As a COVID-19 relief measure, the Canada Revenue Agency (CRA) introduced a 75% wage subsidy to eligible employers. Initial details were released April 1, 2020, with further updates to the subsidy and eligibility criteria announced on April 8 and 11, 2020. More information about the wage subsidy can be found here: Canada Emergency Wage Subsidy.
Commencing April 27, 2020, eligible businesses can apply for the Canada Emergency Wage Subsidy (CEWS).There are three methods for making an application:
- through a business' My Business Account
- if you represent a business, through Represent a Client (you must have Level 2 or Level 3 Authorization)
- a special online application form
In order to access the special online application form, a business will need an online web access code. To obtain a web access code, the business will need its payroll account (RP) number and a copy of its last filed T4 Summary. If the business is receiving a web access code for the first time, it will need the payroll account (RP) number and the date of registration with the CRA.
The CEWS will be processed through the payroll account (RP) of the eligible business. If a business has multiple payroll account numbers, it will have to make a separate application for each account.
Step 1 – Ensure the Business is Registered
If you plan on applying using My Business Account or through Represent a Client, you should ensure that you have access to either of these portals and that the business' details, including direct deposit information, if applicable, is correct.
Step 2 – Prepare to Apply
Businesses must calculate their estimated wage subsidy before applying for the CEWS. Manual calculations can be made, or, alternatively, businesses can download the calculation spreadsheet from the CRA website.
The spreadsheet contains three tabs:
- a tab with "Instructions and Results"
- a tab for businesses who pay employees weekly (Weekly tab), and
- a tab for businesses who pay employees bi-weekly (Bi-Weekly tab).
If a business uses a different pay period, i.e. monthly, it is recommended that the Weekly tab be used, and the remuneration information be adjusted accordingly. Businesses may have to use both the Weekly and Bi-Weekly tabs, as well as make certain adjustments, to accommodate all their employees, including those that work variable hours, those who stop and start in the middle of a pay period, etc.
Each of the Weekly tab and Bi-Weekly tab are broken down into two main sections:
- one for batch calculations that can be used for employees with identical circumstances
- another which applies to calculations for all other employees.
A business has the option of not using any of the batch calculations and rather, perform the calculations for each individual employee if preferred.
While the descriptions for the input cells seem rather straight-forward, it should be noted that the description in Cell G4 "arm's length employees paid less than $1,129.33/week with no reduction in pay since March 15th for all weeks in the claim period" appears to mean arm's length employees who were paid less than $1,129.33 both before and after March 15 with no reduction in pay for all weeks in the claim period.
All results from the Weekly tab and Bi-Weekly tab flow to the Instruction and Results tab. Businesses must then use these results and enter them into the CRA calculator.
The Calculator will also require the business to enter the employer-paid contributions for Employment Insurance (EI), the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP), and the Quebec Parental Insurance Plan (QPIP) for any employees who were on leave with full or partial pay for at least a full week in the eligible period. It is important to note that an employer will not be able to claim the CEWS for any employee who is claiming the Canada Emergency Response Benefit (CERB).
Finally, a business will also be required to enter the amount that is eligible to be claimed under the 10% Temporary Wage Subsidy for Employers as well as any amount eligible employees have received under the Employment and Social Development Canada's Work-Sharing benefit program. The former was confirmed in the CRA's Canada Emergency Wage Subsidy application guide, found here, as follows:
In all cases, if you are eligible for the 10% Temporary Wage Subsidy, you must put the amount that you are eligible for in the box for line F, whether or not you have taken advantage of it.
It is not clear exactly how this will work, but the CRA has stated that it will require businesses to complete a self-identification form to be released in a few months, in order for businesses who did not voluntarily apply for the 10% Temporary Wage Subsidy to have the amount credited to their payroll account.
Once completed, the CRA Calculator will generate the requisite information to be entered into Lines A through G in the CEWS application.
It is recommended that this estimate be prepared before a business starts the application process.
Step 3 – Complete the Application
Businesses will access the CEWS application form through one of the three methods discussed above. For claims filed by an authorized representative, an attestation signed by the person with principal responsibility for the financial activities of the employer must be completed and kept by the business. A copy of the attestation can be found here.
Using the amounts generated by the Calculator, businesses will enter the amounts in Lines A through G in the CEWS application.
Step 4 – Funds Received
It is expected that the eligible business applicant will receive the wage subsidy funds within 10 business days after applying. The government has announced that it anticipates being able to make payments starting May 7.
The CRA has indicated that businesses may be required to provide a complete list of all employees and their Social Insurance Numbers to verify the information indicated in the CEWS applications. There can be significant penalties for fraudulent claims or in the event a business manipulates revenues to satisfy eligibility requirements.
The CEWS amount received is considered a government subsidy, and therefore, will be taxable in the year of receipt.
If you need assistance in calculating the amount of CEWS you might be eligible for, please contact your Crowe Soberman LLP representative.
Originally published 22 April, 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.