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Watch! 75% CEWS FAQ Released

A 35 part FAQ was released. Some of the new elements of note include:

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?

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.

When calculating the qualifying revenue for the current reference period under this rule, the eligible employer's qualifying revenue includes amounts derived 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 is modified to include revenues earned outside of Canada. The particular person or partnership can be either a resident or a non-resident.

For more information about non-arm's length, please see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.

Note: This election must be made 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.

9. Are there special rules for calculating the qualifying revenue of a group of eligible employers?

The qualifying revenue of an eligible employer is generally determined in accordance with its normal accounting practices. Consequently, when a group of eligible employers generally prepares consolidated financial statements, each member of the group will determine its qualifying revenue in accordance with those statements.

However, each member of such a group may determine its qualifying revenue separately and not based on the consolidated statements, so long as every member of the group determines its qualifying revenue on that separate basis.

Example provided.

10. Are there special rules for calculating the qualifying revenue of members of an affiliated group?

If an eligible employer and each member of an affiliated group of eligible employers of which the eligible employer is a member jointly elect (see note), the qualifying revenue of the affiliated group, determined on a consolidated basis in accordance with relevant accounting principles, is to be used for each member of the group. This rule applies even if one or more members of an affiliated group may have no revenue to report in the claim period.

Note: This election must be made and retained with the eligible entity'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 entity's financial activities must attest that this is the case.

Example provided.

14. Can an eligible employer claim the wage subsidy for an employee that the employer hires back and pays retroactively?

Yes. It is possible for an eligible employer to hire back eligible employees and pay them retroactively in respect of a claim period, to be able to qualify for the wage subsidy. Refer to the example in Q20.

Further, if such an employee has received a Canada Emergency Response Benefit (CERB) payment from the CRA for a claim period, and it is later determined that they are no longer eligible for the CERB, whether due to the employment or otherwise, there are ways for the employee to return or repay the CERB amount. For more details on repayment, please refer to Return or repay on the Apply for CERB web page.

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 and the 10% Temporary Wage Subsidy for Employers. However, for an eligible employer that is eligible for both subsidies for a period, all amounts eligible to be claimed under the 10% Temporary Wage Subsidy for remuneration paid in a specific claim period would reduce the amount available to be claimed under the wage subsidy in that same period.

Specifically, with respect to the 10% Temporary Wage Subsidy for Employers, 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 eligible to be claimed under the 10% Temporary Wage Subsidy will be applied to reduce the Canada Emergency Wage Subsidy for the claim period in which the remuneration is paid.

Example provided.

22. Can I claim the wage subsidy for an eligible employee even if they were hired after March 15, 2020?

Yes, an eligible employer may be able to claim the wage subsidy for eligible remuneration paid to eligible employees hired after March 15, 2020.

However, for an eligible employee that does not deal at arm's-length with the eligible employer, it may be able to claim the wage subsidy only if that employee was employed by the eligible employer and has received eligible remuneration during the period from January 1, 2020 to March 15, 2020 (baseline remuneration).

Example provided.

23. Can an eligible employer claim the wage subsidy for an eligible employee even if they do not deal at arm's length with each other?

An eligible employer may be eligible to claim the wage subsidy in respect of an eligible employee who does not deal at arm's length with it, provided the individual was an eligible employee of the eligible employer anytime during the period beginning January 1 and ending March 15, 2020, and received eligible remuneration at that time (baseline remuneration).

24. Is there a special rule for the amount of wage subsidy that can be claimed if an eligible employee is employed by two or more eligible employers?

Generally, there is no limit on the wage subsidy amount that an eligible employer may claim or the total number of eligible employees it could employ during the claim period. However, there is a special rule where an eligible employee is employed in a week by two or more eligible employers that do not deal with each other at arm's length. In this situation, the total amount of wage subsidy in respect of the eligible employee for that week cannot exceed the amount that would arise if the eligible employee's eligible remuneration for that week were paid by only one eligible employer that qualifies for the wage subsidy.

27. How do I claim the wage subsidy?

Eligible employers will be able to apply for the wage subsidy through the CRA's My Business Account portal or the Web Forms application.

Note: The online applications are currently being developed.

Representatives (authorized at a level 2 or 3) will be able to apply for the wage subsidy on behalf of their clients through the Represent a Client service, as well as through the Web Forms application.

To log in to or register for the CRA's online services, go to canada.ca/taxes-business-online.

To use the Web Forms application, or if you have misplaced or do not have a web access code, go to canada.ca/taxes-iref.

When completing the application, you will need:

  • your payroll program account number (123456789RP0001, for example);

  • to know which claim period you are applying for;

  • all of the information necessary to complete the applicable fields in the application.

The processing of the wage subsidy will be performed at the payroll program account level, so you will have to file a separate application for each payroll program account. For example, if you have two payroll program accounts (123456789RP0001 and 123456789RP0002, for example) and are claiming wage subsidy for eligible employees under each account, you must file 2 separate applications.

When you apply for the wage subsidy, you will be asked to enter amounts such as the number of eligible employees and total eligible remuneration paid to those employees during the claim period. To get ready, we have created a web page where you can determine these amounts and preview your subsidy now, based on information you enter. For more information, go to Calculate your subsidy amount.

Upon completion of your application, you will be required to keep records supporting your wage subsidy claim (see Q33).

29. Are there any special T4 reporting requirements for the wage subsidy?

Employers will be expected to report the amount of the wage subsidy that was used to pay each of their employees' salaries by using a special code in the “Other information” area at the bottom of the employees' T4 slips. More information on the T4 reporting requirements will be released before the end of the year.

30. Will the wage subsidy be automatically applied against outstanding debt?

No, wage subsidy payments will not be automatically applied against any outstanding debt you have with the CRA.

However, the legislation gives the CRA the ability to administer the wage subsidy program fairly and reasonably and allows for a common-sense approach to dealing with situations that prevent compliance with our tax laws.

The CRA does have the discretion to reduce the amount of the wage subsidy payment if an applicant owes or are about to owe a debt and the CRA determines there is a risk of not collecting all or part of your tax debt.

31. Will the CRA withhold my wage subsidy because of outstanding returns?

No, wage subsidy payments will not be automatically withheld because of outstanding returns under the Income Tax Act or the Excise Tax Act (as well as certain other tax related laws).

However, the legislation gives the CRA the ability to administer the wage subsidy program fairly and reasonably and allows for a common-sense approach to dealing with situations that prevent compliance with our tax laws.

The CRA does have the discretion to withhold the amount of the wage subsidy payment in cases where there is a significant history of not complying with a duty or obligation under our tax laws.

32. How will the CRA Ensure Compliance?

The CRA will use a combination of automated queries and validation within its data, follow-up phone calls to verify certain elements of the claim when necessary, and more comprehensive post-payment reviews or audits.

The CRA will monitor the initial intake of claims and adjust its queries as necessary. The extent of future post-payment reviews will depend on the conclusions the CRA reaches as it reviews the intake of claims.

As with the CERB, the CRA is actively monitoring the situation to ensure that compliance with the tax laws is assured.

In order to maintain the integrity of the program and to ensure that it helps Canadians keep their jobs, the employer would be required to repay amounts paid under the wage subsidy if they do not meet the eligibility requirements.

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 current reference 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. Where this anti-avoidance rule applies, the employer will be liable to a penalty equal to 25% of the amount of wage subsidy that is claimed in its application, and will have to pay back any wage subsidy that it received. If an employer knowingly, or under circumstances amounting to gross negligence, generally makes, or is involved in the making of a false statement or omission in its wage subsidy application for a claim period, the employer is liable to a penalty (commonly referred to as the “gross negligence penalty”) of up to 50% of the difference between the amount of wage subsidy that it claimed in its application and the amount of wage subsidy to which it is actually entitled.

Penalties may apply in cases of fraudulent claims. The penalties may include fines or even imprisonment.

Finally, if a person (such as an accountant or tax preparer) files or prepares the wage subsidy application on behalf of the employer, they could be subject to a third-party penalty under the Act, if they know, or would reasonably be expected to know, that the application contains false statements, including an omission of information. Third-party penalties are explained in detail in the CRA's Information Circular IC01-1, Third-Party Civil Penalties.

35. Will the CRA publish a list of employers that have applied for the CEWS?

Yes. The Act authorizes the CRA to publish the name of any eligible employer that makes an application for the wage subsidy. The CRA will provide updates regarding the timely publication of a list or registry of wage subsidy applicants. The process for making this information available is still under consideration.

To view the complete FAQ, click here.

Watch! 75% Canada Emergency Wage Subsidy (CEWS) – FAQ Update (COVID-19 – Video #17)

This video is for general information purposes only and deals with dynamic, time-sensitive and complex matters that may not apply to particular facts and circumstances. The information provided should not be relied upon as a substitute for specialized professional advice in connection with any particular matter. For more information visit videotax.com/disclaimer. ©Video Tax News Inc. 2020, All Rights Reserved.

Watch! Wills, Power of Attorney and Personal Directives during the COVID-19 Pandemic (COVID-19 – Video #16)

Watch! Wills, Power of Attorney and Personal Directives during the COVID-19 Pandemic

Doris Bonora Q.C. (Canadian group leader of Dentons' Trust, Estates and Wealth Preservation practice) and Caitlin Butler CPA, CA discuss issues arising with respect to Estate planning during the COVID-19 Pandemic, including:

  • challenges individuals face when drafting or updating a will in the current climate;

  • the importance of a Power of Attorney, especially for small business owners; and

  • the basics of personal directives.

Recorded April 17, 2020

This video is for general information purposes only and deals with dynamic, time-sensitive and complex matters that may not apply to particular facts and circumstances. The information provided should not be relied upon as a substitute for specialized professional advice in connection with any particular matter. For more information visit videotax.com/disclaimer. ©Video Tax News Inc. 2020, All Rights Reserved.

 

 

Watch! 75% Wage Subsidy – Selected Issues with Peter Weissman FCPA, FCA, TEP (COVID-19 – Video #15)

Watch! 75% Wage Subsidy - Selected Issues with Peter Weissman FCPA, FCA, TEP and Joseph R. Devaney CPA, CA.

Source

Recorded April 14, 2020

 

This video is for general information purposes only and deals with dynamic, time-sensitive and complex matters that may not apply to particular facts and circumstances. The information provided should not be relied upon as a substitute for specialized professional advice in connection with any particular matter. For more information visit videotax.com/disclaimer. ©Video Tax News Inc. 2020, All Rights Reserved.

 

Watch! 75% Canada Emergency Wage Subsidy Update - April 11 Legislation (COVID-19 – Video #14)

75% Canada Emergency Wage Subsidy – Legislation Tabled April 11, 2020

On April 11, 2020, legislation (Bill C-14) was tabled to enact the 75% Canada Emergency Wage Subsidy.  The subsidy is available to eligible employers based on their eligible remuneration paid during certain 4-week periods.  Eligibility is based on sufficient declines in qualifying revenue.  The following are some of the key points, clarifications, and confirmations from today’s releases and legislation.

Eligible Remuneration

This includes wages, salaries or other remuneration.  Also, fees, commissions, or other amounts for services paid to “eligible employees” are included.  However, the subsidy is limited to the employee’s baseline remuneration (see below). 

Baseline Remuneration

Baseline remuneration means the average weekly eligible remuneration paid to the eligible employee by the eligible entity during the period that begins on January 1, 2020 and ends on March 15, 2020, excluding any period of seven or more consecutive days for which the employee was not remunerated. 

Remuneration Non-arm’s Length Employees 

For these individuals, no more than 75% of baseline remuneration can be available as a subsidy.  In other words, if no remuneration was paid in January through March 15, 2020 to the individuals, no subsidy would be available.

Qualifying Revenue

This is the standard used to measure whether a sufficient decrease has occurred (15% for March, 30% for April).  It means the inflow of cash, receivables or other consideration arising in the course of the ordinary activities of the eligible entity.  It excludes extraordinary items and amounts derived from persons or partnerships not dealing at arm’s length with the employer.

  • Corporate Groups - Special rules for the computation of revenue take into account issues related to corporate groups. Affiliated groups would be able to compute revenue on a consolidated basis at their discretion. Certain entities receiving substantially all of their revenue from non-arm’s length sources will be permitted to determine their decline in revenue based on the decline in the non-arm’s length parties’ revenues. See Subsection 125.7(4).

  • Cash vs. Accrual - As previously announced, employers may choose to computer their revenue on the accrual or cash basis.  The legislation clarifies that “cash basis” will be computed as defined in Subsection 28(1), the provision commonly used for farming and fishing income.

  • Business with Cyclical Revenues - Minister Morneau verbally stated that as of now, he is satisfied with the current solution.

Future Eligibility

Once an employer meets the criteria in respect of a revenue decline, they would automatically meet the revenue decline criteria for the next period of the program.  For example, an employer with a revenue drop of more than 15% in March would qualify for the first and second periods of the program, covering remuneration paid between March 15 and May 9. 

Qualifying Period

While government announcements indicate that the program is only available for 3 months (to June 6, 2020), the legislation allows flexibility for it to be extended to the end of September, 2020.

EI, CPP, QPP and QPIP

Employer’s premiums for employees that are on leave (not working) with pay are fully (100%) included in the subsidy.

Interaction with the 10% Wage Subsidy

Amounts enjoyed under the 10% subsidy will reduce the amounts eligible under the 75% subsidy.

Interaction with Work-sharing EI Benefit

The 75% subsidy is reduced for EI amounts received by the employees under the Work-sharing benefit.

Interaction with CERB and 75% Wage Subsidy

No subsidy is available for an individual who is without remuneration by the eligible entity in respect of 14 or more consecutive days in the qualifying period.  The Department of Finance backgrounder (updated April 11, 2020) noted that the Government will consider implementing an approach to limit duplication.  This could include a process to allow individuals rehired by their employer during the same eligibility period to cancel their CERB claim and repay that amount.  This would have to be implemented in the future.

Anti-avoidance

  • Multiple Employers in a Group - The maximum subsidy that may be claimed in respect of an individual that is employed by multiple non-arm’s length employers, is limited to a claim that would be made as if they had one employer.

  • Manipulation of Remuneration or Revenue - There are anti-avoidance rules that prevent artificial increases in remuneration eligible for the subsidy.  In addition, several rules have been proposed to target revenue manipulation that would entitle employers to the subsidy.

Penalties

Minister Morneau reiterated his belief that the vast majority of Canadian businesses are honest, and will properly use the subsidy to enable them to maintain their workforce through the COVID-19 crisis.  He also reiterated that severe penalties will apply to the few who may seek to abuse the program.   This includes a new 25% penalty for employers manipulating their revenues, as well as existing penalty of 50% of an excessive claim for false statements or gross negligence, or as much as a 200% fine and five years’ imprisonment for fraud/tax evasion.

Information to Be Communicated

The Minister may communicate or otherwise make available to the public, in any manner that the Minister considers appropriate, the name of any person or partnership that makes an application under the 75% wage subsidy.

Payment Timing

Minister Morneau verbally stated that he expects money under the subsidy will be available within 2-4 weeks.

News Release

Backgrounder

Bill C-14

Bill C-14 Finance Notes

This video is for general information purposes only and deals with dynamic, time-sensitive and complex matters that may not apply to particular facts and circumstances. The information provided should not be relied upon as a substitute for specialized professional advice in connection with any particular matter. For more information visit videotax.com/disclaimer. ©Video Tax News Inc. 2020, All Rights Reserved.

Watch! CEBA $40,000 applications - First Experiences with Neil Blue, Partner with Faber LLP

Watch Neil Blue, Partner with Faber LLP and Joseph Devaney discuss first experiences with CEBA $40,000 applications.

For updates and resources for accounting professionals visit https://www.videotax.com/covid19

This video is for general information purposes only and deals with dynamic, time-sensitive and complex matters that may not apply to particular facts and circumstances. The information provided should not be relied upon as a substitute for specialized professional advice in connection with any particular matter. For more information visit videotax.com/disclaimer. ©Video Tax News Inc. 2020, All Rights Reserved.