THe CEWS FAQ has been updated.
1) It provides listings and details on additional eligible employers including:
certain indiginous businesses;
cerain partnerships;
registered Canadian amature athletic association;
registered journalism organization; and
a person or partnership that operates a private school or pricate college.
2) CRA clarifies that employers who do not have their own business number and payroll account on or before March 15, 2020 that are using third parties to facilitate the administration of payroll, would not be eligible for the subsidy.
3) Employers can elect the 10% Temporary Wage Subsidy to be 0% and therefore not have their CEWS application reviewed. The eligible employer should indicate the 0% election on the self-identification form under the 10% temporary wage subsidy program.
Changes to questions include (added parts are in bold)
21. Will I be eligible for both the Canada Emergency Wage Subsidy and the 10% Temporary Wage Subsidy for Employers?
You may be eligible for both the Canada Emergency Wage Subsidy (CEWS) and the 10% Temporary Wage Subsidy for Employers (10% temporary wage subsidy). However, for an eligible employer that is eligible for both subsidies for a period, all amounts that the employer claims under the 10% temporary wage subsidy for remuneration paid in a specific claim period, reduce the amount available to be claimed under the CEWS in that same period.
The 10% temporary wage subsidy is equal to 10% (or a lower percentage that the employer elects - see note below), of the remuneration that an eligible employer pays from March 18, 2020 to June 19, 2020, up to $1,375 for each employee, to a maximum of $25,000 total per employer.
If the income taxes you deduct with respect to the remuneration you paid are not sufficient to offset the value of the subsidy in that period, you can reduce future payroll remittances to benefit from the subsidy. However, the entire amount claimed under the 10% temporary wage subsidy must be applied to reduce the CEWS for the claim period in which the remuneration is paid.
Note: If an eligible employer completes their CEWS application and does not enter any amount for the 10% temporary wage subsidy, the CEWS will be determined as if the employer is electing 0% as the prescribed percentage for calculating their 10% temporary wage subsidy and requesting the maximum CEWS. However, the eligible employer should indicate the 0% election on the self-identification form under the 10% temporary wage subsidy program.
Example 13-1
In Example 13, assume the eligible employer elects to apply a percentage less than 10% to determine the 10% temporary wage subsidy such that the subsidy is now only $1,050. It is now able to offset the entire $1,050 of the subsidy against the $1,050 from the federal, provincial, or territorial income tax withheld from its employees for that period. In this situation, its CEWS claim for the same period (April 12, to May 9, 2020), is reduced by only $1,050.
Example 13-2
Now assume in Example 13, the eligible employer elects a percentage of 0% for the 10% temporary wage subsidy. Consequently that subsidy will be nil on remuneration paid from April 12, to May 9, 2020 (which coincides with the second claim period). In this situation, it does not reduce the amount of federal, provincial, or territorial income tax withheld from its employees for that period. In addition, its CEWS claim for the same period (April 12, to May 9, 2020), is not reduced. Where the eligible employer does not claim any amount, it should indicate the 0% election on the self-identification form under the 10% temporary wage subsidy program.
33. What books and records do I need to support my claim?
The CRA expects that you will maintain adequate books and records to ensure that your claim is accurate and complete, and clearly supports your eligibility for the wage subsidy for a claim period.
Books and records includes ledgers, journals, financial statements, contracts, elections, calculations or other working papers, payroll records, sales invoices and any other relevant document. For additional information about adequate records and recordkeeping, please see What are records and who has to keep them?
34. Are there penalties for non-compliance?
Yes. Due to a specific anti-avoidance rule, an employer will not be eligible to claim the wage 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.
The specific additional questions include:
3-2. Are there any prescribed organizations that are eligible employers for the purposes of the wage subsidy?
Yes, the following prescribed organizations will be eligible employers for the purposes of the wage subsidy:
certain Indigenous businesses; specifically:
a tax-exempt corporation (under paragraph 149(1)(d.5) of the Act) carrying on a business that is at least 90% owned by one or more Indigenous governments;
a tax-exempt corporation (under paragraph 149(1)(d.6) of the Act) carrying on a business that is owned 100% by one or more Indigenous governments or by tax-exempt corporations described above;
a partnership, each member of which is an eligible employer or an Indigenous government;
in respect of a claim period, a partnership, if throughout the claim period, 50% or more of the fair market value of all interests in the partnership are held - directly or indirectly, through one or more partnerships - by eligible employers;
a registered Canadian amateur athletic association;
a registered journalism organization;
a person or partnership that operates a private school or private college.
As of March 15, 2020, the above prescribed organizations are eligible employers for the purpose of wage subsidy.
3-3. What is a tax-exempt corporation under paragraph 149(1)(d.5) or (d.6) for purposes of the prescribed organizations?
A tax-exempt corporation under paragraph 149(1)(d.5) of the Act, in the context of a prescribed organization refers to a corporation, where:
not less than 90% of the shares or capital (subject to note 1) are owned by one or more entities that are an Indigenous government (see note 2) described in paragraph 149(1)(c) that is a public body performing a function of government in Canada;
no more than 10% of the income of the corporation is earned from activities carried on outside the geographical boundaries of the Indigenous government (the 10% geographical boundaries income test); and
it carries on a business.
A tax-exempt corporation under paragraph 149(1)(d.6) (i.e., wholly-owned subsidiaries of certain corporations) in the context of a prescribed organization refers to a corporation where:
all of the shares (except directors' qualifying shares) or the capital (subject to note 1) are owned by one or more entities each of which is
a tax-exempt corporation described in this paragraph or the paragraph above, or
an Indigenous government (see note 2) described in paragraph 149(1)(c) that is a public body performing a function of government in Canada;
the 10% geographical boundary income test as required in paragraph 149(1)(d.5) applies all the way down a chain of subsidiaries, i.e., each must meet the same 10% geographical boundary income test; and
it carries on a business.
Note 1: In the context of a corporation without share capital, the determination of the ownership necessitates a review of all the relevant documents such as articles of incorporation, by-laws and agreements relating to the operation and control of the corporation and its assets.
For purposes of determining the ownership tests in paragraphs 149(1)(d.5) and 149(1)(d.6) any right to acquire shares or capital of a corporation should be considered as though the right had been exercised.
No persons other than governmental bodies own shares that, in total, give them more than 10% of the votes that could be cast at any meeting of shareholders.
No person (or a group including any person) other than governmental bodies in fact controls the corporation.
Note 2: For the purpose of these rules, an Indigenous government means an Indian, Inuit or Métis government or similar Indigenous governing bodies exempt from tax under paragraph 149(1)(c) (for the purpose of that paragraph, all bands created under the Indian Act meet the criteria to be considered municipal or public bodies performing a function of government in Canada).
3-4. If a partnership has one or more members that are Indigenous governments, will it qualify for the wage subsidy?
A partnership, each member of which is an eligible employer, or an Indigenous government, is an eligible employer for the purposes of the wage subsidy. If such a partnership meets all other conditions necessary to qualify (see Q4), it can make an application for the wage subsidy.
3-5. Where a partnership has both eligible employers (including prescribed organizations), and non-eligible employers as its members, will such a partnership qualify for the wage subsidy?
A partnership that is an eligible employer and meets all other conditions (see Q4) necessary to qualify in respect of a claim period, can make an application for the wage subsidy (see Q26) for that claim period.
Generally, for the purposes of the wage subsidy, a partnership is an eligible employer if each of its members is an eligible employer (individuals, taxable corporations, non-profit organizations, or registered charities), including prescribed organizations (see Q3-2) and other partnerships that themselves are eligible employers (see Q3).
However, where the partnership interests are held by both eligible and non-eligible employers, the partnership will be an eligible employer if, throughout the claim period, 50% or more of the FMV of all interests in the partnership are held - directly or indirectly, through one or more partnerships - by eligible employers.
3-6. If a partnership has one or more members that are prescribed organizations, will it qualify for the wage subsidy?
An entity that is a prescribed organization (see Q3-2) for the purposes of the wage subsidy is an eligible employer. Hence, a partnership that has one or more members that are prescribed organizations, will qualify for the wage subsidy provided:
all the remaining members are eligible employers (see Q3) or Indigenous governments, or
where the remaining members are not all eligible employers or Indigenous governments, then throughout the claim period, 50% or more of the fair market value of all interests in the partnership are held—directly or indirectly, through one or more partnerships—by eligible employers.
3-7. Are all schools and colleges eligible for the wage subsidy?
Public institutions, including colleges and schools, are not eligible employers for the purposes of the wage subsidy.
However, a person or partnership that operates a private school or private college is a prescribed organization and is an eligible employer for the purposes of the wage subsidy.
Private schools and private colleges include for-profit and not-for-profit institutions such as arts schools, language schools, driving schools, flight schools and culinary schools.
3-8. Can an eligible employer that hires a third party to facilitate the administration of its payroll, qualify for the wage subsidy?
In order to qualify for the wage subsidy, an eligible employer must meet certain conditions. One of these conditions is that the eligible employer had an open payroll program account with the CRA on March 15, 2020.
An employer, as the entity who has discretion over the amounts they pay to their employees, is responsible for the payroll withholding, remitting, and reporting obligations under the Income Tax Act. This entity is the one who must register a business number and payroll program account with the CRA.
In many circumstances, an employer will hire a third party to facilitate the administration of their payroll. This third party simply performs actions on the employer’s behalf and should, in all cases, be using the employer’s business number and payroll program account to perform these actions.
Employers who did not have their own business number and payroll program account with the CRA on or before March 15, 2020 would not meet the eligibility criteria, and subsequently, would not be eligible for the wage subsidy. The third party cannot apply for the wage subsidy on behalf of an employer by using their own business number and payroll program account.