The CEBA website was updated to include additional FAQs discussing:
how to apply if a businesses primary financial institution is changed
the definition of arm’s length for CEBA
depreciation of capital equipment is not an Eligible Non-Deferrable Expense
The specific new questions are:
If, after March 1, 2020, a business changed the primary financial institution at which it holds its business/operating account, can the business still apply for a CEBA loan?
Yes, the business may still apply for a CEBA loan, although the business must discuss this situation directly with its current primary financial institution.
What is meant by “arm’s length” for purposes of CEBA?
For the purposes of CEBA, relationships are considered not at arm’s length if the parties are “related persons”, as defined in subsection 251(2) of the Income Tax Act. Unrelated persons are considered to deal at arm’s length for the purposes of CEBA. Individuals connected by a blood relationship, marriage, common-law partnership or adoption are related persons. A blood relationship refers to that of a parent or child (or other descendant, such as a grandchild or a great-grandchild), or a brother and a sister.
Corporations may also be persons related to the relevant employee for the purposes of CEBA, including through a relationship to another corporation or individual. Generally, a corporation is related to another person (including another corporation) where that person controls the corporation, that person is a member of a related group that controls the corporation, that person is a related person of a person who controls the corporation, or that person is a corporation controlled by the same person or group of persons.
Please review the Income Tax Folio for further clarification on what is defined as a related person for the purposes of CEBA.
Is capital equipment depreciation included as an Eligible Non-Deferrable Expense?
Depreciation of capital equipment used for business purposes is not an Eligible Non-Deferrable Expense as it is not an expense pursuant to a legal or contractual obligation on March 1, 2020.