COVID-19 Government Small Business Measures: Temporary Wage Subsidy

Updated: March 26, 2020

To support small businesses, effective March 25th, the government has implemented a three-month wage subsidy for employees that are employed in Canada. The Federal Government’s COVID-19 assistance proposals were passed by Parliament and received royal ascent on March 25th.     The definition of eligible employers has been broadened.

Eligible Employers

The subsidy is available to eligible employers that are Canadian Controlled Private Corporations (CCPC’s) with taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, of less than $15 million.  Eligible employers have been expanded to include individuals, non-profit organizations and charities as well as partnerships all of the members of which are individuals, qualifying CCPC’s, charities or partnerships with such members.  Eligible employers must have an existing business number and a payroll account on March 18, 2020.

Timing

Employers can (i) effective on their next remittance date, reduce their remittances of income tax withheld on their employees’ remuneration, (ii) apply for a refund at the end of the year, or (ii)request that this be transferred to next year’s remittances.

The subsidy is available for remuneration beginning on March 18, 2020 and ending on June 19, 2020. If the subsidy exceeds remittances, it can be credited to a future remittance period.

Calculation

The subsidy is equal to 10% of the remuneration paid between March 18, 2020, and June 20, 2020, up to $1,375 per employee (i.e. $13,500 of wages) and to a maximum of $25,000 total per employer (i.e. $250,000 of wages). The subsidy is taxable to the employer in the year of receipt. Note this has no impact on the amount of tax, CPP and EI deducted from an employee’s perspective. i.e. net pay does not change.

For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.

While association is relevant in evaluating whether a CCPC can qualify, associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

Records Tracking

It is important to maintain records to support your calculation. This would include total remuneration paid between March 18, 2020 and June 20, 2020, tax deducted and number of employees paid in the period.

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