The Canadian economy has suffered over the past months as the nation has gone through an extended lockdown to fight the spread of the COVID-19 pandemic. However, these months of remaining shuttered in the interest of public health and safety have taken their toll on the fortunes of many small businesses. This article contains an overview of how the Canadian government is helping small businesses.
The Canadian Emergency Wade Subsidy (CEWS) will last until December 19th. The government had instituted a 30 percent revenue test, requiring that amount of drop before a small business could receive support, but now there will be a sliding scale to give any employer that had seen revenues decline some assistance. The subsidy size will obviously grow the more revenues have cratered for a particular business. For July and August, employers can keep using the 75% CEWS plan, if their revenues dropped by at least 30 percent, or they can use the sliding-scale rules. The application has been open through CRA’s My Business Account since the end of April.
The $40,000 Canada Emergency Business Account (CEBA) provides loans to assist small firms with expenses that they were not able to defer during the shutdown. The Canadian government backs the loans, which carry no interest and which are forgivable for the first $10,000 so long as they are paid in full by December 31, 2022. In some cases, the loan is a $40,000 check to be paid back over the term; in others, it takes the form of a $40,000 line of credit, sometimes available using a credit card with zero interest. Applications for these loans should take place through the banks that serve the small businesses and nonprofits affected by the shutdown.
The Canada Emergency Commercial Rent Assistance Program (CECRA) was designed to assist business owners during April, May and June of 2020. The Canada Mortgage and Housing Corporation (CMHC) administered this plan to provide forgivable loans to eligible landlords who had eligible tenants. The loan would reduce rent by 75 percent for eligible small businesses and proscribe evictions between April and June. The tenant would still be accountable for the last 25 percent of the rent.
The Canada Emergency Response Benefit (CERB) provides short-term income support for people who have lost income due to COVID-19. The benefit is $2,000 monthly for as many is four months. It is worth noting that this is taxable, and the taxes are not withheld, so you should set that aside to make your income tax payment in 2021. This covers Canadian workers who have had one of these happen:
- Lost their job
- Entered quarantine, contracted COVID-19 or took care of someone with COVID-19
- Retained their job but saw income reduced or eliminated because of COVID-19 changes at their employer
- Were working parents who had to stay at home, unpaid, to care for children who are at home due to daycare or school closures or who are sick
Recipients also had to have had the following to gain eligibility:
- A minimum of $5,000 in income for 2019 or for the 12 months previous to their date of application, as well as
- An expectation of being without employment or self-employment income for a minimum of 14 consecutive days in the first four-week period for which they are applying, and an expectation of zero employment income for later benefit periods
The Business Credit Availability Program (BCAP) has $40 billion available to support businesses having difficulty due to the COVID-19 pandemic. The Business Development Bank of Canada and Export Development Canada are administering this program through financial institutions, so business owners can apply through their banks. This includes the CEBA loan as well as loan guarantees and co-lending programs.
The Regional Relief and Recovery Fund (RRRF) consists of $962 million, distributed through the six Regional Development Agencies (RDAs) in Canada. The money has $675 million in RRRF loans and $287 million in Community Futures Development Corporations, focusing on small businesses and rural towns throughout Canada. Each RDA has slightly different features, based on the needs of that region. Some programs are available along with other forms of relief, while others are only open to entities that have not yet been approved for government aid.
The 10% Wage Subsidy permits employers to keep 10 percent of the federal, provincial or territorial tax that they would normally send to the CRA. This is based on salaries and wages between March 18 and June 19, 2020. Owners who have not yet taken advantage of this can apply retroactively through CRA. To be eligible, employers must be a Canadian-controlled private corporation eligible for the small business deduction, or a non-profit or charity that has an existing payroll program account and business number through CRA by March 18, 2020 and have paid any remunerations to an employee during that period.
When it comes to filing and paying taxes, there are some rule changes that business owners should know. They are as follows:
- For the 2019 income tax year, individuals had an extension to June 1, 2020, to file their return.
- Trusts had their 2019 income tax year return deadline extended to May 1, 2020.
- Individuals and businesses could defer payment on taxes owed between March 18, 2020 and September 2020 until after August 31, 2020.
- Businesses could wait until June 30 to send GST/HST due to the government. This was for: monthly filers for February, March and April; quarterly filers for amounts taken in between January 1 and March 3; annual filers for whom returns or installments were due in March, April or May.
For small business owners, here are some other initiatives that the CRA has instituted:
- Increasing Canada Child Benefit installments by $300 for each child
- Eliminating the majority of post assessment GST/HST or Income Tax audits for the foreseeable future
- Recognizing that electronic signatures meet the Income Tax Act requirements
- Making the Liaison Officer Service available via phone for information about tax measures to assist self-employed individuals and small business owners
- Suspending new collection activities and instituting flexible payment plans
Changes to the EI sickness benefit include the following:
- Waiving the one-week waiting period for workers who have been told they should self-isolate or who are in imposed quarantine; the waiver would last for six months
- Applicants do not need medical certificates
- Sickness benefit applications after March 15 and remaining unprocessed will also be submitted automatically for CERB consideration. Employers should NOT use the ROE code K, because that will pull the application out of the automatic queue.
The Work Sharing Program can bring employer, employee and Service Canada together to bring EI benefits for any workers who voluntarily reduce working hours because of events that are outside the control of their employers. The maximum duration is now 76 weeks, not 38; the 30-day waiting period is waived for those who have made use of the program in the past; the application review process is shortened from 30 days to 10.
Canada Post had provided free Hold Mail and Mail Forwarding but ended that as of August 2020. Those businesses that registered before that deadline and still need the service can still receive either, or both, for no charge if they renewed ahead of August 1.
Changes to the Canada Summer Jobs program for 2020 include:
- Boosting the wage subsidy from 50 percent to 100 percent of each employee’s provincial or territorial minimum hourly wage
- Permitting employers to change their job activities and projects in support of essential services
- Permitting employers to bring in part-time staff
- Extending employment ending date to February 28, 2021