26.04.2020
Taxation
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Since the beginning of the COVID-19 crisis, the federal government has announced several measures in the attempt of helping Canadians go through these financially difficult times. The federal government proposed the Canada Emergency Wage Subsidy (CEWS) on April 11 2020.

The main objective of the measure is to help businesses survive the crisis, while offering to pay 75% of their employee’s remuneration. Indeed, the employers will be able to keep their employees working during the Coronavirus pandemic. We will take a closer look at the subject.

Are you eligible for the Canada Emergency Wage Subsidy?

T2inc mainly works with business corporations and non-profit organizations, which are eligible to the CEWS. In this article, we will focus on these cases. However, if your situation is different, don’t hesitate in contacting us in order to analyze your situation.

First of all, to be eligible, your accounting records must be up to date since you will need to prove your reduced income. In other words, the accounting must be done as of March 31 2020. Please be free to contact one of our professional tax experts to help you carry out the task.

For now, the Canada Emergency Wage Subsidy covers the period from March 15 to June 6 2020. There are three eligible periods:

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

If you are eligible for one of these periods, you will automatically be eligible for the following one.

Obviously, your corporation had to be in activity before March 15 in order to be eligible. In other terms: you must already have been paying wages and have your employer numbers to remit the fiscal authorities the wages source deductions.

Then, to be entitled to get the CEWS, you must show a reduction of your income. Here are three ways of proving it.

Method 1: 2020 vs 2019

To be entitled to get the CEWS, the employer must show a reduction of 15% of the income earned in March 2020 compared to March 2019, as well as a reduction of 30% of the income earned in April and May 2020 compared to April and May 2019. You must do the comparison month by month for each eligible period mentioned above.

Method 2: First trimester vs Second trimester

However, if you do not qualify for this method, there is a second option. You can compare your monthly income for March, April and May 2020 with your January and February 2020 monthly income average. You must show an income reduction of 30%.

You basically choose the calculation method that is the most beneficial for you. Keep in mind that you must use the same method for the whole duration of the program.

Method 3: Cash accounting vs Accrual accounting

You can also choose the income accounting method. You can choose between cash accounting and accrual accounting. For example, when doing business tax, we always do accrual accounting. However, in this case, you can choose to only take into account the money received (cash accounting).

A closer look a the Emergency wage subsidy

The subsidy amount planned by the Government of Canada is equivalent to a maximum of 75% (taxable) of the remuneration paid, with a few restrictions: car benefits, stock option plans, etc. For each employee, the maximum benefit is of 847$ per week.

Moreover, keep in mind that before requesting the 75% wage subsidy, you can request the 10% wage subsidy. Naturally, the 10% will be deducted from the CEWS.

Eligibility for the Emergency wage subsidy: ask professionals if in doubt

To finish with, keep in mind that the bill is still very new. It will be important to be on the lookout for any update.

Be that as it may, it will be essential to get the help of a specialist in order to do everything correctly. If needs be, be free to contact us so T2inc specialists can analyze your situation.

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