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:

1. Qualifying Period 8 (QP8) from September 27 to October 24 (October/ or September Revenue Test)
2. Qualifying Period 9 (QP9) from October 25 to November 21 (November/ or October Revenue Test)
3. 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:

1. For each Qualifying Period, compare either that month, or the preceding month revenues with the same period as the prior year OR
2. 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:

1. 70% or more revenue decline = Base subsidy of 65% of Qualifying Expenditures
2. 50% to 69% revenue decline = Base subsidy of 40% + 1.25 X revenue decline % greater than 50% of Qualifying Expenditures
3. 0% to 49% revenue decline = Base subsidy of .8 X revenue decline % of Qualifying Expenditures

Some Examples:

1. Revenue Decline of 80% = Base Subsidy of 60% of Qualifying Expenditures
2. Revenue Decline of 60% = Base Subsidy of 52.5% of Qualifying Expenditures
3. 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.

An Example:

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.

Qualifying Expenditures

If you Pay Rent to an Arm’s Length Party, Qualifying Expenditures are:

1. Gross rent, which can include Triple Net leases
2. Excludes interest or penalties under a Lease
3. Less any sublet rents received from arm’s length parties

If you Own the Property, Qualifying Expenditures are Arm’s Length:

1. Mortgage interest
2. Property taxes
3. Property insurance
4. Less and sublet rents received from arm’s length parties

Subsidy Constraints

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.

ANDERSONBRONSCH TEAM
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

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
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.

The post Canada Emergency Rent Subsidy (CERS) appeared first on AndersonBronsch Team, CPA.

There are 4 replacement programs as follows:

1. Transition from CERB to EI
2. Canada Recovery Benefit (CRB)
3. Canada Recovery Caregiver Benefit (CRCB)
4. Canada Recovery Sickness Benefit (CRSB)

The Replacement Programs

A. Transition from CERB to EI

The Government will transition from the CERB to a flexible and more accessible EI program, starting September 27, 2020, as originally announced on August 20, 2020.

As a result of these temporary measures, EI will now be available to more Canadians, including those who would not have qualified for EI in the past, supporting an additional 400,000 people through the program. Canadians receiving EI are eligible for a taxable benefit at a rate of at least $500 per week, or $300 per week for extended parental benefits. Canadians claiming EI benefits for job loss would be eligible for at least 26 weeks. Returning to the EI program will allow claimants to benefit from the Working While on Claim rules. These rules allow claimants to keep receiving part of their EI benefits and all their earnings from work. In addition, employers will once again be able to make use of registered Supplemental Unemployment Benefit (SUB) plans to provide support to employees.

The EI program will also allow Canadians with 120 hours of insurable work or more to qualify by providing a temporary, one-time credit of 300 insurable hours for those claiming EI regular and work-sharing benefits. Canadians claiming EI special benefits – including maternity, parental, sickness, compassionate care, and family caregiver – will be provided with a temporary, one-time credit of 480 insurable hours.

In light of the continuing pandemic, the waiting period will be waived for EI sickness benefit claimants to encourage compliance with public health measures. The requirement to provide a medical certificate will also be waived for all sickness claimants. Service Canada will retain the ability to request evidence of sickness for integrity purposes.

To ensure a smooth transition to EI, the majority of Canadians still receiving the CERB through Service Canada who are eligible for EI will be automatically transitioned. Service Canada will contact all EI clients to confirm whether they need to apply or are being transitioned automatically. Clients can also verify the status of their claim in their My Service Canada Account.

• Canadians who will need to apply to Service Canada to access EI benefits include:
• 900-series Social Insurance Number holders;
  self-employed workers who received benefits through Service Canada; and,
• Canadians who received the CERB from the Canada Revenue Agency but could have 120 hours of insurable and meet the other eligibility criteria.

As is normally the case, Canadians become eligible for their first EI payment at the end of the two weeks that they are out of work. This means, for example, that those switching to EI from CERB effective September 27, 2020, will be eligible for their first EI payment as of October 11. Over 80% of eligible Canadians are expected to receive their payment by October 14 – 3 days after becoming eligible, and over 90% are expected to be paid within 3 to 14 days.

Service Canada has nearly doubled the number of specialized EI call centre agents in advance of the expected unprecedented number of EI claims over the coming weeks. Nevertheless, Canadians who need to speak to an agent should expect long wait times due to the anticipated record call volumes. Service Canada thanks Canadians needing to speak to an agent for their understanding and patience.

B. Canada Recovery Benefit (CRB)

The CRB will provide eligible workers with $500 per week (taxable, tax deducted at source) for up to 26 weeks for those who have stopped working and who are not eligible for EI, or had their employment/self-employment income reduced by at least 50% due to COVID-19. This benefit will be paid in two-week periods. The Canada Recovery Benefit (CRB) gives income support to employed and self-employed individuals who are directly affected by COVID-19 and are not entitled to Employment Insurance (EI) benefits. The CRB is administered by the Canada Revenue Agency (CRA). The program is not yet open but it is expected that you can apply online on October 21, 2020. Your eligibility ends after 13 periods. You cannot receive CRB after you have reached the maximum 13 periods (26 weeks). You may apply for benefits retroactively for any period up to 60 days after the particular period has ended.

If you are eligible for the CRB, you can receive $1,000 ($900 after taxes withheld) for a 2-week period.

If your situation continues past 2 weeks, you will need to apply again. You may apply up to a total of 13 eligibility periods (26 weeks) between September 27, 2020 and September 25, 2021.

Each Canada Recovery Benefit (CRB) eligibility period is a specific 2-week period. It begins and ends on specific dates. When you apply, you will receive a $1,000 ($900 after taxes withheld) payment for the period that you applied for.

The CRB does not renew automatically. You must apply for each period between September 27, 2020 and September 25, 2021 separately. You can apply for a maximum of 13 periods out of the total 26 periods available.

The 13 periods do not have to be taken consecutively.
You may apply for any period that you’re eligible for. If you meet all the eligibility criteria for the entire 2-week period, the earliest you can apply is the first Monday after the 2-week period has ended.

To be eligible for the CRB, you must meet all of the following conditions for the 2 week period you are applying for:

1. During the period you are applying for you were not working for reasons related to COVID or you had a 50% reduction in your average weekly income compared to the previous year (2019 gross income / 52 weeks / 2) due to COVID.
2. You did not apply for or receive the Canada Recovery Sickness Benefit (CRSB), Canada Recovery Caregiving Benefit (CRCB), short term disability, workers compensation, EI, or Quebec Parental Insurance Plan benefits.
3. You were not eligible for EI
4. You reside in Canada
5. You were present in Canada
6. You are at least 15 years old
7. You have a valid SIN
8. You earned at least $5,000 in 2019 2020, or in the 12 months before the date you apply from employment, self-employment, maternity and parental benefits from EI.
9. You have not quit your job or reduced your hours voluntarily on or after September 27, 2020
10. You were seeking work during the period either as an employee or self-employed
11. You have not turned down reasonable work during the 2 week period you are applying

C. Canada Recovery Caregiver Benefit (CRCB)

The Canada Recovery Caregiving Benefit (CRCB) will provide $500 per week (taxable, tax deducted at source) for up to 26 weeks per household for workers unable to work for at least 50% of the week because they must care for a child under the age of 12 or family member because schools, day-cares or care facilities are closed due to COVID-19, or because the child or family member is sick and/or required to quarantine or is at high risk of serious health implications because of COVID-19. This benefit will be paid in one-week periods.

The Canada Recovery Caregiving Benefit (CRCB) gives income support to employed and self-employed individuals who are unable to work because they must care for their child under 12 years old or a family member who needs supervised care. This applies if their school, regular program or facility is closed or unavailable to them due to COVID-19, or because they’re sick, self-isolating, or at risk of serious health complications due to COVID-19. The CRCB is administered by the Canada Revenue Agency (CRA).

If you’re eligible for the CRCB, your household can receive $500 ($450 after taxes withheld) for each 1-week period.

If your situation continues past 1 week, you will need to apply again. You may apply up to a total of 26 weeks between September 27, 2020 and September 25, 2021. You may start applying on the first Monday after the 1-week period you’re applying for has ended. Applications do not renew automatically.

You must apply for each period separately. You may apply for any period you are eligible for that is open for application, including up to 60 days after the period has ended.

Each Canada Recovery Caregiving Benefit (CRCB) eligibility period is a specific 1-week period. When you apply, your household will receive a $500 ($450 after taxes withheld) payment for that period.

The CRCB does not renew automatically. If your situation continues, you must apply for each period separately. You may apply for any eligible 1-week period for up to 60 days after that period has ended.

Each household can apply up to a maximum of 26 periods between September 27, 2020 and September 25, 2021. The 26 weeks do not need to be taken consecutively.

If you started caring for a family member part way through a period, you can only apply for that period if you missed more than 50% of that work week. If you miss less than that, you need to wait to apply for the next eligibility period.

Each 1-week period starts on a Sunday and ends on the following Saturday. You may start applying on the first Monday after the 1-week period you’re applying for has ended.

To be eligible for the CRCB, you must meet all of the following conditions for the 1 week period you are applying for:

1. You are unable to work at least 50% of your scheduled work week because you are caring for a family member
2. You are caring for a child under 12 or a family member who needs supervised care because they are at home for any of the following reasons: their school, daycare, or care facility is closed or unavailable due to COVID, their regular care services are unavailable due to COVID, or the person under your care is either sick with COVID, has symptoms of COVID, at risk of serious health complications if they get COVID as advised by a medical professional, or is self-isolating due to COVID.
3. You did not apply for or receive any of the Canada Recovery Benefit, Canada Recovery Sickness Benefit, short term disability, workers compensation, EI, or Quebec Parental Insurance Plan benefits.
4. You were not eligible for EI
5. You reside in Canada
6. You were present in Canada
7. You are at least 15 years old
8. You have a valid SIN
9. You earned at least $5,000 in 2019 2020, or in the 12 months before the date you apply from employment, self-employment, maternity and parental benefits from EI.
10. You are the only person in your household applying for the benefit for the week
11. You are not receiving paid leave from your employer for the same period.

D. Canada Recovery Sickness Benefit (CRSB)

The Canada Recovery Sickness Benefit (CRSB) will provide $500 per week (taxable, tax deducted at source) for up to a maximum of two weeks, for workers who are unable to work for at least 50% of the week because they contracted COVID-19, self-isolated for reasons related to COVID-19, or have underlying conditions, are undergoing treatments or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, government or public health authority, would make them more susceptible to COVID-19. This benefit will be paid in one-week periods.

The Canada Recovery Sickness Benefit (CRSB) gives income support to employed and self-employed individuals who are unable to work because they’re sick or need to self-isolate due to COVID-19, or have an underlying health condition that puts them at greater risk of getting COVID-19. The CRSB is administered by the Canada Revenue Agency (CRA).

If you’re eligible for the CRSB, you can receive $500 ($450 after taxes withheld) for a 1-week period.

If your situation continues past 1 week, you will need to apply again. You may apply up to a total of 2 weeks between September 27, 2020 and September 25, 2021.

Each Canada Recovery Sickness Benefit (CRSB) eligibility period is a specific 1-week period. When you apply, you will receive a $500 ($450 after taxes withheld) payment for that period.

The CRSB does not renew automatically. If your situation continues, you must apply for your second eligibility period separately. You may apply for any eligible 1-week period for up to 60 days after that period has ended.

You can apply for a maximum of 2 weeks between September 27, 2020 and September 25, 2021. The 2 weeks do not have to be taken consecutively.

If you become sick or have to self-isolate due to COVID-19 part way through a period, you can only apply for the period if you missed more than 50% of that work week. If you miss less than that, you need to wait to apply for the next eligibility period.

Each 1-week period starts on a Sunday and ends on the following Saturday. You may start applying on the first Monday after the 1-week period you’re applying for has ended.

To be eligible for the CRSB, you must meet all of the following conditions for the 1 week period you are applying for:

1. You are unable to work at least 50% of your scheduled work week because you are self-isolating due to one of the following situations: You are sick with COVID or may have COVID, you are advised to self-isolate due to COVID (by your employer, medical practitioner, nurse, person in authority, the government, you public health authority), you have an underlying health conditions that puts you at a greater risk of COVID (advised by a medical practitioner, a nurse, a person in authority, the government, your public health authority).
2. You did not apply for or receive any of the Canada Recovery Benefit, Canada Recovery Caregiver Benefit, short term disability, workers compensation, EI, or Quebec Parental Insurance Plan benefits.
3. You were not eligible for EI
4. You reside in Canada
5. You were present in Canada
6. You are at least 15 years old
7. You have a valid SIN
8. You earned at least $5,000 in 2019 2020, or in the 12 months before the date you apply from employment, self-employment, maternity and parental benefits from EI.
9. You are the only person in your household applying for the benefit for the week
   You are not receiving paid leave from your employer for the same period.

ANDERSONBRONSCH TEAM
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

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
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.

The post Canada Emergency Response Benefit (CERB) Replacement Programs appeared first on AndersonBronsch Team, CPA.

The intent is to grant a taxable subsidy to employers whose revenues are impacted by COVID-19 and who are still able to continue to pay employees including the “owners” who are also employees (or hire new employees or re-hire ex-employees) during the period of March 15 to August 29, 2020 (now extended to December, 2020). There is also no subsidy based on dividends paid to the owners, only salaries. We would hope that the government addresses this gap in the near future.

Overview

Just about any employer, except for public institutions, are eligible. This includes corporations, partnerships, individuals, and non-profit organizations. Even though initially thought to be denied, Individuals who operate as proprietorships and have employees can now be eligible.

The employer must have a valid Payroll account as of March 15 to qualify.

Any amount received under the previous 10% Temporary Wage Subsidy Program as well as amounts received by the employee as a work-sharing benefit under the EI Act will reduce the amount of CEWS.

The benefits may be paid over 3 qualifying 4 week periods (the “qualifying periods”) of:

1. March 15 to April 11 (qualifying period 1) – Using calendar March revenue test (below)
2. April 12 to May 9 (qualifying period 2) – Using calendar April revenue test (below)
3. May 10 to June 6 (qualifying period 3) – Using calendar May revenue test (below)
4. June 7 to July 4 (qualifying period 4) – Using calendar June revenue test (below)
5. July 5 to August 1 (qualifying period 5) – Using calendar July revenue test (below)
6. August 2 to August 29 (qualifying period 6) – Using calendar August revenue test (below)
7. August 30 to September 26 – Using calendar September revenue test (below)
8. September 27 to October 24 – Using calendar October revenue test (below)
9. October 25 to November 21 – Using calendar November revenue test (below)
10. November 22 to December 19 – Using calendar December revenue test (below)
11. Further extensions are at the discretion of the government

If the employer thinks they qualify in any of the above periods, then they make an application to CRA through the My Business Account for that period. For those who have not signed up for a My Business Account it is probably best to expedite that process now.

An individual responsible for the finances of the employer must “attest” to the completeness and accuracy of the application. There are two administrative penalties that apply if benefits received exceed the benefits that the employer was entitled to. First, if the benefits claimed from gross negligence, the responsible person will be liable to a penalty of 50% of the excluded benefit. Second, if there is revenue manipulation (for the revenue test below), the responsible person will be liable for a penalty of 25% of the excluded benefit. In addition, any excluded benefit will also have to be repaid. If, after application, the employer determines that an application was made in error, then the error should be rectified in a timely manner to mitigate any penalties. In addition, the legislation gives the Minister the power to make public the name of any persons who applied for CEWS, presumably to punish those who the government think did not put the CEWS money to its intended use.

The Revenue Test

There must be a reduction in revenue for the employer to make a subsidy claim. There are two ways to calculate this and once one method is chosen it must be consistently applied in each qualifying period:

1. Compare revenues to the corresponding month last year. For each of the qualifying periods, normal operating gross revenues is compared to the same month in the previous year. For the March period, If there is at least a 15% decrease, then the first qualifying period test is met. For each subsequent qualifying period, the test increases to 30%.
2. Or Elect to use January and February 2020 average revenues. In this case, take the total revenues in those two months X ½ to obtain the average. Compare this average to each of March, April, May, June, July, and August as in 1 above for the same percentage change.

If the employer elects to use method 2 above but did not carry on business throughout all of January and February, then some proration method based on days must be used to determine the average.

If the employer meets a revenue test in a particular qualifying period, the employer is automatically deemed to have met the test in the subsequent period.

If a Partnership is a qualified employer for the CEWS and that Partnership has partners that would also qualify as “employers” as they have employees separate from the Partnership, then these partners may also qualify for the CEWS.

Here is a chart which summarizes the Revenue Test. Periods of June onwards just an extension of Period 3:

*Must use same method (e.g. 2019 vs. 2020 or average of January/February 2020) for all periods

What is Qualifying Revenue?

An employer may elect to use either cash inflows (cash basis accounting) or accrued revenue (normal accounting revenue) to determine “revenue”. If the employer elects to use cash inflows, then it must use that method for all qualifying periods and is used in the comparison for the revenue decline test discussed above.

Qualifying revenue excludes extraordinary items and amounts from non-arm’s length entities.

Complex Entities – Consolidation Options

For those entities who are non-arm’s length and in consolidated groups, may elect on how qualifying revenues are determined. It appears that the election can be changed in each period (you are not obligated to always use the same method). The choices are:

1. If a group of eligible entities normally prepares consolidated financial statements, each member elects to compute its qualifying revenues separately, excluding non-arm’s length revenues. Each member must use this method.
2. If an eligible entity and each member of an affiliated group of eligible entities, jointly elect, the qualifying revenue of the group determined on a consolidated basis is to be used for each member of the group – again this excludes non-arm’s length revenues. Each member must use this method.
3. If all or substantially all (90% or more) of an eligible entity’s revenue is from a non-arm’s length source and each member jointly elects, then a complex calculation is used to determine qualifying revenue. This is to enable the entity with these substantial non-arm’s length revenues to sometimes qualify.

How Much is the Subsidy?

An employee is an eligible employee for a particular week during the qualifying period unless the employee was not remunerated for 14 or more consecutive days during the qualifying period. In this case the Canada Emergency Response Benefit (CERB) would be available to the employee. Subsidies are paid directly by CRA to the employers.

To avoid manipulation to maximize the CEWS, there is a calculation of “baseline remuneration” (BR). BR is the employee’s average weekly remuneration for the period between January 1, 2020 and March 15, 2020 excluding any period of 7 or more days in which the employee was not remunerated.

If the Employee is Arm’s Length to the Employer:

The benefit is the greater of A or B (for either new arm’s length or existing arm’s length employees):

A = The lesser of:

1. 1. 75% of the remuneration paid in respect for the week for each week in the qualifying period
   2. Or $847 for each week in the qualifying period

B = The lesser of:

1. 1. The full amount (100%) of the remuneration paid in respect for for the week for each week in the qualifying period.
   2. Or 75% of the BR (discussed above) per week
   3. Or $847 for each week in the qualifying period.

If the Employee is Non-Arm’s Length to the Employer:

The benefit is the Just B (for existing non-arm’s length employees at March 15 – new non-arm’s length employees are disqualified):

B = The lesser of:

• 1. The full amount (100%) of the remuneration paid in respect for the week for each week in the qualifying period.
  2. Or 75% of the BR (discussed above) per week
  3. Or $847 for each week in the qualifying period.

Here is a chart calculating the subsidy for various scenarios:

Once the subsidy is calculated, there are final subsidy adjustments as follows:

1. Deduct benefits received by the employee from Employment Insurance work- sharing program
2. Deduct any amount of the 10% Temporary Wage Subsidy previously claimed in respect of the employee for the week
3. Add the employer’s EI and CPP contributions for employees on paid leave (employees who did not report for duties for the week). This is for employees who are still being paid but are not working. The employer does not have to make the matching EI and CPP payments.

What is “Remuneration for the Week”?

The Qualifying Periods are on 4 week periods, but the benefit is calculated on a weekly basis and on a per employee basis. In addition, the Qualifying Periods begin on a Sunday – a day many employees do not “work” and a lot of employees are paid bi-monthly (15^th and the last day of the month) which conflicts with the 4 week Qualifying Period dates. Adding to the confusion, consider a situation where during the Qualifying Periods, an employee’s wage changes (wage cut back or even a wage increase). In the legislation, the words are “eligible remuneration paid to the eligible employee in respect of that week”. In our opinion, that means that the amount paid refers to some calculation of the work performed in that week, notwithstanding that the employee receives payment at a later date. To reconcile all of this in a calculation of “remuneration for the week”, it will require some thought.

A possible example:

Assuming the employee is salaried, there was no pay variance within any bi-monthly pay period (but could include wage cut backs or increases at the beginning of a bi-monthly pay period), and works Monday to Friday for the same amount of hours each day, for the first qualifying period of March 15 to April 11:

1. The March 15 day would only include 1 day of the March 1 to 15^th pay period amount. Since March 15 is a Sunday, there is nothing to calculate for this day.
2. The week of March 16 to 20^th is then 5/12 of the March 31 payroll amount paid.
3. The week of March 23 to 27^th is then 5/12 of the March 31 payroll amount paid.
4. The week of March 30 to April 3 is then 2/12 of the March 31 payroll amount paid + 3/11 of the April 15 payroll amount paid.
5. The week of April 6 to 10 is then 5/11 of the April 15 payroll amount paid.

The above is a possible example and, if circumstances are different, then another possible calculation would be used possibly using a daily equivalent wage applied to each week. Spreadsheets and a Calendar would be required to keep track of all of this.

Less Than Clear Situations

The legislation is specific on qualified claims and is silent on those situations which do not fit exactly in the wording of the legislation. We do know that CRA is sympathetic to those situations which may be in the grey areas (within the intent of the legislation but is not expressly allowed by the legislation). The Canadian Tax Foundation (CTF) which is comprised of tax lawyers and tax accountants have already submitted to CRA a list of clarifying questions. To date, CRA has not responded. Over the coming weeks, we anticipate that CRA will announce their administrative position on allowable situations. Therefore, if your organization has some situations which may fall into these grey areas, you may, if cash flow permits, delay your claim until some clarity from CRA emerges. CEWS claims can be made as late as September 30, 2020.

Next Steps

1. Register for the CRA’s My Business Account
2. Set up direct deposit to receive subsidy payments
3. Gather monthly revenue and weekly payroll data
4. Apply online once portal opens
5. Continuing paying wages and salaries
6. Upon approval, the CRA to pay subsidy directly to employers

ANDERSONBRONSCH TEAM
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

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
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.

The post Canada Emergency Wage Subsidy (CEWS) appeared first on AndersonBronsch Team, CPA.

1. Interest-free loan of up to $40,000 for qualifying small businesses and non-profits.
2. If the full $40,000 is borrowed, $10,000 of the loan (25% of the base loan) is eligible for forgiveness if $30,000 (or 75% of the balance) is fully repaid on or before December 31, 2022. If not repaid at that time, 5% interest starts but there are no minimal principal payments required. The remaining balance must be paid by December 31, 2025.
3. No principal payments until December 31, 2022.
4. If you have payroll from $0 to $20,000 and are incorporated, you need to have Active Business Income in your last corporate T2 tax return (see below for details).
5. If you have payroll of $20,000 to $1,499,999, then you need to provide certain payroll information (see below for details).

Eligibility for Businesses with No Payroll or Payroll Less than or Equal to $20,000 in 2019

• The person applying has the ability and authority to bind the organization.
• Your organization is a sole proprietorship, partnership or a Canadian-controlled private corporation (“CCPC”) that was in operation on March 1, 2020.
• Your total employment income paid in the 2019 calendar year was less than or equal to $20,000. You will need to have a federal tax registration and provide:
  • Your Canada Revenue Agency Business Number (BN) (9 digits)
  • Your business income as reported in your 2019 tax return (or for 2018 if 2019 taxes have not been submitted)
  • If you are a corporation, the value reported on line 400 of your latest T2 which is an amount for Active Business Income (ABI) eligible for the Small Business Deduction (SBD). If there is no ABI eligible for the SBD, the corporation is not eligible.
  • If you are not incorporated, the following values reported in your T1 return for 2019 (or for 2018 is 2019 has not yet been submitted):

• • Your total Eligible Non-Deferrable Expenses (as defined below) that you were obligated to pay in 2020 (as of March 1, 2020).
  • The total of your Excluded Expenses, defined as expenses for which you have received or are expecting to receive by December 31, 2020, support or subsidies under other COVID 19 programs

• Your Eligible Non-Deferrable Expenses MINUS your Excluded Benefits is more than $40,000 and less than $1,500,000.
• You must upload documents evidencing greater than $40,000 of Eligible Non-Deferrable Expenses (net of Excluded Expenses) to a Government of Canada website prior to being approved for CEBA
• Per the requirements of the program, as set out by the Government of Canada, you will agree to use funds from this loan to pay for the following Eligible Non-Deferrable Expenses incurred or to be incurred in 2020:
  1. wages and other employment expenses to independent (arm’s length) third parties
  2. rent or lease payments for real estate used for business purposes
  3. rent or lease payments for capital equipment used for business purposes
  4. payments incurred for insurance related costs
  5. payments incurred for property taxes
  6. payments incurred for business purposes for telephone and utilities in the form of gas, oil, electricity, water and internet
  7. payments for regularly scheduled debt service
  8. payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business by the Borrower; and
  9. any other expense in a category other than the above as may be indicated by the Government of Canada website from time to time as being an Eligible Non-Deferrable Expense for the purpose of the Program.

• You have an active business chequing/operating account at a participating bank, which is your primary financial institution.  Your account was opened prior to March 1, 2020, and was not in arrears on existing borrowing products, if applicable, with the participating bank by 90 days or more as of March 1, 2020.
• You have not previously received CEBA and are not applying for this program at any other financial institution.  You understand that applying for support under the Program at more than one financial institution may result in ineligibility under the Program, default under the facility in respect of which this attestation is being provided, prosecution or other enforcement measures available at law or otherwise.
• You agree to participate in post-funding surveys conducted by the Government of Canada or any of its agents.
• You intend to continue to operate your business or to resume operations.
• You authorize Export Development Canada, as your representative with the Canada Revenue Agency, to access any required payroll information for the purpose of verifying eligibility.

Eligibility for Businesses with Payroll Expenses greater than $20,000 and less than $1,500,000 in 2019

• The person applying has the ability and authority to bind the organization.
• Your organization is a sole proprietorship, partnership or a Canadian-controlled private corporation (“CCPC”) that was in operation on March 1, 2020.
• Your organization’s payroll paid in the 2019 calendar year was greater than $20,000 and less than $1,500,000 (updated payroll expense requirements effective April 17, 2020). You will need to have a federal tax registration and provide:
  • Your Canada Revenue Agency Business Payroll Number (BN) (15 digits), as reported at the top of the 2019 T4 Summary of Remuneration Paid (T4SUM)
  • Your total employment income paid reported on all employee T4 slips for 2019.  For customers who also pay employees tax-exempt employment income under the Indian Act, all employment income reported in Box 71 of T4 statements issued to the organization’s employees for 2019 must also be included in the total
  • Information to demonstrate the above when requested upon audit by the Government of Canada
• Per the requirements of the program, as set out by the Government of Canada, you will agree to use funds from this loan to pay for the following Eligible Non-Deferrable Expenses incurred or to be incurred in 2020:
  1. wages and other employment expenses to independent (arm’s length) third parties
  2. rent or lease payments for real estate used for business purposes
  3. rent or lease payments for capital equipment used for business purposes
  4. payments incurred for insurance related costs
  5. payments incurred for property taxes
  6. payments incurred for business purposes for telephone and utilities in the form of gas, oil, electricity, water and internet
  7. payments for regularly scheduled debt service
  8. payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business by the Borrower; and
  9. any other expense in a category other than the above as may be indicated by the Government of Canada website from time to time as being an Eligible Non-Deferrable Expense for the purpose of the Program.
• You have an active business chequing/operating account at a participating bank, which is your primary financial institution.  Your account was opened prior to March 1, 2020, and was not in arrears on existing borrowing products, if applicable, with the participating bank by 90 days or more as of March 1, 2020.
• You have not previously received CEBA and are not applying for this program at any other financial institution.  You understand that applying for support under the Program at more than one financial institution may result in ineligibility under the Program, default under the facility in respect of which this attestation is being provided, prosecution or other enforcement measures available at law or otherwise.
• You agree to participate in post-funding surveys conducted by the Government of Canada or any of its agents.
• You intend to continue to operate your business or to resume operations.
• You authorize Export Development Canada, as your representative with the Canada Revenue Agency, to access any required payroll information for the purpose of verifying eligibility.

ANDERSONBRONSCH TEAM
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

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
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.

The post Canada Emergency Business Account (CEBA) appeared first on AndersonBronsch Team, CPA.

Some common uses of a Holding Company include:

1. A tax advantage in Canada exists in that intercorporate dividends between a subsidiary and its Holding Company are not subject to income tax in Canada. This allows the sheltering of after-tax earnings from exposure to lawsuits or other potential liabilities of the operations of the subsidiary Company. Most liability would be incurred by the operating Company, but most of the after-tax cash would end up in the Holding Company on tax-free intercorporate dividends.
3. Acquisition of a Company or companies is less expensive in cases where the purchase price is funded by bank loans or self-financing with after-tax Company profits. Since inter-Company dividends are tax-free, the operating Company can pay after-tax dividends at low corporate tax rates to the Holding Company and the Holding Company does not have to pay additional corporate tax on the dividends. These dividends can then be used to repay the bank loan or to repay the shareholder for the original purchase.
4. Estate planning purposes where the shareholder wants to involve family members in future growth of the subsidiary operating Company. Utilizing a Holding Company, the original shareholder “freezes” the value of the subsidiary Company by using complex provisions of the Income Tax Act. The result is that future growth in value of the subsidiary Company passes to family members and the family members may take advantage of the tax-free capital gains exemption.
6. Corporate reorganization where unrelated parties own an operating Company but have differing views on how to spend the after-tax earnings. Each shareholder could reorganize to have a Holding Company which receives its proportionate share of inter-corporate dividends tax-free. Each shareholder can then decide how they want to spend the money in their Holding Company.
8. Making a corporation attractive to a potential buyer. The operating Company can move redundant assets by way of tax-free intercorporate dividends to the Holding Company which makes the sale price of the operating Company lower. The purchaser would be more likely to purchase a Company which is less expensive but has the same earnings potential.

ANDERSONBRONSCH TEAM
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

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
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.

The post Common Uses of a Holding Company appeared first on AndersonBronsch Team, CPA.