Click here to learn about Canada’s COVID-19 Economic Response Plan and support available for individuals and businesses

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We continue to update this information as new updates become available, but should you have questions about any of these government initiatives or programs, please contact your Smythe Partner directly.

Many businesses are struggling making the decision whether to retain their workforce while revenues are decreasing and communities are exercising self-isolation. To support eligible employers and workers, the Federal Government has announced various new measures:

  1. Canada Emergency Wage Subsidy (75% Subsidy)
  2. Temporary Wage Subsidy for Employers (10% Subsidy)
  3. Canada Emergency Response Benefit

More details are needed to clarify certain eligibility conditions and timing, as well as confirm how to access these measures. 

As businesses learn more about the existing programs, as well as the changes, they should consider contacting their employment and human rights lawyer. 

For federal and provincial tax deadlines or for information on other measures, click here

Support for Businesses to Retain Workers 

Canada Emergency Wage Subsidy (75% Subsidy)

On April 11, 2020, Minister of Finance, Bill Morneau introduced into Parliament Bill C-14, the COVID-19 Emergency Response Act, No. 2. This Bill received Royal Assent, bringing this measure into law. This Bill brings clarification of the legislative details related to the Canada Emergency Wage Subsidy (CEWS).

Click here for information related to the CEWS updates released by the Government of Canada on May 15, 2020.


The Government of Canada has announced that applications for the CEWS will be open on Monday, April 27, 2020.

The CRA has included a CEWS calculator on its website. This calculator can assist businesses to determine the appropriate subsidy amount in advance of the April 27, 2020 application date. This calculator can be accessed here.

Applications will be available through the CRA using:

  • My Business Account;
  • Represent a Client; and
  • A separate online application form.

The CEWS will be processed at the payroll program (RP) account level, so businesses will have to file a separate application for each RP account.


Eligible Employee

An eligible employee is an individual employed in Canada.

Eligibility for the CEWS of an employee’s remuneration will be limited to employees that have not been without remuneration for 14 or more consecutive dates in the qualifying period.


Eligible remuneration includes amounts on which employers would generally be required to withhold or deduct payroll remittances (i.e., salary and wages). However, retiring allowance, stock option benefits, the personal use of a corporate vehicle and other similar items are excluded.

Qualifying Entities

Eligible entities include:

  1. Individuals;
  2. Taxable corporations;
  3. Partnerships consisting of eligible entities described in (a) through (d);
  4. Registered charities and most not-for-profit organizations; and
  5. Prescribed organizations.

Note that public institutions are not eligible for this subsidy.

To qualify for the subsidy, an eligible entity must:

  • File a complete and accurate application before October 2020;
  • Have a CRA payroll remittance number that was in effect on March 15, 2020; and
  • Meet the applicable decline in revenue test.

Revenue Test

The CEWS is now available to eligible employers that see a decline in revenue of at least 15% in March. The requirement of a decline in revenue of 30% for the months of April and May remains in effect. Where an employer is eligible for the CEWS for a specific period, that employer will automatically qualify for the CEWS for the next period of the program.

In determining the decline of revenue, employers may calculate the change by comparing their revenue for the specific month (i.e., March, April, or May) to the same time last year (year-over-year approach) or, as an alternative approach, they can use an average of their revenue earned in January and February 2020. Employers will need to select the year-over-year approach or the alternative approach when first applying for the CEWS and would be required to use the same approach for the full duration of the program.

CEWS Deadlines

The remuneration claiming period is also referred to as an eligible entity’s qualifying period.

Qualifying revenue for the purpose of determining an eligible entity’s decline in revenue refers to the inflow of cash, receivables or other consideration arising in the course of ordinary activities in Canada, excluding extraordinary items, amounts on account of capital, and amounts derived from non-arm’s length persons or partnerships (see below for some approaches to non-arm’s length revenue).

Eligible entities may calculate their revenues under the accrual method or the cash method, but not a combination of both. Further, employers will need to select an accounting method when first applying for the CEWS and would be required to use that method for the full duration of the program.

For eligible entities that began operations after January 1, 2020, revenues are to be extrapolated over January and February 2020 for an appropriate comparison to March, April and May. A formula is provided in the legislation in respect of this extrapolation.

The following significant updates are provided with respect to the computation of revenue:

  • Where a group of eligible entities normally prepares consolidated financial statements, each member may determine its qualifying revenue separately; however, every member of the group must determine its revenue on that basis.
  • Eligible entities that comprise an affiliated group may jointly elect to have the qualifying revenue of the group determined on a consolidated basis. If this election is made, the consolidated qualifying revenue must be used for each member of the affiliated group.
  • If all of the interests in an eligible entity are owned by participants in a joint venture, the qualifying revenues of the joint venture may be used (rather than the qualifying revenues of the eligible entity) where more than 90% of the qualifying revenue of the eligible entity is in respect of the joint venture.
  • If more than 90% of an eligible entity’s revenue is from one or more particular non-arm’s length persons or partnerships, the eligible entity and each particular person or partnership can jointly elect to calculate the eligible entity’s decline in revenue based on each particular person’s decline in revenue. A complex formula is provided in the legislation in respect of this determination.

Subsidy Amount

Baseline remuneration (also referred to in news releases as “pre-crisis earnings”) means the average weekly eligible remuneration paid to an eligible employee between January 1, and March 15, 2020, excluding any period of seven or more consecutive days for which the employee was not remunerated.

For arm’s length employees, the subsidy amount paid for a particular employee will be the greater of:

  • 75% of the amount of the remuneration paid up to a maximum benefit of $847/week; and
  • The lesser of
    • the amount of eligible remuneration paid, up to a maximum benefit of $847/week; and
    • 75% of baseline remuneration.

For non-arm’s length employees, the subsidy amount paid for a particular employee will be the lesser of:

  • The amount of eligible remuneration paid, up to a maximum benefit of $847/week; and
  • 75% of baseline remuneration.

Note that a non-arm’s length employee must have an amount of baseline remuneration for the eligible entity to receive a subsidy amount in respect of that employee. Further, the CEWS would only be available in respect of non-arm’s length employees that were employed prior to March 15, 2020.

Where an eligible employee is employed in a week by two eligible entities that do not deal at arm’s length, the total subsidy in respect of that employee cannot exceed the amount that would have been allowed if the employee were only employed by one of the entities.

Refund for Certain Payroll Contributions

The Government has expanded the CEWS by introducing a 100% refund for certain employer-paid contributions to Employment Insurance (EI), the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP) and the Quebec Parental Insurance Plan (QPIP). This refund would apply to employer paid contributions for eligible employees for each week throughout which those employees are on leave (i.e., do not perform any work for the employer) with pay, and for which the employer is eligible to claim the CEWS for those employees.

This refund would not be subject to the weekly maximum benefit of $847/week and there would be no overall limit on the refund amount that an eligible employer may claim.

Employers would be required to collect and remit employer and employee contributions and would then apply for a refund at the same time they apply for the CEWS.


To prevent eligible entities from artificially increasing remuneration to claim a higher amount under the CEWS, the definition of eligible remuneration specifically excludes the following:

  • Amounts that can reasonably be expected to be returned, directly or indirectly, to the eligible entity; and
  • Amounts paid where as part of an arrangement between the eligible entity and the eligible employee, the amount paid is in excess of the employee’s baseline remuneration and it is reasonably expected the employee will be paid a lower amount after the qualifying period.

Eligible entities and non-arm’s length parties that engage in artificial transactions to reduce revenue for the purpose of claiming the CEWS may be subject to a penalty of 25% of the amount of the subsidy claimed, in addition to having to repay in full, the subsidy that was improperly claimed.

The Minister of Finance may communicate or otherwise make available to the public, the name of any person or partnership that makes a claim for the CEWS. It is unclear if this is meant to be for anti-abuse purposes.


Applications will be processed through the CRA’s My Business Account portal, as well as a web-based application. Further details of the process will be available shortly.

Eligible entities should register for direct deposit with the CRA to ensure timely receipt of funding and keep records demonstrating their reduced qualified revenues and remuneration paid to employees.

The subsidy is considered government assistance and will be considered taxable income to the employer. 

More information and examples on CEWS, click here.

Interaction with Other Subsidies

In addition to the Canada Emergency Wage Subsidy (CEWS), the Federal Government also announced a temporary 10% wage subsidy and the Canadian Emergency Response Benefit (CERB).

If an employer is eligible for both the CEWS and the 10% wage subsidy, benefits from the 10% wage subsidy for remuneration paid in a specific period will generally reduce how much an employer is able to claim under the CEWS for the same period.

Employers are not eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a four-week period in which that employee is eligible for the CERB. However, employers that are not eligible for the CEWS are still able to furlough employees who will receive up to $2,000 paid out by the CERB.

Temporary Wage Subsidy for Employers (10% Subsidy)

A 3-month measure that will allow eligible employers to reduce payroll remittances for remuneration paid between March 18 and June 19, 2020. 

The subsidy is equal to 10% of remuneration paid during March 18 and June 19, 2020, to a maximum of $1,375 per employee and $25,000 per employer.    

Remuneration for the purpose of this subsidy includes salary, wages, bonuses, or other remuneration paid to an employee. 


Eligible employer means one who meets all of the following three criteria: 

  • Employs one or more individuals in Canada;
  • Has an existing payroll program account with the CRA on March 18, 2020; and 
  • Is one of the following: 

(a) A Canadian Controlled Private Corporations (“CCPC”) that would have a small business limit greater than nil for its last taxation year ending before March 18, 2020*;
(b) An individual (other than a trust);
(c) A registered charity;
(d) A partnership, all of the members of which are described in (a) to (d); and
(e) A non-profit organization

*Note: The requirement for a CCPC to have a small business limit in its last taxation year ignores the passive income grind. Thus, a CCPC would have a small business limit if its taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, was less than $15 million and it was assigned a portion of the available limit by the group. 

Associated CCPC’s do not share the $25,000 maximum.

There is no application for this subsidy. To receive the subsidy, the eligible employer may reduce remittances to CRA of income tax withheld (not CPP or EI) from remuneration paid to its employees.

For more information and examples, click here.

Support for Canadian Workers and Employers

Canada Emergency Response Benefit (CERB)

On March 25, 2020, the Government of Canada announced the new Canada Emergency Response Benefit (CERB) to replace the previously announced Emergency Care Benefit and Emergency Support Benefit.

Under this new program, a worker may apply for a taxable benefit of $2,000 per month for up to four months. A worker means a person residing in Canada, who is at least 15 years of age, and who, for 2019 or in the 12-month period preceding the application date, has a total income of at least $5,000.

A worker can apply for an income support payment under this program for any four-week period beginning on March 15, 2020 and ending on October 3, 2020*. A worker will be eligible for the income support payment if the worker (whether employed or self-employed) ceases to work for reasons related to COVID-19 for at least 14 consecutive days within the four-week period in respect of which they apply for the payment, and for the consecutive days on which they have ceased working. They do not receive:

  • Employment or self-employment income;
  • Employment Insurance (EI) benefits; or
  • Allowances, money or other benefits paid because of pregnancy or adoption.

The worker will need to re-apply every four weeks and the maximum number of weeks a worker can receive the benefit is 16 weeks.

The CERB will be accessible online starting April 6, 2020 through CRAs My Account and over the phone through an automated phone service. Workers should confirm they are registered for direct deposit to ensure timely receipt of funds.

For more information on this benefit, click here.

If you have questions about any of these government initiatives or programs, please contact your Smythe Partner directly.

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