Canada’s COVID-19 Economic Response Plan Legislation RE: Temporary Wage Subsidy for Employers

The Federal Department of Finance announced Canada’s COVID-19 Economic Response Plan: Support for Canadians and Businesses on March 18, 2020. Our newsletter from March 19, 2020 provided our comments on that first release of information.

This newsletter provides updated information on the Temporary Wage Subsidy for Employers based on Bill C-13: An Act respecting certain measures in response to COVID-19 (“Bill C-13”) which was passed by the House of Commons and the Senate, and received Royal Assent, on March 25, 2020.

Support for Employers: Temporary Payroll Subsidy

Bill C-13 provides eligible employers with a temporary wage subsidy in effect for the period commencing March 18, 2020 and ending June 19, 2020.

The CRA has posted responses to frequently asked questions regarding the temporary wage subsidy here. Note that some of the CRA’s comments in that FAQ are now out of date as the legislation enacted on March 25, 2020 contained some changes to the initial proposals described in the CRA’s FAQ.

Note: If you use a payroll service provider, they may be able to handle the calculations of the subsidy amount and the reduced remittance on your behalf.

Who is Eligible for the Subsidy?

An eligible employer is:

  • a non-profit organization;
  • registered charity;
  • an individual;
  • a Canadian-controlled private corporation (a “CCPC”) that was eligible for the small business deduction (assuming that the passive investment income grind to the small business deduction did not exist); or
  • a partnership, if all of the members of the partnership are CCPCs eligible for the small business deduction, individuals (excluding trusts), or registered charities.

To be eligible, the employer must:

  • have an existing business number and payroll program account with the CRA on March 18, 2020; and
  • pay salary, wages, bonuses, or other remuneration to one or more individuals employed in Canada during the relevant time period.

If you do not pay salary, wages, bonuses, or other remuneration to an employee between March 18, 2020, and June 19, 2020, you cannot receive the subsidy, even if you are an eligible employer.

When Does this Subsidy Start?

You can start to reduce your employer payroll source deductions remittance for the first remittance period that includes remuneration paid between March 18, 2020, and June 19, 2020.

For example, if you are a regular remitter, you can reduce your remittance that is due to the CRA on April 15, 2020.

How Much is the Subsidy?

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 19, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer. Associated CCPCs are not required to share the maximum subsidy of $25,000 per employer.

For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.

If you calculated a subsidy of $2,050 for the April 15 remittance, you would reduce your current remittance of federal, provincial, or territorial income tax by $2,050. You could continue reducing future income tax remittances, up to the maximum amount of $25,000, for all remuneration paid before June 20, 2020.

The subsidy is only for income tax withholdings. You cannot reduce your remittance of Canada Pension Plan contributions or Employment Insurance premiums.

What if the Amount of Tax Withheld is Less than the Subsidy Available?

If the income taxes you deduct are not sufficient to offset the value of the subsidy in a specific period, you can reduce future remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 19, 2020).

For example: If you calculated a subsidy of $2,050 on remuneration paid between March 18, 2020, and June 19, 2020, but only deducted $1,050 of federal, provincial, or territorial income tax from your employees, you can reduce a future income tax remittance by $1,000, even if that remittance is in respect to remuneration paid after June 19, 2020.