On July 2, 2021, CRA updated their CEWS FAQ. The key updates include:
1. What is the Canada Emergency Wage Subsidy? Updated: July 2, 2021
The following key component has been added:
For periods 14 to 16 (from March 13, 2021 to June 5, 2021), the rules related to the wage subsidy will remain essentially the same as for periods 11 to 13, except that an additional alternative baseline remuneration period is available. In particular, an eligible employer would be allowed to elect to use for periods 14 to 16, the period of March 1, 2019 to June 30, 2019, or July 1, 2019 to December 31, 2019, to calculate the baseline remuneration for its eligible employee (see Q18).
For periods 17 to 20 (from June 6, 2021 to September 25, 2021), the rules related to the wage subsidy will remain essentially the same as for periods 14 to 16 with the following changes:
A revenue reduction of greater than 10% will be required to be eligible for the wage subsidy for periods 18 to 20 (periods beginning after July 3, 2021) (see Q5-01).
The maximum combined wage subsidy will gradually reduce from a maximum of 75% for period 17 to a maximum of 20% for period 20.
For period 18 and later, an eligible employer may elect to use the period from July 1, 2019 to December 31, 2019, to calculate the baseline remuneration for its eligible employees (see Q18).
The wage subsidy for employees on leave with pay would continue to be available until the end of period 19 (August 28, 2021), i.e., wage subsidy for employees on leave with pay will not be available for period 20 (see Q20-02).
5-02. Can an eligible employer qualify for the wage subsidy if it does not have a revenue reduction in a claim period? Updated: July 2, 2021
For claim periods 5 to 17, 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 for periods 5 to 10, if it is eligible for top-up portion of subsidy (see Q20-3).
For claim periods 18 to 20, an eligible employer must have experienced an actual reduction in revenue greater than 10% for a particular claim period, or have a reduction in revenue greater than 10% as calculated per the deeming rule that is applicable to claim periods 5 to 20 (see Q5-03).
5-03. What is the deeming rule for claim periods 5 to 20?Updated: July 2, 2021
The following key component has been added:
For claim periods 18 to 20, an eligible employer will need to have a reduction in revenue greater than 10% to claim the wage subsidy. For example, an eligible employer’s actual reduction in revenue for claim period 18 (current claim period) was 6% while the actual reduction in revenue for claim period 17 (the immediately preceding claim period) was 12%. Because of the deeming rule applicable to claim periods 5 to 20 applies, its reduction in revenue for claim period 18 will be considered to be 12% instead of 6%. Since the reduction in revenue is greater than 10%, the eligible employer will be able to claim the wage subsidy for claim period 18. If the actual reduction in revenue for period 17 was only 8 %, its reduction in revenue for period 18 will be deemed to be 8%. However, since the deemed reduction in revenue for claim period 18 is not greater than 10%, the eligible employer’s wage subsidy amount for that period will be nil.
28-2. What is the executive compensation wage subsidy repayment rule? New: July 2, 2021
The executive compensation wage subsidy repayment rule is a requirement imposed on certain eligible employers (see 28-3) to repay any or all of the wage subsidy they were refunded in respect of active eligible employees (i.e., other than employees on leave with pay - see Q20-03) for claim period 17 and subsequent claim periods if its aggregate compensation for specified executives (see Q28-6) during the 2021 calendar year exceeds its aggregate compensation for specified executives during the 2019 calendar year.
28-3. Which eligible employers are subject to the executive compensation wage subsidy repayment rule? New: July 2, 2021
An eligible employer will be subject to the executive compensation wage subsidy repayment rule if:
its shares of capital stock are listed or traded on a stock exchange or other public market, or it is controlled by an eligible employer, the shares of capital stock of which are listed or traded on a stock exchange or other public market (referred to as the public parent corporation); and
it has an executive compensation repayment amount (see Q28-4).
28-4. How is the executive compensation repayment amount calculated? New: July 2, 2021
An eligible employer’s executive compensation repayment amount is the amount determined by the formula A x B, where:
A is:
the percentage assigned to the eligible employer under an agreement (see Q28-5); or
in any other case, 100% and
B is the lesser of
the total of all amounts, each of which is a wage subsidy amount of:
the eligible employer;
the public parent corporation (see Q28-3),if any; and
each other eligible employer controlled in that period by the eligible employer or the public parent corporation, if any;
for claim period 17 and subsequent claim periods received in respect of its active eligible employees; and
the amount, if any, by which the 2021 executive remuneration (see Q28-6) of the eligible employer—or of the public parent corporation, if any—exceeds such executive remuneration for 2019.
The amount of executive remuneration is determined with respect to the calendar year. In cases where the fiscal period of an eligible employer does not coincide with the calendar year, a proration of the fiscal periods that overlap the calendar year is required. This is based on the number of days in the fiscal period that fall within the calendar year.
28-5. What is the agreement for the purpose of calculating the executive compensation repayment amount? New: July 2, 2021
The agreement is relevant where there is a group of eligible employers that have wage subsidy amounts for the claim period 17 or any of the subsequent claim periods. For this purpose, the group of eligible employers comprises the eligible employer, the public parent corporation, and each other eligible employer controlled in that period by the eligible employer or the public parent corporation to the extent that they have a wage subsidy amount for claim period 17 or any of the subsequent claim periods.
The agreement allows the members of the group to determine how much of the total executive compensation repayment amount will be repaid by each of them. This agreement must be filed in a prescribed form, and must be entered into by each member of the group.
In order to ensure that the total executive compensation repayment amount is assigned, the agreement must assign a percentage (including 0%), in respect of each member of the group and, the total of all percentages assigned under the agreement must be 100%. No member of the group can be assigned a percentage that would create a greater repayment obligation than the total of its wage subsidy amounts for the relevant periods. Accordingly, where no agreement is made (for example, where there is only one corporation in the group that received the wage subsidy), the default percentage is 100%.
28-6. What is executive remuneration for the purpose of calculating the executive compensation repayment amount? New: July 2, 2021
Executive remuneration for the purpose of calculating the executive compensation repayment amount is a measure of executive compensation, based upon the amount determined for certain securities law purposes.
Where an eligible employer is required to make disclosures to shareholders under Canadian securities laws, its executive remuneration is the total amount of compensation that is required to be disclosed in its Statement of Executive Compensation for Named Executive Officers (i.e. form 51-102F6), pursuant to the Canadian Securities Administrators’ National Instrument 51-102, Continuous Disclosure Obligations. In general terms, this amount is the total compensation reported by the eligible employer for its Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executives (specified executives).
Where an eligible employer is not subject to the aforementioned disclosure requirement, but is required to make a similar disclosure to shareholders under the laws of another jurisdiction, its executive remuneration is the amount of total compensation reported in that similar disclosure (limited to the five most highly compensated individuals, if the compensation of more than five individuals is required to be reported under that disclosure).
In any other case, an eligible employer's executive remuneration is the amount that would be required to be reported by that eligible employer, if it were required to make disclosures to shareholders under Canadian securities laws (i.e. using the methodology for preparing form 51-102F6).
28-7. What is the mechanism to repay the executive compensation repayment amount? New: July 2, 2021
If an eligible employer has an executive compensation repayment amount, all or a portion of the amount of wage subsidy refunded on a particular date in respect of any of claim period 17 and subsequent claim periods is deemed to be an amount that was refunded to the eligible employer in excess of the amount of wage subsidy which the eligible employer was entitled to for the claim period (referred to as an excess refund). This excess refund is deemed to have become payable to the Receiver General on that particular date. It is calculated as the lesser of:
The wage subsidy refunded on that particular date; and
The amount determined by the formula A – B where:
A is the eligible employer’s executive compensation repayment amount (see Q28-4); and
B is the total of all excess refunds determined after the particular date.
This formula effectively provides an ordering rule, where later wage subsidy amounts are required to be repaid first, until the total of all excess refunds equal the eligible employer’s executive compensation repayment amount. See Example 28-7A.