under the 10% subsidy.
How to calculate the subsidy amount
Canada Emergency Business Account (CEBA) - $40,000 loan
The Canada Emergency Business Account (CEBA) 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.
To qualify, you will need to demonstrate that you paid between $20,000 to $1.5 million in total payroll in 2019 (2019 T4 Summary).
Business owners can apply for support from the Canada Emergency Business Account through their banks and credit unions.
What are the eligibility requirements for the CEBA
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 Cdn.$20,000 and Cdn.$1,500,000.
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 at 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.
Restrictions on how to use CEBA funds
The funds from this loan shall only be used to pay non-deferrable operating expenses
without limitation, may use for Payroll, Rent, Utilities, Insurance, Property tax, Regularly scheduled debt payments, etc
may NOT use for other loan/debt prepayment, dividend payment, increase in management compensation, etc
Canada Emergency Commercial Rent Assistance (CECRA)
This program will lower 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.
Who are eligible tenants (small business owners)
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),
have temporarily ceased operations (i.e. generating no revenues), or has experienced at least a 70% decline in pre-COVID-19 revenues.
Who are eligible commercial property owners
You own property that generates rental revenue from commercial real property located in Canada.
You are the property 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.
You have entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, that will reduce impacted small business tenant’s rent by at least 75%.
Your rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May and June 2020.
You have declared rental income on your tax return (personal or corporate) for tax years 2018 and/or 2019.
This support will also be available to non-profit and charitable organizations and it is expected that CECRA will be operational by mid-May, and further details will be announced soon.
WCB premiums (Alberta)
WCB premiums are deferred until early 2021. If you've already paid your WCB premium for 2020, you may be eligible for a rebate or credit for next year. Also, the government is going to cover 50% of the premium when it is due.
GST credit enhancement
Starting April 9, individuals will get a one-time special payment through the GST credit for low- and modest-income families. The average boost to income for those benefiting from this measure will be close to $400 for single individuals and close to $600 for couples.
We recommend filing your personal income tax return as soon as possible in order to receive the enhanced GST credit refund.
Canada Child Benefit enhancement
The government is proposing an increase to the maximum annual Canada Child Benefit (CCB) for the July 1, 2019 to June 30, 2020 benefit year. The overall increase for families receiving CCB will be approximately $550 on average; the maximum increase families will receive is an extra $300 per child as part of their May payment.
We recommend filing your personal income tax return as soon as possible in order to receive the enhanced CCB benefits.