Good News for Both Renters and Property Owners
The CERS replaces the old program and is designed to operate like the Canada Emergency Wage Subsidy (CEWS) in that affected businesses claim the CERS on their CRA My Business Account. My Account has now been updated and affected businesses can start claiming the subsidy immediately.
There are 3 Qualifying Periods that are announced (perhaps more in the future) which mirror the CEWS periods as follows:
- Qualifying Period 8 (QP8) from September 27 to October 24 (October/ or September Revenue Test)
- Qualifying Period 9 (QP9) from October 25 to November 21 (November/ or October Revenue Test)
- Qualifying Period 10 (QP10) from November 22 to December 19 (December/ or November Revenue Test)
The revenue decline test in each period is, like the CEWS, based on a revenue decline test. However, the choices are a little different as follows:
- For each Qualifying Period, compare either that month, or the preceding month revenues with the same period as the prior year OR
- For each Qualifying Period, compare either that month, or the preceding month revenues with the average of January + February 2020 revenues.
There are two subsidies, a Base Subsidy (BS) and a Top Up Subsidy (TUS)
Base Subsidy (BS)
The BS is based on a sliding scale depending on the percentage revenue decline test outcome as follows:
- 70% or more revenue decline = Base subsidy of 65% of Qualifying Expenditures
- 50% to 69% revenue decline = Base subsidy of 40% + 1.25 X revenue decline % greater than 50% of Qualifying Expenditures
- 0% to 49% revenue decline = Base subsidy of .8 X revenue decline % of Qualifying Expenditures
- Revenue Decline of 80% = Base Subsidy of 60% of Qualifying Expenditures
- Revenue Decline of 60% = Base Subsidy of 52.5% of Qualifying Expenditures
- Revenue Decline of 25% = Base subsidy of 20% of Qualifying Expenditures
Top Up Subsidy (TUS)
The TUS is available for businesses who qualify for the BS in a period AND are subject to a public health restriction or lockdown. The TUS % is prorated for the % of time in the Qualifying Period the business is subject to a public health restriction or lockdown. This means the business is required to cease some or all of its activity for at least 1 week under the public health restriction or lockdown to qualify. If the business is eligible for a TUS, then it adds an additional 25% (potentially prorated during a Qualifying Period) of Qualifying Expenditures to its Base Subsidy claim.
One business location was on lockdown for 7 days of a particular 28 day Qualifying Period. The eligible TUS would be 6.25% calculated as 25% base TUS rate X 7/28 days.
A public health restriction means an order or decision:
- made under provincial or federal law;
- made in response to the COVID-19 pandemic;
- which is limited in scope by geography, type of business/activity, or risks associated with a particular location;
- where non-compliance is an offence or can result in an administrative monetary penalty or other sanction from the provincial or federal government;
- which is not an order or decision imposed because the eligible entity violated another applicable order or decision;
- whereby some or all of the types of activities of the eligible entity at, or in connection with, the qualifying property (that it is reasonable to expect the eligible entity would, absent the order or decision, otherwise have engaged in) are required to cease (note that a mere restriction on the extent that an activity may be performed is not sufficient for this purpose);
- whereby it is reasonable to conclude that at least approximately 25 percent of the qualifying revenues of the eligible entity for the prior reference period that were earned from, or in connection with, the qualifying property were derived from the restricted activities; and
- whereby the restricted activities are required to cease for a period of at least one week.
If you Pay Rent to an Arm’s Length Party, Qualifying Expenditures are:
- Gross rent, which can include Triple Net leases
- Excludes interest or penalties under a Lease
- Less any sublet rents received from arm’s length parties
If you Own the Property, Qualifying Expenditures are Arm’s Length:
- Mortgage interest
- Property taxes
- Property insurance
- Less and sublet rents received from arm’s length parties
There is a Subsidy (Combined Base and Top Up) Cap of $75,000 per location per Qualifying Period. In addition, there is an overall Subsidy Cap for just the Base Subsidy, of $300,000 per Qualifying Period for an associated group.
ROMANOVSKY & ASSOCIATES LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Keith M.J. Anderson* BCom, CPA, CA-IT, CITP
Chartered Professional Accountant and Chartered Accountant (Canada)
CA-Designated Information Technology Specialist (Canada)
Certified Information Technology Professional (US)
* Professional Corporation
This information is provided for general information purposes only. As legislation changes frequently, certain information may be out of date periodically. The complexity of the Law and the varied circumstances of each taxpayer dictates that the information provided may not be suitable in all circumstances. Readers must not rely on any information provided without first obtaining direct and competent professional advice. The information provided is not intended to replace or serve as substitute for any audit, advisory, tax or other professional advice, consultation or service. Therefore, the information is provided “as is” without warranties of any kind, express or implied, including accuracy, timeliness and completeness. In no event shall and associated parties to this information be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other damages whatsoever.