On November 23, 2020, CRA updated their FAQs and CEWS application portal. The more significant changes are listed are detailed below. The additional questions include
5-03.1. How is the reduction in revenue for the immediately preceding period calculated for purposes of the deeming rule for claim periods 5 to 10?
12-3. Can an eligible employer amend or revoke an election?
17-5. Are bonuses paid to an eligible employee included in eligible remuneration for purposes of computing the wage subsidy?
17-6. How are commissions paid to an eligible employee included in eligible remuneration for purposes of computing the wage subsidy?
17-7. Are payments of wages in lieu of termination notice and salary continuance payments eligible for the wage subsidy?
17-8. Does a payment to an eligible employee under a supplementary unemployment benefit plan (“SUBP”) qualify for the wage subsidy?
There have also been significant modifications to previously released questions. Such modifications are included below the “ADDITIONAL QUESTIONS FULL DESCRIPTION”
Additional Questions full description
5-03.1. How is the reduction in revenue for the immediately preceding period calculated for purposes of the deeming rule for claim periods 5 to 10? New: November 23, 2020
In order to determine if the deeming rule (see Q5-03) applies, an eligible employer must compare its reduction in revenue for the current claim period with its reduction in revenue for the immediately preceding claim period. For this purpose, the reduction in revenue for the immediately preceding claim period is calculated using the rules (that is, the elections and approaches) that were applicable to that specific claim period for the eligible employer.
Two examples added.
12-3. Can an eligible employer amend or revoke an election? New: November 23, 2020
Yes, an eligible employer may amend or revoke an election. However the amendment or revocation must be made and the claim amended (where applicable), on or before the due date for filing the wage subsidy application for that claim period (see Q26). For elections that apply to multiple claim periods (such as the election to use the cash or accrual method for determining qualifying revenue (see Q12), or the election to use the alternative approach for prior reference periods (see Q2)), the amendment or revocation must be made before the application due date for the first claim period in respect of which the election is made.
17-5. Are bonuses paid to an eligible employee included in eligible remuneration for purposes of computing the wage subsidy? New: November 23, 2020
An amount paid as a bonus by an eligible employer to an eligible employee is generally considered salary, wages and remuneration, and would be considered eligible remuneration.
However, only eligible remuneration paid by an eligible employer to an eligible employee in respect of a week in a claim period is included for purposes of computing the wage subsidy. Therefore, an eligible employer may need to do a manual calculation to determine the amount that was paid in respect of each week in the claim period.
For example, in the case of an annual bonus paid by an eligible employer to an eligible employee, it would generally be reasonable to consider that the annual bonus was earned throughout the fiscal period to which it relates.
Further, for the purposes of computing baseline remuneration in respect of an eligible employee for a claim period, the bonus amount must be paid during the relevant baseline remuneration period as described in Q18. It would also be reasonable, for purposes of computing baseline remuneration, to calculate the average weekly eligible remuneration by dividing the bonus amount by the number of weeks included in the period to which it relates (see Q18-2).
An eligible employer will not be eligible for the wage subsidy in respect of eligible remuneration paid to an eligible employee with which it does not deal at arm’s length (for example, an owner-manager) for a week in the claim period, if it did not pay any eligible remuneration during the employee’s relevant baseline remuneration period described in Q18 (see Q17-2).
Example 17-5A
17-6. How are commissions paid to an eligible employee included in eligible remuneration for purposes of computing the wage subsidy? New: November 23, 2020
An amount paid as a commission by an eligible employer to an eligible employee is generally considered salary, wages and remuneration, and would be considered eligible remuneration. However, only eligible remuneration paid by an eligible employer to an eligible employee in respect of a week in a claim period, is included for purposes of computing the wage subsidy.
To determine whether a commission payment is in respect of a specific week, it is necessary to review the complete set of facts pertaining to a particular situation, including the employment contract, which would normally describe the conditions required to be met for an employee to be entitled to a commission. Other factors may also be relevant, such as the practices specific to a particular industry, which may provide a reasonable methodology to determine whether a commission relates to a given week.
For example, if a car salesperson, who is remunerated by commission when a car is sold as provided in the employment contract, sells two cars in a given week in a claim period, it could be reasonable to consider that those commissions are paid “in respect of the week” in which those two sales occurred.
Example 17-6A provided
17-7. Are payments of wages in lieu of termination notice and salary continuance payments eligible for the wage subsidy? New: November 23, 2020
An amount received by an individual arising out of or in consequence of the termination of their employment may be considered income from employment or a retiring allowance. A retiring allowance is not eligible remuneration for purposes of the wage subsidy.
A payment in lieu of earnings for a period of reasonable notice of termination (wages in lieu of termination notice) that is made under the explicit or implied terms of an individual’s employment is considered salary or wages from employment. However, wages in lieu of termination notice are not considered to have been paid in respect of a week, and therefore are not eligible for the wage subsidy.
Salary continuance payments are generally periodic amounts paid to an employee who is being terminated but who remains on payroll and remains entitled to benefits available only to employees, even if they are no longer required to report to work. Where pension benefits continue to accrue to the individual, an employment relationship continues to exist (as pension benefits only accrue to employees) even though the individual is not required to report to work.
Where the employment relationship continues to exist, salary continuance payments to an eligible employee are salary or wages from employment, that would generally be considered eligible remuneration paid in respect of a week, and would be eligible for the wage subsidy. However, an employee receiving salary continuance payments will not be considered to be on leave with pay for purposes of the wage subsidy (see Q20-03).
17-8. Does a payment to an eligible employee under a supplementary unemployment benefit plan (“SUBP”) qualify for the wage subsidy? New: November 23, 2020
A SUBP, often described as a top-up plan, provides benefits that supplement the employment insurance benefits that employees receive during a period of unemployment due to a temporary work stoppage. A SUBP can be funded through a trust or unfunded and can be registered with Service Canada or with both Service Canada and CRA. More information about these registration processes is available on the Service Canada and CRA websites.
Direct pay plan
If the SUBP benefits are paid to eligible employees by the eligible employer directly, rather than through a trustee, these payments would be remuneration paid to the employees. Accordingly, these payments would also generally qualify as eligible remuneration paid to an eligible employee for purposes of the wage subsidy.
If an eligible employee was receiving Employment Insurance benefits between January 1 and March 15, 2020 and the eligible employer paid a supplementary top-up amount directly to the eligible employee during that period, the top-up payment would also be included in baseline remuneration in respect of the employee for purposes of the wage subsidy.
Trusteed plan
If the SUBP is one under which the eligible employer makes payments to a trustee in trust for the purpose of providing periodic amounts to laid-off employees, payments by the trustee to eligible employees would not be considered to be salary, wages or other remuneration of the employees. Accordingly, these payments would not qualify as eligible remuneration for purposes of the wage subsidy.
In addition, employer contributions made by an eligible employer to the trustee under this type of trusteed SUBP would not be considered eligible remuneration paid to an eligible employee for purposes of the wage subsidy.
Modified questions
5-01. How is the revenue reduction determined for claim periods 5 to 10? Updated: November 23, 2020
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 10.
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 claim periods 5 to 10, 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 10 (see Q5-03) apply, or the employer is eligible for the top-up subsidy (see Q20-3). An eligible employer’s revenue reduction percentage is relevant to determining its base wage subsidy amount in claim periods 5 to 10 (see Q20-2). Additionally, an eligible employer might qualify for the top-up wage subsidy for that claim period.
For claim periods 5 to 7, the top-up wage subsidy is calculated based on the three-month revenue-reduction test (Table 2B). For claim periods 8 to 10, the top-up wage subsidy is the greater of the amount determined under the three-month revenue-reduction test and the one month revenue reduction test (Table 2C). See Q20-3 for the safe harbour rule to calculate top up wage subsidy for the claim periods 8 to 10.
8-3. Are there special rules that apply for calculating the qualifying revenue where an eligible employer acquired assets from a third party? Updated: November 23, 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 (the acquirer) 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; or
if the seller and the acquirer deal with each other at arm’s length, all or substantially all of the property of the seller that can reasonably be regarded as being necessary for the acquirer to be capable of carrying on a business of the seller, or part of a business of the seller, as a 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 acquirer elects in respect of the claim period or, if the seller is in existence during the claim period, the acquirer and the seller jointly elect in respect of that period (see note 2 below).
Application
Where all the above conditions are met, 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). However, if the acquirer did not have an open payroll account with the CRA on March 15, 2020, they may receive an error message when submitting their wage subsidy application. In this situation, the acquirer must contact the CRA’s Business Enquiries line at 1-800-959-5525 and inform the agent that they have recently purchased assets of another business and are electing for the asset acquisition rules to apply. After a review of both the acquirer’s and seller’s payroll program accounts, the agent will advise the acquirer when they can apply for the wage subsidy.
In the formula for calculating the qualifying revenue for a prior reference period using the alternative approach (see Q5), the acquirer is deemed to have commenced carrying on the business in which the acquired assets were used, at the earlier of
the date on which the acquirer commenced carrying on that business, and
the date on which the seller commenced carrying on the business in which the acquired assets were used.
Note 1: For example, if the seller’s business operation has more than one division, and if the acquirer was not dealing at arm’s length with the seller, the acquirer must consider all the assets used in carrying on the business of all the divisions of the seller 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 8-3B).
Note 2: This election (see Q12-2), must be made in respect of each claim period and retained with the acquirer'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.
13. Who is an eligible employee? Updated: November 23, 2020
An eligible employee, in respect of a week in a claim period, means an individual employed primarily in Canada by the eligible employer throughout the claim period (or the portion of the claim period throughout which the individual was employed by the eligible employer)(see note 1 below). For the claim periods 1 to 4, it does not include an individual who has been without remuneration from the eligible employer in respect of 14 or more consecutive days in the claim period (see note 2 below).
For claim periods 5 to 10, individuals employed primarily in Canada by the eligible employer throughout 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 1: For applications submitted before November 19, 2020, 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, subject to the 14 day restriction for claim periods 1 to 4 described above.
Note 2: Eligible employee status is determined in respect of each week in each claim period. So an individual that is not an eligible employee in a preceding claim period (because, for example, the 14 day remuneration condition for claim periods 1 to 4 has not been met), may become eligible in a following claim period (see Example 15A).
Q13-1. In determining who is an eligible employee, what is the meaning of the phrase, “employed in Canada”? Updated: November 23, 2020
An employee is “employed in Canada” if they are performing the duties of an office or employment in Canada. Generally, a person exercises the functions of their employment at the place where they are physically present. Thus, when that place is situated outside Canada, that person will not generally be considered as being “employed in Canada”. It is necessary for an individual to be employed primarily in Canada throughout the claim period (or the portion of the claim period throughout which the individual was employed by the eligible employer) to be an eligible employee. Generally, “primarily” means more than 50%. See Q13 for additional information on who is considered an eligible employee.
16. Can a non-resident employee be an eligible employee? Updated: November 23, 2020
Yes, since eligible employee status is determined based on where the individual is employed and not where the individual resides. Generally, a non-resident individual employed primarily in Canada through out a claim period (or the portion of the claim period throughout which the individual was employed by the eligible employer) will qualify as an eligible employee as long as all other conditions to be an eligible employee are met (see Q13 and Q13-1).
18. What is baseline remuneration? Updated: November 23, 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. Further, since the election is in respect of an employee, the eligible employer must keep a list of names of such employees for each claim period for which it makes an election.
20-02. How is the wage subsidy calculated for claim periods 7 to 10?Updated: November 23, 2020
Note 1: For claim periods 7 and 8 the amount is 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, nil, 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
For claim periods 9 and 10 the amount is the greater of
$500, and
the lesser of
55% of baseline remuneration in respect of the eligible employee determined for that week, and
$573.
Note 2: 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.
20-3. How is the top-up wage subsidy calculated for claim periods 5 to 10?Updated: November 23, 2020
Under the general year-over-year approach, for claim periods 5 to 7, the top-up wage subsidy is calculated based on the revenue drop experienced when comparing the average monthly qualifying revenues of the eligible employer in the last 3 calendar months that ended prior to the current reference period for the claim period, to the average monthly qualifying revenues for the same months in the prior year. For claim periods 8 to 10, the top-up wage subsidy is based on the greater of the revenue reduction as calculated above (three month revenue reduction test) and the revenue reduction for the claim period (one month revenue reduction test) (see Q20-2).
Under the alternative approach, for claim periods 5 to 7, an eligible employer’s top-up wage subsidy would be determined based on the revenue drop experienced when comparing average monthly qualifying revenue in the last 3 calendar months that ended prior to the current reference period for the claim period, to the average monthly revenue in January and February 2020. For claim periods 8 to 10, it will be based on the greater of the percentage calculated as above (three month revenue reduction test) and the revenue reduction percentage (one month revenue reduction test) of the eligible employer for the claim period.
Top-up revenue reduction percentage
For claim periods 5 to 7 (three month revenue reduction test)
The top-up revenue reduction percentage of an eligible employer for claim periods 5 to 7, 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.
For claim periods 8 to 10 (safe harbour rule for top-up wage subsidy calculation)
The top-up revenue reduction percentage of an eligible employer for claim periods 8 to 10 is the greater of (see Example 20-3B):
the result (expressed as a percentage) of the formula described above (three month revenue reduction test), and
its revenue reduction percentage (see Q 20-2) for the claim period (one month revenue reduction test)
Top-up percentage
The top-up percentage, of an eligible employer for a claim period, means the percentage determined by regulation for the claim period (currently there is none) or, if there is no percentage determined by regulation for the claim period, 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 top-up 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.
26. When can I claim the wage subsidy? Updated: November 23, 2020
The wage subsidy program opened for applications from qualifying eligible employers on April 27, 2020.
Applications in respect of a claim period can be made only after the end of the claim period, and provided the eligible employer has paid to the eligible employee, the eligible remuneration used to calculate the wage subsidy for that period.
Additionally, wage subsidy applications must be made on or before the later of
January 31, 2021, and
180 days after the end of the claim period.
33. What books and records do I need to support my claim? Updated: November 23, 2020
Where an eligible employer elects to use a baseline remuneration period other than the period that begins on January 1, 2020, and ends on March 15, 2020, in respect of an employee for a qualifying period, the employer must keep a list of the names of such employees for each claim period for which it elects.
Other
Baseline remuneration for periods 5-10
For claim periods 5 to 10, if the eligible employee was on a leave that was for maternity, paternity, parental, or adoption reasons, or if the employee is on leave due to illness, injury, quarantine to provide compassionate care or support for family members, or to provide care or support for critically ill children or critically ill adult family members, throughout a period that begins on July 1, 2019 and ends on March 15, 2020, then the eligible employer can elect that the baseline remuneration period is a period that is 90 days immediately before the date on which they commenced their leave.