The CEWS FAQ was updated to include:
timing information on the extended eligibility periods;
proposals to enhance ability for newly amalgamated companies to be eligible;
inability for newly incorporated entities to use predecessor proprietorship revenues; and
a few other clarifications.
Additions to responses for previously released questions:
1. What is the Canada Emergency Wage Subsidy?
The government has proposed the extension of the wage subsidy for an additional twelve weeks (i.e., three more 4 week periods). All the rules related to the wage subsidy for the proposed fourth period (June 7 to July 4, 2020), will be identical to the ones for the preceding third period (May 10 to June 6, 2020), as described in these questions. The government will announce shortly, details of potential changes to the program’s framework for the fifth (July 5 to August 1, 2020) and/or sixth (August 2 to August 29, 2020) periods.
3-8. Can an eligible employer that hires a third party to facilitate the administration of its payroll, qualify for the wage subsidy?
Note: On June 10, 2020, the government introduced Bill C-17 in Parliament that proposes to extend eligibility for the CEWS to certain employers who did not have an RP account but instead use a payroll service provider who makes their payroll remittances on the provider’s RP account. The proposed change will only be administered and applied once the legislation has received Royal Assent.
5. How is the reduction in revenue determined?
The proposed Period 4 claim period is from June 7 to July 4, 2020. The reference period is June 2020 over June 2019 or average of January and February 2020.
18. What is baseline remuneration?
The government has proposed that where an eligible employer elects, it can instead use a period that begins on March 1 and ends on May 31, 2019 (see Q18-1).
20. How is the wage subsidy calculated?
CRA added the following note in respect of the fully reimbursable employer contributions to Employment Insurance (EI), the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP), and the Quebec Parental Insurance Plan (for an employee that is on leave with pay) :
Note 1: In general, an eligible employee will 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. This amount would not be available for eligible employees that are on leave with pay for only a portion of a week. In addition, regular rules will apply in calculating the employer contributions in respect of that employee.
CRA added the following note in respect of CEWS reductions for work sharing benefits received by employees:
Note 2: On an administrative basis, CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.
New questions added:
6-4. Can a corporation formed on the amalgamation of two or more predecessor corporations, or where one corporation is wound up into another, qualify for the wage subsidy?
Corporations formed on the amalgamation of two or more predecessor corporations, or where one corporation is wound up into another, may not qualify for the wage subsidy. The amalgamated corporation would be considered a new corporation and as such, it may not have a comparator or a full-picture comparator for its prior reference period in order to determine that it has experienced the required reduction in revenue to qualify for the wage subsidy for that claim period. Similarly, a subsidiary corporation that is wound up into its parent corporation on a tax-deferred basis would cease to exist and, as such, the remaining corporation may not have a comparator that provides a full picture of pre-crisis revenues for its prior reference period in order to determine that it experienced the required reduction in revenue.The government has proposed to amend the wage subsidy to allow corporations formed on an amalgamation of two or more predecessor corporations (or where a corporation is wound up into another), to calculate their qualifying revenue using their combined revenues, unless it is reasonable to consider that one of the main purposes for the amalgamation (or the winding up) was to qualify for the wage subsidy.This change is proposed to be retroactive to April 11, 2020, which means that it would apply to the first claim period starting March 15, 2020 and subsequent claim periods. These proposed changes will only be administered and applied once the legislation has received Royal Assent.
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?
No. Where an eligible employer (the new corporation) was not carrying on business or otherwise carrying on its ordinary activities on March 1, 2019, it is required to use the "alternative approach" (see Q5) to calculate its decline in revenue. That is, the reduction in revenue determination is made by comparing the qualifying revenue for the calendar month in which the claim period began with the average of the qualifying revenues earned in January and February 2020.Where an eligible employer was not carrying on business or otherwise not carrying on its ordinary activities throughout all of January and February 2020, as in the case of a new business that started mid-January, the qualifying revenues for the months of January and February 2020 will be grossed up under the alternative approach for the comparison of the qualifying revenue in the prior reference period to the qualifying revenue in the current reference period (see Example 4). If the eligible employer did not have any revenue during January and February 2020 or if it incorporated after February 2020, then it will not be eligible for the wage subsidy.
6-6. Can an eligible employer's qualifying revenue for a reference period be adjusted to account for changes in business operations of an eligible employer's business?
No. Subject to the special rules discussed in Q7 to Q12, an eligible employer should use its normal accounting practices when determining its qualifying revenue. Qualifying revenue means the inflow of cash, receivables or other consideration arising in the course of the eligible employer's ordinary activities in Canada in a particular period and excludes revenue received from extraordinary items (see Q6-2).Aside from the special rules, there are no provisions that allow an eligible employer to adjust qualifying revenue from prior reference periods or current reference periods in order to account for changes in operation levels. For example, an eligible employer would not be able to make adjustments to its qualifying revenue calculations for a prior reference period with unusually low revenue caused by an interruption to its operations due to damage to equipment or premises, an employee lock-out or strike, or a supply chain disruption. Likewise, qualifying revenue calculations cannot be adjusted for a recent expansion of an eligible employer's normal operations, such as adding additional locations to a business or the purchase of a competitor's assets.An eligible employer has the option of using the average of qualifying revenues in January and February 2020 for the prior reference period instead of using the general "year-over-year" approach (see alternative approach in Q5). An eligible employer who was not carrying on a business (including a situation described in Q6-5), or otherwise not carrying on its ordinary activities (such as a complete halt in operations) on March 1, 2019, must use this alternative approach.
28-1. In what circumstances will I have to return or repay any or all of the wage subsidy that I received?
Generally, an employer would be required to repay all amounts paid under the wage subsidy if the CRA determined during the post-payment review or audit, that it did not meet the eligibility requirements (see Q4).
An employer will also have to return or repay all or part of the wage subsidy where:
it made an error in the calculation of the amount claimed for a period, thereby reducing the amount originally claimed;
it noticed that it did not qualify for the wage subsidy after submitting the application and receiving the wage subsidy;
it noticed that it made a data entry error (typo), thereby reducing the amount originally claimed for a period;
on a review of its claim by the CRA after it received the subsidy, the claim amount was either rejected or reduced by the CRA.
Note: Interest may apply to excess wage subsidy amounts received. Penalties may also apply in cases of fraudulent claims (see Q34).