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Published: May 16, 2020

Last Updated: December 8, 2021

Introduction – COVID-19 Relief Measures for Businesses

The federal government has implemented a number of relief programs aimed at businesses to limit the damage caused by the COVID-19 pandemic. So far these programs have focused on support for employers to limit layoffs, deferred tax payment deadlines, and lending programs to help businesses experiencing cashflow problems. This article summarizes what these measures looked like as of May 11, 2020. It is likely that new measures will be introduced and changes will be made to existing programs. For up to date information consult an experienced Toronto tax expert.

Relief Measures for Employers – COVID-19 Relief Measures for Businesses

10% Temporary Wage Subsidy – Relief Measures for Employers

The Government is providing a subsidy to eligible employers in relation to the wages they pay their individual Canadian employees between March 18, 2020 and June 19, 2020.  The Government has announced that it intends to extend its wage subsidy programs, but no details have yet been released.


An eligible employer must:

  • be a(n):
    • individual,
    • partnership,
    • non-profit organization,
    • registered charity, or
    • Canadian-controlled private corporation (including cooperative corporations).
  • have had a business number and payroll program account with the Canada Revenue Agency on March 18, 2020; and
  • pay salary, wages, bonuses or other remuneration to an individual employed in Canada.

Trusts are not eligible for this subsidy. A partnership is only eligible for this subsidy if its members include only individuals, registered charities, eligible Canadian-controlled private corporations, or other partnerships eligible for the subsidy.

A Canadian-controlled private corporation is only eligible if it had a small business deduction business limit for its last tax-year end prior to March 18, 2020 that is greater than zero as determined without reference to the passive income business limit reduction. Canadian-controlled private corporations that are part of a group of associated corporations or with a high amount of taxable capital employed in Canada should consult with an experienced Toronto tax lawyer to confirm eligibility.

Subsidy Amount

The amount of the subsidy is 10% of the remuneration paid to individuals employed in Canada between March 18, 2020 to June 19, 2020 up to $1,354 for each individual employed in Canada and a maximum of $25,000 per employer. Associated Canadian-controlled private corporations are not required to share the $25,000 per employer maximum.

Accessing the Subsidy

No application is required to access the subsidy. The subsidy can be accessed in the eligible employer’s first payroll remittance period including remuneration paid March 18, 2020 by the eligible employer reducing their remittances of federal, provincial, or territorial income tax. Employers are responsible for calculating the amount of the subsidy they are entitled too and the corresponding reduction in income tax remittances. Employers may not reduce their non-income tax payroll remittances such as Canada Pension Plan and Employment Insurance contributions

Eligible employers who choose not to reduce their remittances will be able to receive a direct payment from the CRA or credit towards future remittances, although the exact timeline for receiving these payments or the manner in which they will be obtained has not yet been announced.

The Subsidy is Taxable Income

The amount of subsidy received by an eligible employer will be taxable income for that employer. This income will be included in the tax year in which the subsidy is received by the eligible employer.

Canada Emergency Wage Subsidy (“CEWS”) – Relief Measures for Employers

The CEWS is available to eligible employers whose revenue was significantly reduced by the COVID-19 pandemic. Employers who qualify are able to access a much larger subsidy than offered by the Temporary 10% Wage Subsidy. The subsidy is available, or not, to eligible employers with respect to three different claim periods:

  • March 15 to April 11, 2020,
  • April 12 to May 9, 2020, and
  • May 10 to June 6, 2020.

The Government has announced that it intends to extend its wage subsidy programs, but no details have yet been released.

The structure of the subsidy is complex and this article does not provide an exhaustive description of how it operates. If you have questions about CEWS, you should consult a top Toronto tax lawyer and not rely on this article for preparing your subsidy application.

Eligible Employers

Only certain types of employers are eligible for CEWS. The types of employers eligible for CEWS is not the same as for the Temporary 10% Wage Subsidy. The list of eligible employers includes:

  • corporations that are not exempt from tax under Part I of the Income Tax Act,
  • individuals,
  • trusts,
  • registered charities,
  • persons exempt from tax under Part I of the Income Tax Act that are:
    • agricultural institutions,
    • boards of trade or chambers of commerce,
    • non-profit corporations,
    • labour organizations or societies,
    • benevolent or fraternal benefit societies or orders, and
    • non-profit organizations; and
  • partnerships whose members are all persons or partnerships from this list.

Public institutions such as school boards, hospitals, health authorities, or public universities are not eligible employers. There are other specific exceptions for other government entities which are not  eligible employers for CEWS including municipalities, local governments, and tax-exempt Crown corporations.

Qualifying for the Subsidy

To receive a subsidy under the CEWS program, and eligible employer must meet the following criteria:

  • the employer must have had an open payroll program account with the CRA on March 15, 2020,
  • the employer needs to have experienced a specified reduction in qualifying revenue for one or more CEWS claim period,
  • the employer must make an application for the subsidy before October 2020, and
  • the individual who has principal responsibility for the eligible employer’s financial activities must attest that the application mentioned above is complete and accurate in all material respects.

Employers who successfully apply for the subsidy will receive it via direct payment from the CRA through direct deposit or a cheque.

The Revenue Reduction Criterion

Employers determine their revenue reduction for a specific claim period by calculating their eligible revenue for two reference periods associated with the specific CEWS claim period. One of these periods represents the employer’s baseline revenue. The other represents the employer’s revenues earned during the pandemic. If the employer’s revenue has declined relative to the baseline by the required percentage associated with that specific CEWS claim period then they meet the revenue criterion for that claim period. The revenue reduction criterion is complex and advice regarding eligibility should be sought from an expert tax advisor prior to making an application.

There is a general approach and an alternative approach for computing the revenue reduction. The difference between these approaches is the specific refence periods used. The general approach uses reference periods from 2019 as the baseline for calculating revenue decline. This means that businesses which were not operating in 2019 cannot use determine their eligibility using this method. The alternative approach uses the average monthly qualifying revenue of January and February 2020 as the baseline. Businesses which were operating in 2019 can elect to use the alternative method, but must use it with respect to applications for every claim period. Meeting the criterion does not require that the reduction in revenue was caused by COVID-19.

CEWS Claim Period Required Revenue Reduction Pandemic Revenue Reference Period General Approach Baseline Reference Period Alternative Approach Baseline Reference Period
March 15, 2020 to April 11, 2020 15% March 2020 March 2019 Average of January 2020 and February 2020
April 12, 2020 to May 9, 2020 30% April 2020 April 2019 Average of January 2020 and February 2020
May 10, 2020 to June 6, 2020 30% May 2020 May 2019 Average of January 2020 and February 2020


Qualifying revenue generally includes the proceeds of the sale of goods, the rendering of services, and the use-by others- of the eligible employer’s resources. For registered charities qualifying revenue will generally include gifts and other amounts received in the course of their ordinary activities. Qualifying revenue should be determined by the employer using its normal accounting practices. If the employer uses accrual accounting, it can use that method or elect to use cash accounting instead but cannot use a combination of the two or use a different method when applying with respect to a different CEWS claim period. Qualifying revenue excludes extraordinary items, amounts on account of capital, and amounts from persons or partnerships that the eligible employer was not dealing with at arm’s length.

If an employer meets the revenue for a specific CEWS claim period, they are deemed to meet the revenue requirement for the immediately following CEWS claim period, but not the period after that.

Subsidy Amount

In simplified terms, the amount of the CEWS for a specific claim period is 75% of the remuneration paid to each eligible employee during the claim period up to a maximum of $847 per week plus associated employer Employment Insurance and Canada (or Quebec) Pension Plan contributions minus the 10% Temporary Wage Subsidy and work-sharing benefits as applicable. This description captures roughly the idea of the subsidy, but the actual method for calculating it is more complicated and can sometimes mean that simplified description is not correct.

More precisely, the amount of the subsidy for an eligible employer for a specific claim period is:

the sum of amounts I and II below:

  1. the total of all amounts, each of which is for an eligible employee in respect of a week in the claim period, equal to the greater of
    1. the least of
      1. 75% of eligible remuneration paid to the eligible employee in respect of that week,
      2. $847, and
  • if the eligible employee does not deal at arm’s length with the eligible employer in the claim period, $0, and
  1. the least of
    1. the amount of eligible remuneration paid to the eligible employee in respect of that week,
    2. 75% of baseline remuneration in respect of the eligible employee determined for that week, and
  • $847;
  1. total of the employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan for an eligible employee for each week in the claim period throughout which week that employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee.

minus the sum of amounts III and IV below:

  • total of all amounts eligible to be claimed under the 10% Temporary Wage Subsidy for Employers, by the eligible employer that qualifies for the Canada Emergency Wage Subsidy for the claim period; and
  1. total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act.

Eligible Employees and Eligible Remuneration

An eligible employee is an individual employed in Canada by the eligible employer during the claim period. The eligible employee does not need to be a Canadian tax resident or live in Canada. However, if the employee is not remunerated for a period of more than 14 days in the claim period that employee is not an eligible employee for that claim period. Employees who are laid off or furloughed or otherwise not remunerated for more than 14 days can become eligible retroactively if rehired and given retroactive pay.

Eligible remuneration includes amounts paid to an employee as salary, wages, fees, commissions and taxable benefits. It does not include severance pay or amounts deemed to have been received by an eligible employee as an employment benefit in respect of a stock option agreement. Dividends paid to shareholders, including to an owner-manager, are not eligible remuneration.

Eligible remuneration was defined to prevent some potential abuses of the CEWS program. Payments made to an employee with that can reasonably be expected to be transferred back to the employer or someone not at arm’s length from the employer or to someone else at the direction of the employer are not eligible remuneration. Neither are higher than baseline payments made to an employee in the CEWS claim period for the purpose of increasing the amount of the wage subsidy with the expectation that lower than baseline payments will be made to the employee after the claim period.

The method for determining the amount of the subsidy incorporates the baseline remuneration of each eligible employee. Baseline remuneration is the average weekly eligible remuneration paid to an employee between January 1, 2020 and March 15, 2020. Periods of seven or more consecutive days in which the employee was not paid during that time period can be omitted from the calculation of an employee’s baseline remuneration.

The baseline remuneration part of the subsidy calculation is important for owner-managers. Employees of a firm who own enough of the firm that they are not arm’s length from their employer will give rise to $0 of subsidy from calculation step I. a. above due to I. a. i.. This means that unless the owner-manager employee is receiving pay less than 75% of his or her baseline remuneration, the amount of wage subsidy available for them will be driven by his or her baseline remuneration and not his or her pay during the CEWS claim period.

Anti-Avoidance Rule and Penalties

An employer will not be eligible to claim the subsidy for a claim period if the employer (or a person or partnership that does not deal at arm’s length with that employer) participates in a plan that has one of the main purposes of effectively reducing the employer’s qualifying revenues for the current reference period, in order to qualify for the subsidy. When this anti-avoidance rule is applied, the employer will need to pay back any subsidy received and will also be liable for a penalty equal to 25% of the amount of wage subsidy that was claimed in the employer’s application.

The legislation implementing the CEWS program also included a more onerous gross negligence penalty. If an employer knowingly, or under circumstances amounting to gross negligence, generally makes, or is involved in the making of a false statement or omission in its wage subsidy application for a claim period, the employer is liable for a penalty of up to 50% of the difference between the amount of subsidy that it claimed in its application and the amount of wage subsidy to which it is actually entitled.

Deliberately filing a false application to obtain a subsidy you are not entitled to is fraud and may result in criminal prosecution leading to fines or imprisonment.

The Subsidy is Taxable Income

The amount of subsidy received by an eligible employer will be taxable income for that employer. This income will be included in the tax year in which the subsidy is received by the eligible employer.

The Expanded Work-Sharing Program

The federal government has expanded the scope of and streamlined applications for its work-sharing program. The program is intended to help employers avoid layoffs when there are temporary decreases in business activity beyond the control of the employer. To use the program a group of employees must agree to reduce their hours of work by the same percentage, at least 10-60%, in order to share the available work.  The employer must also agree to this arrangement and apply to Employment and Social Development Canada. If this application is granted, then the group of employees will receive Employment Insurance benefits for the duration of the arrangement to offset their reduced pay from the employer. The maximum duration of a work-sharing arrangement has been extended to 76 weeks.

Employers who have has a year-round business (i.e. not seasonal) in Canada for at least one year are eligible to apply if they have at least 2 employees willing to agree to a work-sharing arrangement who are not seasonal employees, summer or co-op students, casual or temporary employees, self-employed, or owner managers controlling more than 40% of the voting shares of the business. Not-for-profit employers experiencing a shortage of work due to COVID-19 and government business enterprises are now also eligible to apply for work-sharing arrangements.

Deferred Payment of Taxes – COVID-19 Relief Measures for Businesses

Income Taxes

Businesses can defer payment until September 1, 2020 of income tax amounts that became owing on or after March 18, 2020 but before September 1, 2020. This applies to both tax balances owing and installment payments. No penalties or interest will be charged with respect to these amounts before September 2. This does not apply to amounts income tax amounts employers are required to withhold from their employee’s pay and remit to the CRA.

Corporations previously required to file their income tax returns before June 1, 2020 but after March 18, 2020 have had their filing deadline extended to June 1, 2020. No extension has been issued to the June 15, 2020 filing deadline for self-employed individuals and their spouses or common law partners.

GST/HST and Customs Duty Payments

GST/HST payments that became owing from March 27, 2020 until the end of May 2020 can be deferred until June 30, 2020. GST/HST and customs duty payments for imported goods that were owing for March, April or May can be deferred until June 30, 2020.

The filing deadlines for GST/HST returns have not been changed.

Access to Loans – COVID-19 Relief Measures for Business

The government has taken steps through several programs to expand business’s access to lending to help them deal with their operational expenses and cash flow challenges. The Canada Emergency Business Account program provides interest free loans of up to $40,000 to small businesses and not-for profits. To qualify for under this program, an applicant will need to demonstrate they paid between $20,000 and $1,500,000 in total payroll in 2019. Applicants can apply for this program through their banks and credit unions. Larger loans are also available through the Business Credit Availability Program. Applicants interested in loans through this program should inquire with their financial institution.

The government is working on a Canada Emergency Commercial Rent Assistance (“CECRA”) program that may become operational by mid-May 2020. The details of this program are yet to be finalized, but it would provide forgivable loans to commercial landlords who enter into rent reduction agreements with their small business tenants experiencing financial hardship. It is expected that to qualify the landlord would need to sign rent reduction agreements with the relevant tenants which reduce those tenants’ rent by at least 75% for April through June of 2020 and include a moratorium on eviction for that period. The government would provide forgivable loans which would cover 50% of three monthly rent payments payable by the tenants.

Tax Tips – COVID-19 Relief Measures for Business

Some of the relief measures, CEWS in particular, have complex rules associated with them and steep penalties for errors. Businesses planning on using these programs should seek advice from an expert Toronto tax lawyer before taking any irrevocable steps.

The government is administering these programs in such a way as to allow businesses to access their benefit as soon as possible. This means that the government knows it is not verifying whether many of the businesses it is providing subsidies or other benefits to actually qualify. As such, we expect that there will be a substantial effort to audit businesses who received subsidies or other benefits in the future. To prepare for this, it is more essential than ever to keep appropriate books, records, and supporting documents. Depending on the specifics of your circumstances it may be wise to produce contemporaneous documentation which corroborates what happened during the relevant period of 2020 beyond normal books and records. It may also be worth obtaining a memo from an experienced Canadian tax lawyer regarding any potentially contentious issues before submitting an application or otherwise claiming a benefit or subsidy as that will make it more likely you submit a correct application and makes it much more difficult for you to be found grossly negligent and penalized accordingly.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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