On August 11, 2020 CRA released a series of tools and updates to the tools in respect of the application for CEWS for Periods 5 and onwards:
On August 12, 2020 the Attestation form (RC661) was also updated to include the new elections available.
The updates to the FAQs include:
2. Elections
An eligible employer must use the alternative approach if:
For claim periods 5 to 9
Where the eligible employer is using the general approach for the claim periods 1 to 4:
it can continue to use the same approach for all of claim periods 5 to 9; or
it can elect to apply the alternative approach for all of the claim periods 5 to 9.
Where the eligible employer is using the alternative approach for the claim periods 1 to 4:
it can elect to continue to use the alternative approach for all of the claim periods 5 to 9; or
it can apply the general approach for all of the claim periods 5 to 9.
Once an approach is chosen, the eligible employer would be required to use the same approach for all of claim periods 5 to 9.
Note: The election (see Q12-2), must be made and retained with the eligible employer's other books and records (see Q33) in support of its wage subsidy claim and eligibility, and the individual who has principal responsibility for the eligible employer's financial activities must attest that this is the case.
3-1. How does the wage subsidy apply to an eligible employer that is a partnership?
The wording in bolding was added:
….Provided the partnership had an open payroll program (RP) account on March 15, 2020 or, had a payroll service provider administer its payroll service and certain conditions are met (see Q3-8), and meets all other eligibility requirements (see Q4), it can make an application for the wage subsidy (see Q26)…
3-02. Can a non-resident corporation be an eligible employer if its income is excluded in computing its income under the Act because of a tax treaty?
Yes. A non-resident corporation may be an eligible employer even if all of its Canadian-sourced business income is not taxable in Canada on the basis that it is excluded from the computation of its income under the Act because of a tax treaty.
For the purpose of the wage subsidy, an eligible employer includes a corporation (other than a public institution) that is not exempt from tax under Part I of the Act (see Q3). However, there are some exceptions and certain corporations that are exempt from tax can still be eligible employers (see Q3-2, Q3-3). Generally, a corporation that is exempt from tax under Part I of the Act is a corporation listed in subsection 149(1) of the Act.
Where a corporation resides in a country with which Canada has a tax treaty and carries on a business in Canada but does not have a permanent establishment in Canada, the treaty might provide that such income is not taxable in Canada. That non-resident corporation is not listed in subsection 149(1) of the Act as being exempt from tax under Part I of the Act. The fact that the treaty provides that its income is not taxable in Canada does not prevent it from being an eligible employer.
3-8. Can an eligible employer that hires a third party to facilitate the administration of its payroll, qualify for the wage subsidy?
Yes. However, each eligible employer must make their wage subsidy application for a claim period in the prescribed form and manner. This means that each eligible employer requires their own business number and payroll program account to apply for and receive the wage subsidy.
Eligible employers who did not have their own payroll program account with the CRA on or before March 15, 2020, but on March 15, 2020 employed one or more individuals and allowed a third party with a business number to make payroll remittances on their behalf, through the third party’s account, will need to register for their own payroll program account. Eligible employers may also need to register for their own business number if they did not previously have one.
Once the payroll program account (and business number if applicable) is opened, the CRA will require information from the third party to verify that remittances were previously made on behalf of the eligible employer. This would include a listing of each employer the third party made remittances on behalf of, and the remittances that can be attributed to each of those employers from January 1, 2020. The listing should also include the new business number and payroll program account for each eligible employer.
The third party can provide this information to the CRA by sending an email to CEWSINFOG@cra-arc.gc.ca. Please note that this mailbox is only used to receive the applicable information from third parties. General enquiries will not be responded to.
After the information is received and verified, the CRA will transfer the applicable remittances from the third party to the eligible employer’s new account, and advise when the eligible employer can proceed with their wage susbsidy application. Employers will be expected to continue using their new business number and payroll program account for all future payroll remittances.
5. How is the reduction in revenue determined for claim periods 1 to 4?
The following items were added to the answer:
Relevant periods
…In a situation where the eligible employer, subsequently determines that it actually experienced the required reduction in revenue, without applying the deeming rule, for the second claim period - April 12 to May 9, 2020, the eligible employer will be considered to have experienced the required reduction in revenue for that third claim period because of the deeming rule that can now be applied to the third period ….
5-01. How is the revenue reduction determined for claim periods 5 to 9?
An eligible employer’s reduction in revenue for a particular claim period is its decline in qualifying revenue from the relevant prior reference period to the relevant current reference period (see Q2), expressed as a percentage.
The two available approaches for the reduction in revenue determination (i.e., the general year-over-year approach and the alternative approach; (see Q5) continue to apply to claim periods 5 to 9.
For claim periods 1 to 4, the revenue reduction determination was to determine if the eligible employer had the required reduction of its qualifying revenue in a claim period to be eligible for the wage subsidy. However, for period 5 and subsequent claim periods, an eligible employer is required to have a revenue reduction greater than 0% to be eligible for the wage subsidy (unless the deeming rules for claim periods 5 to 9 (see Q 5-03) apply, or the employer is eligible for the top-up subsidy (see Q20-2)). An eligible employer’s revenue reduction percentage is relevant to determining its base wage subsidy amount in claim periods 5 to 9 (see Q20-01). Additionally, an eligible employer might qualify for the top-up wage subsidy for that claim period (see Q20-2).
5-02. Can an eligible employer qualify for the wage subsidy if it does not have a revenue reduction in a claim period? New: August 11, 2020
For claim periods 5 to 9, if an eligible employer has not experienced a reduction in revenue for a particular claim period, it may still qualify to claim the wage subsidy in the particular claim period if the deeming rule (see Q5-03) applies, or if it is eligible for top-up portion of subsidy (see Q20-03).
5-03. What is the deeming rule for claim periods 5 to 9? New: August 11, 2020
The deeming rule that is applicable to claim periods 1 to 4 (see Q5) does not apply to claim period 5 and subsequent periods.
For period 5 and subsequent claim periods, if an eligible employer had a greater reduction in revenue in the immediately preceding claim period than it has otherwise determined for the current claim period, the reduction in revenue for the immediately preceding period is deemed to be the eligible employer’s reduction in revenue for the purposes of determining its base wage subsidy amount for the current claim period (deeming rule for periods 5 to 9 – see Table below).
This deeming rule for periods 5 to 9 applies in respect of each particular claim period subsequent to claim period 4, but a reduction in revenue considered to be the current claim period’s reduction in revenue (because of the deeming rule) cannot apply beyond the current claim period.
For example, an eligible employer’s actual reduction in revenue for claim period 5 (current claim period), was 35% while the actual reduction in revenue for period 4 (prior claim period) was 45%. Because of the deeming rule for periods 5 to 9, its reduction in revenue for the fifth period (current period), will be considered to be 45%, instead of 35%. However, if the eligible employer determines its actual reduction in revenue for claim period 6 to be less than 45%, then its reduction in revenue cannot be deemed to be 45%. It will be the greater of the actual reduction of revenue for period 5 (prior claim period), i.e., 35% and the actual reduction of revenue for period 6 (current claim period).
In a situation where the eligible employer determines that its actual reduction in revenue for the current claim period is lower than its reduction in revenue from the immediately preceding claim period, that actual reduction in revenue for the current claim period will be available when applying this deeming rule to the immediately following claim period. Alternatively, in the above example, if the actual reduction in claim period 6 was 30%, the eligible employer’s deemed revenue reduction for period 6 will be 35%, which is the greater of the actual reduction of revenue in claim period 5 (35%) and the actual revenue reduction in claim period 6 (30%).
Similarly, where an eligible employer did not qualify for the wage subsidy for claim period 4 because its reduction in revenue was less than the required 30% for that period or it qualified for the wage subsidy due to the deeming rule that is applicable for claim periods 1 to 4 (see Q 5), its actual reduction in revenue for claim period 4 will still be available when applying the deeming rule for periods 5 to 9, to claim period 5.
For example, an eligible employer’s actual reduction in revenue for claim period 5 (current claim period), was 20%. The deemed reduction in revenue for claim period 4 (prior claim period) was 40% because of the deeming rule for periods 1-4, and its actual reduction in revenue was 25%. Because of the deeming rule for periods 5 to 9, the eligible employer’s reduction in revenue for period 5 (current claim period), will be deemed to be 25%, being the greater of the actual reduction of revenue in claim period 4 (25%) and the actual revenue reduction in claim period 5 (20%).
Table below provides examples of some generic scenarios to further demonstrate how the deeming rule for periods 5 to 9 works.
5-04. What is the revenue reduction safe harbour rule for periods 5 and 6? New: August 11, 2020
Under the safe harbour rule for periods 5 and 6, if an eligible employer has a revenue reduction of 30% or more, then the employer would be entitled to a wage subsidy not lower than the amount calculated under the rules in place for periods 1 to 4 in respect of an eligible employee who is not on leave with pay (see Q20-03) for that week. This means that in claim periods 5 and 6, an eligible employer with a revenue decline of 30% or more (actual or deemed reduction because of the deeming rules applicable to period 5 and subsequent periods (see Q5-03)), would receive a wage subsidy rate of at least 75% (safe harbour rule). The eligible employer could qualify for an even higher wage subsidy rate (up to 85%) using the new rules used to calculate the wage subsidy for claim periods 5 to 9 for eligible employees who are not on leave with pay.
Under the safe harbour rule, for claim periods 5 and 6, when an eligible employee is not on leave with pay (see Q20-03), the wage subsidy in respect of the employee for a week in the claim period will be the greater of:
wage subsidy amount calculated based on the rules for periods 1 to 4 (see Q20) if the revenue reduction percentage of the eligible employer is 30% or more for the relevant claim period; and
wage subsidy amount calculated based on the rules for periods 5 to 9, i.e., wage subsidy amount calculated using the rate that is the sum of the base rate (see Q20-2) and the top-up rate (see Q20-3).
When an eligible employee is on leave with pay (see Q20-03) in respect of a week in a claim periods 5 and 6, if either the revenue reduction percentage (see Q20-2) or the top-up percentage (see Q20-3) of the eligible employer for the claim period is greater than 0%, then the eligible employer will be entitled to a wage subsidy amount calculated based on the rules for claim periods 1 to 4 (see Q20). Otherwise, if neither the revenue reduction percentage nor the top-up wage percentage of the eligible employer is greater than 0%, then the employer will not be entitled to a wage subsidy in respect of that employee.
6-2.1. If an eligible employer changes its operations to manufacture essential products during the pandemic, which generates revenues but no profit, is the revenue included in qualifying revenue?
Yes. The qualifying revenue of an eligible employer means the inflow of cash, receivables, or other consideration arising in the course of its ordinary activities (see Q6) in Canada in a particular period. As these inflows are generally from the sale of goods, the rendering of services, and the use by others of the eligible employer’s resources, they would include the revenue arising from the sales of new products. An eligible employer’s profit margin is not a criteria used to determine whether it qualifies for the wage subsidy.
6-5. Where a sole proprietorship business is incorporated, can the corporation use the revenue of proprietorship for the prior period to determine the decline in its qualifying revenue?
Yes. Where a sole proprietorship business is incorporated, it is possible, when certain conditions are met, to use the qualifying revenue attributable to the assets of the proprietorship to calculate the qualifying revenue of the corporation for the relevant reference period for a claim period. See Q8-3 for the conditions to be met as well as Example 6-1.
8. Are there special rules for calculating the qualifying revenue of an eligible employer that derives its revenue from one or more non-arm's length persons or partnerships?
Items in bold have been added
Special rules exist for an eligible employer that derives all or substantially all of its revenue from one or more particular persons or partnerships with which it does not deal at arm's length.
Essentially, if the eligible employer and each of these particular persons or partnerships with which it does not deal at arm's length jointly elect (see note below), the eligible employer's qualifying revenue for the prior reference period is deemed to be $100 and a weighted-average approach (see Example 6), is used to determine qualifying revenue for the current reference period.
In applying this approach, when calculating the qualifying revenue for the current reference period, the eligible employer’s qualifying revenue is based solely on amounts derived in the course of its ordinary activities in Canada from persons or partnerships not dealing at arm’s length with it.
The amount used for each of the particular person’s or partnership’s qualifying revenue includes revenues earned both inside and outside of Canada. This is a modification of the method described in Q6 where only revenues from activities in Canada are considered. The particular person or partnership can be either a resident or a non-resident (see Example 6-1). Additionally, there is no requirement that the particular person or partnership be in the same trade or business as the eligible employer.
The eligible employer may choose not to make this election.
For more information about non-arm’s length, please see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.
8-3. Are there special rules that apply for calculating the qualifying revenue where an eligible employer acquired assets from a third party? New: August 11, 2020
Special rules exist to determine qualifying revenue of an eligible employer when the employer acquires assets of a person or partnership (the seller), during a claim period or at any time before that period.
Conditions
The following conditions must be met for the special rules to apply to an eligible employer in respect of a claim period:
immediately prior to the acquisition of assets, the fair market value of the acquired assets constituted all or substantially all (see Q8-1) of the fair market value of the property of the seller used in the course of carrying on business (see note 1 below);
the acquired assets were used by the seller in the course of a business carried on by it in Canada;
it is reasonable to conclude that none of the main purposes of the acquisition was to increase the amount of the wage subsidy; and
the eligible employer elects in respect of the claim period or, if the seller is in existence during the claim period, the employer and the seller jointly elect in respect of that period (see note 2 below).
Application
Where all the above conditions are met, an eligible employer (the acquirer), will determine its qualifying revenue for its prior reference period or current reference period, as the case may be, for a claim period in the following manner:
for a claim period, the acquirer will include in calculating its qualifying revenue for its prior or current reference period, the amount of the qualifying revenue of the seller for that period that is reasonably attributable to the acquired assets (“assigned revenue”); and
if a portion of the assigned revenue is from a person or partnership (third party) that did not deal at arm’s length with the seller, and if the third party deals at arm’s length with the acquirer throughout the current reference period, then that portion of the assigned revenue is deemed to not be derived from a non-arm’s length person or partnership and therefore, will be included in the qualifying revenue of the acquirer. However, if the acquirer and the third party do not deal at arm’s length throughout the current reference period, then that portion of the assigned revenue will be considered to have been derived by the acquirer from a non-arm’s length party and will not be included in the qualifying revenue of the acquirer (see Q6).
The assigned revenue is to be subtracted from the qualifying revenue of the seller for its prior reference period or current reference period, as the case may be, for the claim period.
The acquirer is deemed to have met the conditions related to having an open payroll account with CRA on March 15, 2020, or using a payroll service provider to make their payroll remittances on the eligible employer’s behalf, if the seller met those conditions (see Q4 & Q3-8).
Note 1: For example, if the seller’s business operation has more than one division, the employer must consider all the assets used in carrying on the business of all the divisions when determining whether the fair market value of the acquired assets constituted all or substantially all of the fair market value of the property used in the course of carrying on the business of the seller (see Example 6-3).
Note 2: This election (see Q12-2), must be made in respect of each claim period and retained with the eligible employer's other books and records in support of its wage subsidy claim and eligibility (see Q33), and the individual who has principal responsibility for the eligible employer's financial activities must attest that this is the case.
10-3. Will the CRA accept one signed election (see Q10) by an authorized representative on behalf of all members of an affiliated group? New: August 11, 2020
An eligible employer and each member of an affiliated group of eligible employers of which the eligible employer is a member may jointly elect to determine the qualifying revenue of the group on a consolidated basis (see Q10).
This joint election must be signed by each eligible employer in the affiliated group that is applying for the wage subsidy (see note below). On an administrative basis, the CRA will accept a signature by the authorized representative of the ultimate parent entity of the affiliated group, on behalf of all eligible employers in the affiliated group that are not making a wage subsidy claim. Where the ultimate parent entity is signing on behalf of eligible employers who are members of the affiliated group who do not qualify for the wage subsidy, a complete list of these group members must be attached to the joint election. The list should include the legal name and address of each affiliated group member represented by the parent entity’s signature on the election.
Note: This election (see Q12-2) and the list, must be made and retained with the eligible employer's other books and records (see Q33) in support of its wage subsidy claim and eligibility, and the individual who has principal responsibility for the eligible employer's financial activities must attest that this is the case.
10-3. Will the CRA accept one signed election (see Q10) by an authorized representative on behalf of all members of an affiliated group?
An eligible employer and each member of an affiliated group of eligible employers of which the eligible employer is a member may jointly elect to determine the qualifying revenue of the group on a consolidated basis (see Q10).
This joint election must be signed by each eligible employer in the affiliated group that is applying for the wage subsidy (see note below). On an administrative basis, the CRA will accept a signature by the authorized representative of the ultimate parent entity of the affiliated group, on behalf of all eligible employers in the affiliated group that are not making a wage subsidy claim. Where the ultimate parent entity is signing on behalf of eligible employers who are members of the affiliated group who do not qualify for the wage subsidy, a complete list of these group members must be attached to the joint election. The list should include the legal name and address of each affiliated group member represented by the parent entity’s signature on the election.
Note: This election (see Q12-2) and the list, must be made and retained with the eligible employer's other books and records (see Q33) in support of its wage subsidy claim and eligibility, and the individual who has principal responsibility for the eligible employer's financial activities must attest that this is the case.
12. Can I choose between the cash and the accrual method of accounting when determining my qualifying revenue?
Items in bold have been added.
Qualifying revenue of an eligible employer is to be determined in accordance with its normal accounting practices.
If the normal accounting practices of an eligible employer is the accrual method, the employer would be allowed to elect (see note below) to calculate its qualifying revenue under the cash method instead of the accrual method.
Similarly, if the normal accounting practices of an eligible employer is the cash method, the employer would be allowed to elect to calculate its qualifying revenue under the accrual method, in accordance with generally accepted accounting principles.
However, an eligible employer cannot use a combination of both methods. The elections referred to above will apply for all claim periods.
An eligible employer that did not elect to use either the cash or accrual method (as applicable) when filing its initial application for the wage subsidy may later elect to do so. Since the election to use either a cash or accrual method will apply for all claim periods, the employer must amend all previously submitted applications to reflect this change.
13. Who is an eligible employee? Updated: August 11, 2020
Items in bold have been added.
An eligible employee, in respect of a week in a claim period, means an individual employed in Canada by the eligible employer in the claim period. For the claim periods 1 to 4, it does not include an employee who has been without remuneration from the eligible employer in respect of 14 or more consecutive days in the claim period (see note below).
For claim periods 5 to 9, individuals employed in Canada by the eligible employer in the claim period are no longer excluded if they are without remuneration in respect of 14 or more consecutive days in that claim period.
Note:Eligible employee status is determined in respect of each week in each claim period. So an employee that is not an eligible employee in a preceding claim period (because, for example, the 14 day remuneration condition has not been met), may become eligible in a following claim period (see example under Q15).
17-01. Can the value of a non-cash taxable benefit, such as a stand-by charge for the personal use of a corporate vehicle, be claimed for the wage subsidy?
No. Non-cash taxable benefits are not remuneration eligible for the wage subsidy. Only eligible remuneration paid to an eligible employee qualifies for purposes of computing the wage subsidy. Although the value of a stand-by charge is a taxable benefit derived because of employment, the value of such benefit is not eligible remuneration paid to an eligible employee for purposes of computing the wage subsidy.
17-02. Are non-taxable employee benefits, such as employer contributions to a registered pension plan or a private health services plan, included in eligible remuneration paid to an eligible employee?
No. Eligible remuneration of an eligible employee means amounts paid to an employee as salary, wages, and other remuneration for which an eligible employer would generally be required to make payroll deductions to be remitted to the CRA. Non-taxable benefits are not eligible remuneration paid to an eligible employee.
18. What is baseline remuneration? Updated: August 11, 2020
Baseline remuneration means the average weekly eligible remuneration paid to an eligible employee by an eligible employer during the period that begins on January 1, 2020, and ends on March 15, 2020. Any period of seven or more consecutive days for which the employee was not remunerated is excluded from the calculation. However, the eligible employer may elect for each claim period in respect of an employee, a different period to calculate the average weekly eligible remuneration, as described in table 3 below:
Consider the following example:
Cold Brothers Inc. (CBI) is an ice cream shop in Winnipeg, Manitoba, and has been in business since 2015. Since its business is seasonal, it pays its employees a lower weekly salary during the months of November to March and then pays higher amounts during the months of May until October. Due to the COVID-19 crisis, it paid a reduced salary for its employees beginning in April of 2020.
Average weekly salary paid during January 1, 2019 to March 31, 2019 — $500
Average weekly salary paid during April 1, 2019 to October 31, 2019 — $1,500
Average weekly salary paid during November 1, 2019 to March 31, 2020 — $500
Average weekly salary paid beginning April 1, 2020 — $750
20-01. How is the wage subsidy calculated for claim periods 5 and 6? New: August 11, 2020
For an eligible employer that qualifies for the wage subsidy, the amount of the wage subsidy in respect of an eligible employee for claim periods 5 and 6, depends on three factors - the revenue reduction percentage (see Q20-1) in the claim period, the employer’s 3-month average revenue drop and whether the eligible employee is on leave with pay in respect of that week in the claim period, or is not on leave with pay (see Q20-03).
Depending on whether the eligible employee is on leave with pay (see II below), or is not on leave with pay (see I below) in respect of a week in the claim period, the wage subsidy is the total of the following amounts in respect of the claim period (there is no overall limit on the wage subsidy amount that an eligible employer may claim):
I. Where an eligible employee is not on leave with pay in respect of a week in the claim period 5 or 6, the wage subsidy in respect of the week is the greater of 1. and 2. where:
is an amount equal to:
$0, if the revenue reduction percentage of the eligible employer for the claim period is less than 30%; and
if the revenue reduction percentage is equal to or greater than 30%, an amount equal to the greater of :
the least of
75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
$847, and
if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and
the least of
the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
75% of baseline remuneration in respect of the eligible employee determined for that week, and
$847;
is the amount determined by the result of:
the sum of the eligible employer’s base percentage (see Q20-2) for the claim period and the eligible employer’s top-up percentage (see Q20-3) for the claim period, multiplied by the least of the following amount:
the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week;
$1,129; and
if the eligible employee does not deal at arm’s length (see Q8-2) with the eligible employer in the claim period, the baseline remuneration in respect of the eligible employee determined for that week.
II. Where an eligible employee is on leave with pay in respect of a week in the claim periods 5 or 6, the amount of wage subsidy in respect of the week in the claim period is:
$0, unless:
the revenue reduction percentage (see Q20-2) of the eligible employer for the claim period is greater than 0%, or
the top-up percentage (see Q20-3) of the eligible employer for the claim period is greater than 0%, and
where any of the two conditions in 1. above are met, an amount equal to the greater of:
the least of
75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
$847, and
if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and
the least of
the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
75% of baseline remuneration in respect of the eligible employee determined for that week, and
$847;
III. In respect of each week in the claim period throughout which the employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee:
$0, unless:
the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or
the top-up percentage of the eligible employer for the claim period is greater than 0%, and
where any of the two conditions in 1. above are met, the 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.
Less:
IV. Total of all amounts claimed or intended 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
V. 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 (see Note below).
Note: On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.
20-02. How is the wage subsidy calculated for claim periods 7 to 9? New: August 11, 2020
For an eligible employer that qualifies for the wage subsidy, the amount of the wage subsidy for a claim period, in periods 7 to 9, is the total of the following amounts (there is no overall limit on the wage subsidy amount that an eligible employer may claim):
I. Where an eligible employee is not on leave with pay (see Q20-03), in respect of a week in the claim period, the amount determined by the result of the sum of the eligible employer’s base percentage (see Q20-2) and the eligible employer’s top-up percentage (see Q20-3) for the claim period, multiplied by the least of the following amount:
the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week;
$1,129; and
if the eligible employee does not deal at arm’s length (see Q8-2) with the eligible employer in the claim period, the baseline remuneration in respect of the eligible employee determined for that week.
II. Where an eligible employee that is on leave with pay in respect of a week in the claim period, the least of:
the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
an amount determined by regulation in respect of the eligible employer for the claim period (there is no such amount currently),
$0, if
the eligible employee does not deal at arm’s length with the eligible employer in the claim period, and
the baseline remuneration of the eligible employee for that week is $0, and
$0, unless
the revenue reduction percentage (see Q20-2) of the eligible employer for the claim period is greater than 0%, or
the top-up percentage (see Q20-3) of the eligible employer for the claim period is greater than 0%;
III. For each week in the claim periods 7 or subsequent periods throughout which week the employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee:
$0, unless:
the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or
the top-up percentage of the eligible employer for the claim period is greater than 0%,
where any of the two conditions in 1. above are met, the amount equal to the 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.
Less:
IV. Total of all amounts claimed or intended 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
V. 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 (see Note below).
Note: On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.
20-03. When is an employee considered to be on leave with pay? New: August 11, 2020
An eligible employee will generally be considered to be on leave with pay throughout a week if that employee is remunerated by the eligible employer for that week but does not perform any work for the employer in that week. Generally, this will only apply to employees on paid furlough (that is, employees that have been temporarily laid off with pay). An employee will not be considered to be on leave with pay for purposes of the wage subsidy if they are on a period of paid absence, such as vacation leave, sick leave, or a sabbatical. Leave with pay would also not apply to situations where the employment relationship has been severed, such as wages in lieu of termination notice.
Additionally, an eligible employee will not be on leave with pay for a week if the employee continues to perform any of their employment duties during the week, including only minimal duties.
20-04. Does an eligible employer have to reduce the eligible remuneration of an employee for amounts received that are funded by another government program? New: August 11, 2020
No. If an eligible employer has received or is reasonably expected to receive an amount as a subsidy or other assistance based on the salary, wages or other remuneration paid to an eligible employee that would otherwise be eligible for the wage subsidy, the amount of the government subsidy or assistance does not reduce the amount of the eligible remuneration used to calculate the wage subsidy for that employee.
However, if the government entity providing the subsidy pays the eligible employee directly, the eligible employer would only be able to claim, for the wage subsidy, the amount of eligible remuneration the employer actually paid to the employee.
The amount that may be claimed by an eligible employer for the wage subsidy is reduced by amounts claimed under the 10% Temporary Wage Subsidy for Employers and by amounts received by the employee as a work-sharing benefit under the Employment Insurance Act.
20-1. What is meant by base wage subsidy and top-up wage subsidy for the claim periods 5 to 9?
Effective period 5 and subsequent claim periods, the wage subsidy calculation consist of two parts:
a base portion of wage subsidy (base subsidy) available to all eligible employers that are experiencing a decline in qualifying revenues, with the wage subsidy amount varying depending on the scale of qualifying revenue decline; and
a top-up portion of wage subsidy (top-up subsidy) of up to an additional 25% for those eligible employers that have been most adversely affected by the COVID-19 crisis.
20-2. How is the base subsidy determined for claim periods 5 to 9? New: August 11, 2020
The base portion of the wage subsidy consists of a specified base percentage applicable to the amount of eligible remuneration paid to the eligible employee by the eligible employer for a claim period, on remuneration of up to $1,129 per week. The specified base percentage would vary depending on the level of decline in qualifying revenue (see Table below). The base percentage gradually reduces from a maximum of 60% in claim periods 5 and 6 (July 5 to August 29) to 20% in claim period 9 (October 25 to November 21).
The maximum base wage subsidy applies to eligible employers with a revenue reduction percentage of 50% or more, with a phase-out measure when the decline in revenue is between a 50% revenue drop and no decline of revenue.
The base percentage is determined for each of claim periods 5 to 9 by multiplying the revenue reduction percentage (see below) by a factor that declines during each claim period (except between periods 5 and 6), as described below:
Periods 5 and 6
60%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
in any other case, 1.2 multiplied by the revenue reduction percentage;
Period 7
50%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
in any other case, 1 multiplied by the revenue reduction percentage;
Period 8
40%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
in any other case, 0.8 multiplied by the revenue reduction percentage;
Period 9
20%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
in any other case, 0.4 multiplied by the revenue reduction percentage; and
For a prescribed period that ends no later than December 31, 2020 (currently there are no prescribed periods), a percentage determined by regulation in respect of the eligible employer (currently there is no percentage determined by regulation).
Revenue reduction percentage
The revenue reduction percentage, of an eligible employer for a claim period, means the result (expressed as a percentage) of the formula (1 − A/B), where:
A is the eligible employer’s qualifying revenue for the current reference period for the claim period; and
B is the eligible employer’s qualifying revenue for the prior reference period for the claim period – or, if the prior reference period is January and February 2020, the amount determined by the formula (see note below), or a period prescribed by regulation in respect of the eligible employer for the claim period (currently there is no period prescribed by regulation).
If the above formula results in a lower revenue reduction percentage in respect of an eligible employer for a particular qualifying period than for the immediately preceding qualifying period, then the revenue reduction percentage in respect of the eligible employer for the particular qualifying period is deemed to be equal to its revenue reduction percentage for the immediately preceding qualifying period.
Note: the formula is: 0.5xAx(B/C) where
A= qualifying revenues for the months of January and February of 2020
B= number of days in January and February 2020
C= number of days in January and February of 2020 during which the eligible employer was carrying on business —or otherwise carrying on its ordinary activities.
20-3. How is the top-up wage subsidy calculated for claim periods 5 to 9? New: August 11, 2020
Under the general year-over-year method, the top-up portion of the wage subsidy is calculated based on the revenue drop experienced when comparing revenues in the preceding 3 months to the same months in the prior year. Under the alternative approach, an eligible employer’s top-up wage subsidy would be determined based on the revenue drop experienced when comparing average monthly revenue in the preceding 3 months to the average monthly revenue in January and February 2020.
Top-up revenue reduction percentage
The top-up revenue reduction percentage of an eligible employer for a claim period, means the result, expressed as a percentage, of:
(1 - A/B) where
A is the average monthly qualifying revenue of the eligible employer for the last three calendar months that ended prior to the current reference period for the claim period;
B is the average monthly qualifying revenue of the employer for:
(a) if the prior reference period for the claim period is January and February 2020, then January and February 2020, and
(b) in any other case, the last three calendar months that ended before the prior reference period for the claim period.
The top-up percentage, of an eligible employer for a claim period, means the lesser of 25% and the percentage determined by the formula:
1.25 × (employer’s top-up revenue reduction percentage for the claim period − 50%)
If the revenue reduction percentage of the eligible employer is equal to or less than 50%, the employer will not be eligible for the top-up wage subsidy.
As with the base percentage, the top-up percentage applies to eligible remuneration of up to $1,129 per week.
32. How will the CRA Ensure Compliance? Updated: August 11, 2020
The CRA will use a combination of automated queries, validation within its data, follow-up phone calls to verify certain elements of the claim upon pre-payment review, and more comprehensive post-payment audits.
As a result of the review or audit, the CRA may at any time determine that any or no amount of a wage subsidy claim is an overpayment and send a Notice of Determination to the claimant. In the case of an audit, the wage subsidy claimant would be required to repay amounts previously paid as well as applicable interest. In regard to cases of serious non-compliance, significant penalties may be applicable.