1. Contributing into RRSP to Reduce Tax Liability

RRSP contributions are tax deductible - they can be claimed as a deduction from income in the same year or may be carried forward and claimed as a deduction in a future year, depending on your expected income level. In the example noted above, if RRSP contribution of $5,000 is made by March 1, 2021, it can result in tax savings of $2,000 for 2020. For effective tax planning, you must consider not only your income level but also the income sources during the year to calculate the optimal amount of RRSP contribution for that year.

2. Income Splitting through Spousal RRSP

Splitting income with the low-income spouse can reduce taxable income and marginal tax rate of the high-income spouse. Spousal RRSP lets you contribute into your spouse’s RRSP, so that income, upon retirement, is split between the spouses and your combined taxes are lower than what you alone would have paid if the entire amount were received by you.

You must consider the following with a spousal RRSP:

• If you contribute into your spouse’s RRSP, you are the one who will claim this contribution as a reduction of your income in the same year or in a future year. This works out well if you were the high-income spouse.
• Your RRSP deduction limit is reduced by your contribution into spousal RRSP. For example, if your RRSP deduction limit for 2020 is $15K and you put $6K into spousal RRSP, you have the balance of $9K to contribute into your RRSP or leave unused.
• Your contribution into spousal RRSP must not be withdrawn for at least 3 years. If a withdrawal is made by the spouse within 3 years, it is added to your taxable income and not your spouse’s.
• You cannot contribute into your RRSP after the end of the year in which you turn 71. But you can still use your RRSP deduction limit to contribute into spousal RRSP until your spouse turns 71. This is particularly useful in reducing overall taxes if you are over 71 and still earning and your spouse is in a lower income tax bracket.

3. Using RRSP as a First-Time Home Buyer

Withdrawals from RRSP are taxable in all cases except two. One of these exceptions is the Home Buyers' Plan (HBP) that allows you to withdraw tax-free funds of up to $35,000 from RRSP to buy a home for yourself or for a related person with a disability. This opens up an effective tax planning opportunity, whereby you reduce taxes in each of the years that you contribute into RRSP and then access the accumulated funds ahead of your retirement and without any immediate tax implication. You have up to 15 years to repay the amounts that you have withdrawn from your RRSP under the HBP.

Unless you are a person with a disability or you are helping a related person with a disability buy a home, you must be a first-time home buyer to withdraw funds under the HBP. A first-time home buyer does not mean that it is the first ever home that you are buying as a principal residence. Instead, you qualify if, at any time in the previous four years, you did not live in a home that you owned or that your current spouse or common-law partner owned.

4. Using RRSP for Post-Secondary Education

Another way to withdraw tax-free funds from RRSP is through the Lifelong Learning Plan (LLP) whereby you can take out up to $10,000 in a year, and up to $20,000 in total, for your or your spouse’s full-time technical or vocational training or post-secondary education. LLP can be used toward part-time education if the student has a disability. Repayments to RRSP under the LLP is done over a 10-year period.

Contributing into RRSP for subsequently withdrawing those funds under LLP can be an effective tax planning tool for individuals who are currently in a low-income bracket and are pursuing further studies. For example, if you are a college student with a part time job, you can contribute into RRSP but can decide to forego deduction from your taxable income in the current year since your marginal tax rate is already low. You can carry forward the un-deducted contribution and use it in a later year when your income level has gone up, while in the meantime having used the LLP to partially fund your education.

5. Final RRSP Contribution

The final RRSP contribution must be made up to December 31 of the year in which you turn 71, by which time RRSP must be either withdrawn or transferred into RRIF or an annuity. If you are working during the year when you are 71, you will have RRSP deduction limit for next year, but you will not be allowed to contribute into your RRSP at that time. A tax planning opportunity arises here - you can estimate your RRSP deduction limit for next year and make a final contribution into RRSP in December of the year in which you turn 71 before it is converted into RRIF or annuity. CRA will charge 1% penalty on the over-contribution for one month only, but you will potentially have a larger tax saving by deducting RRSP contribution from your income for next year.

Choose Wisely

Tax planning cannot follow a ‘one size fit all approach’. You need to be careful in deciding which tax planning strategy works best for you and choose the optimal combination that can help reduce taxes. The options that have been discussed here are meant for general information only, and you must obtain professional advice in deciding which tax planning strategy would work in your particular situation. 

Due Date for Filing T3010

It is mandatory for a charity to file T3010 within six months of the end of its fiscal year. For example, if your charity’s fiscal year-end is March 31, it should file T3010 by September 30.

Please note that, as a COVID-relief measure, the deadline for filing T3010 has been extended to December 31, 2020 for charities that were required to file T3010 between March 18, 2020 and December 31, 2020. As such, if your charity has been filing T3010 by September 30 every year, based on its fiscal year-end of March 31, it can avail the extended deadline for filing T3010 by December 31 of this year.

Why File T3010?

There are multiple reasons for filing T3010. Let’s have a quick look at some of them.

1. It’s a legal requirement under the Canadian Income Tax Act for a charity to file T3010. You would not want to be non-compliant with the law.

2. In case you are unable to file T3010 by the due date, you are at risk of losing the charitable status. As per CRA, failure to file T3010 is the most common reason for revocation of charity registration.  

3. Besides the compliance requirements, filing T3010 has an upside for charities. Details from T3010 are publicly available on CRA’s website. From here, donors can access a charity’s information and make informed funding decisions. In fact, information from T3010s across the charitable sector is collated by organizations like CanadaHelps to provide a central platform where donors can read about different charities, compare their performance and accordingly give to the charity of their choice.
 
4. Filing T3010 is so much more than disclosing the charity’s financial information. It gives you the opportunity to make a pitch to prospective donors and educate your supporters, the media and other stakeholders by describing the charity’s ongoing and new programs in relevant section of T3010. So, if you have not filed T3010 or not doing a good enough job in filling in its various sections, you are missing out on fundraising opportunities.

How to File T3010?

Things to Keep in Mind While Filing Charity Return

For your convenience, here are certain aspects to bear in mind while filing T3010.

• Mark the due date and be sure not to miss it
• Prepare a complete return, including all applicable forms
• Include financial statements (audited, if applicable) for the same fiscal year as the T3010
• Provide details of directors, trustees and officers of the charity
• Describe charitable activities that are current and relevant
• Where applicable, include registration number of qualified donees
• Ensure that the return has been signed
• Remember to file the charity return even if the charity was inactive during the year
  

1. Contribute into a Registered Retirement Savings Plan (RRSP)

Putting money into RRSP gets you a deduction from the total income that lowers the amount of tax payable for the year. Income received within RRSP remains tax-free, but tax is applied when you withdraw funds from RRSP. Essentially, RRSP is a retirement savings vehicle since it allows you to defer taxes on contributions into RRSP and on your earnings until retirement, at which time you pay tax based on the applicable marginal rate. Most people are usually in a lower tax bracket after retirement; hence, the tax rate is likely to be lower than what it would be now. You can also use spousal RRSP for tax planning when the spouses are in different tax brackets.

2. Invest into a Tax-Free Savings Account (TFSA)

TFSA provides a tax-free option to earn investment income, such as interest, dividends, and capital gains. Money deposited into a TFSA can grow on a tax-free basis, and no tax is payable when you withdraw that money or your earnings. TFSA provides an effective tax planning tool for low- and modest-income earners since they can earn investment income within TFSA without reducing or becoming disqualified for government benefits and credits that are linked to their income level. Another way TFSA can be used in tax planning for individuals is for a high-income spouse to gift money to a low-income spouse to contribute into the spouse’s TFSA or for a parent to gift money to a child who is at least 18 years old for contributing into the kid’s TFSA.

3. Give Charitable Donations

Giving is a joy in itself! You can double the joy by claiming charitable donation tax credit to reduce your tax liability. The federal tax credit is 15% on the first $200 of donations to registered charities and then at a much generous level of 29% on additional donations in a year. The tax credit can reach 33% if you are in the highest tax bracket. In tax planning for individuals, unused charitable donations may be carried forward for up to five years so that the tax credit can be claimed in a later year when taxable income is higher than usual. You can also share charitable donations with your spouse to enable the higher-income spouse to reduce the tax bill.

4. Income Splitting

Splitting income with the low-income spouse can reduce taxable income and marginal tax rate of the high-income spouse. Income splitting needs to be approached with caution to ensure that tax reduction arrangements are not subject to tax on split income (TOSI) rules, attribution rules or otherwise inconsistent with the intent of law. Despite the scrutiny, certain income splitting opportunities remain available for the benefit of taxpayers. These include the spousal RRSP and TFSA arrangements noted above as well as the opportunity to transfer dividend income to a spouse, lending money to spouse for investment, and pension income splitting. Each arrangement comes with its set of rules and caveats that must be considered for effective tax planning.

Choose Wisely

The above-mentioned ways are just a few of the many different techniques one can use for effective tax planning. Tax planning cannot follow a ‘one size fit all approach’. You need to be careful in deciding which tax planning strategy works best for you and choose the optimal combination that can help reduce taxes. Depending on your circumstances, it may be useful to obtain professional advice for tax planning that caters to your specific situation.

1.1 Since its introduction in March 2020, the government has expanded the eligibility criteria for CEBA to allow more businesses have access to cheaper financing.

1.2 Initially, only businesses that had paid payroll between $20,000 and $1.5 million in the calendar year 2019 were eligible to apply. Under the now broader criteria, businesses that have little or no payroll cost, sole proprietors who derive income directly from business, and family-owned corporations that use dividends instead of payroll as a form of remuneration now have a chance to apply for CEBA if they have eligible, non-deferrable expenses between $40,000 and $1.5 million in 2020.

1.3 You can determine your eligibility to apply for CEBA using the flow chart below.

1.4 The following are specifically excluded from applying for CEBA:

• a government organization or body, or an entity wholly owned by a government organization or body;
  
• a non-profit organization, registered charity, union, a fraternal benefit society or order, or an entity owned by such an organization, unless the entity is actively carrying on a business in Canada;
  
• an entity owned by any Federal Member of Parliament or Senator; and
  
• an organization or an entity involved in promoting violence, hatred or discrimination, contrary to applicable laws.
  

1.5 If your business has previously used CEBA, you cannot apply again for the same business at another financial institution. In case you are running multiple businesses, you can claim CEBA for each business that meets the eligibility criteria. Each qualifying business is limited to one CEBA loan only.

1.6 To qualify for CEBA, you must maintain an active business chequing/operating account on March 1, 2020, which was not in arrears by 90 days or more on existing borrowing facilities. In case you have been using a personal bank account for your business, you will not be eligible to apply for CEBA.

1.7 The main factor that establishes eligibility for CEBA is the amount of payroll paid by your business between January and December 2019, as reported in Box 14 of the 2019 T4 Summary (if there are more than one CRA payroll program accounts for a business, use the sum of all T4 Summaries).

•  If payroll was between $0 and $20,000 in 2019, you will need to demonstrate that you have sufficient eligible non-deferable expenses in the ongoing year of 2020 and you have filed a tax return for your business for 2018 or 2019.
• If payroll was greater than $20,000 and less than $1.5 million in 2019, you are ready to apply for CEBA.
• Businesses with payroll of $1.5 million or more in 2019 do not qualify for CEBA.
  

1.8 The eligible non-deferrable expenses include:

• Wages and other employment expenses to arm’s length third parties
• Rent for premises used for business purposes
• Rent or lease payments for capital equipment used for business purposes
• Insurance costs
• Property taxes
• Telephone and utility expenses (gas, oil, electricity, water and internet) for business purposes
• Payments for regularly scheduled debt service (e.g., interest on loans)
• Payments to independent contractors
• Licensing and other fees for authorizations or permissions necessary to conduct business
  

1.9 In calculating the non-deferrable expenses, adjustment must be made for any COVID-19 government assistance received or to be received by your business in 2020, such as the Canada Emergency Wage Subsidy, the 10% Temporary Wage Subsidy, and the Canada Emergency Commercial Rent Assistance.

1.10 Expenses will be subject to verification and audit by the government.

2.1 You should contact the financial institution where your primary business chequing/operating account is maintained to apply for CEBA.

2.2 There are over 230 financial institutions that are participating in CEBA. While all institutions have started loan disbursement under the original eligibility criteria, applications under the expanded eligibility criteria are, for now, available only at the larger banks and selected financial institutions. It is expected that additional institutions will shortly start accepting CEBA applications under the expanded criteria.

2.3 There are two application streams for CEBA:

• Payroll Stream
• Non-Deferrable Expenses Stream
  

2.4 If your business has paid employment income to its employees between $20,000 and $1.5 million in 2019, you qualify for the Payroll Stream and can complete your CEBA application directly through the financial institution where you hold the business account.

2.5 The Non-Deferrable Expenses Stream is available for businesses who have paid employment income in 2019 of $20,000 or less and whose eligible non-deferrable expenses in 2020 are between $40,000 and $1.5 million. For such businesses, applying for CEBA is a two-step process:

• You will apply at the financial institution where the business account is maintained.
• You will then be directed to a CEBA website to provide documentation (receipts/invoices/agreements) in support of the eligible non-deferrable expenses and to complete the application.
  

III. Upon Application

3.1 Your CEBA application is assessed by the government, which notifies your financial institution about its decision to approve or decline funding.

3.2 Funds received under CEBA must be used to pay non-deferrable operating expenses, including payroll, rent, utilities, insurance, property tax and regularly scheduled debt service.Funds shall not be used toward prepayment/refinancing of existing indebtedness, payment of dividends, and increases in management compensation.

3.3 If your CEBA application has been declined, you may re-apply to make good the deficiency in your earlier application, such as providing additional information or making a correction. If, however, you are considered ineligible for CEBA, there is no further recourse. None of the organizations involved in administering the CEBA, including your financial institution, can grant exceptions.

To provide support to individuals facing financial hardship due to COVID-19, the Government has introduced Canada Emergency Response Benefit (CERB) to give eligible individuals $500 per week, for up to a maximum of 16 weeks, between March 15, 2020 and October 3, 2020.

This is how the benefit will work.

Eligibility

1. Who is eligible to apply for CERB?

The CERB is available to workers:

• residing in Canada, who are at least 15 years old;
• who have stopped working because of COVID-19 or are eligible for EI regular or sickness benefits or have exhausted their EI regular benefits or EI fishing benefits between December 29, 2019 and October 3, 2020;
• who have not voluntarily quit their job;
• who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and
• who have earned not more than $1,000 in employment and/or self-employment income over 14 or more consecutive days within the four-week benefit period of their first CERB application. For subsequent applications, they expect to earn not more than $1,000 in employment and/or self-employment income over the entire four-week benefit period of their new claim.
  

2. Under what circumstances can I apply for CERB?

CERB is available to individuals who stopped work as a result of reasons related to COVID-19. You cannot quit your job voluntarily and apply for CERB.

As such, the following can apply for CERB:

•  workers, including those who are self-employed, who have been let go from their jobs or whose work hours have reduced;
• workers who are sick, in quarantine, or taking care of someone who is sick or in quarantine due to COVID-19;
• workers who must stay home without pay to care for children or other depedents because of school and care facility closures; and
• workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work.

CERB is also available to workers who are eligible for EI regular or sickness benefits and those who have used up their entitlement to EI regular or fishing benefits between December 29, 2019 and October 3, 2020. The latter entitles workers in a seasonal occupation and those laid-off from work prior to March 15, 2020, for reasons not related to COVID-19, to claim CERB. The date of eligibility for CERB, in this case, would be the week following the last EI benefit payment or March 15, 2020, whichever is latest.

3. Do I need to be laid off from work to access CERB?

No, you can apply for CERB even if you remain attached to your employer as long as you meet the eligibility requirements. This covers temporary lay-offs by employers as well as sending employees on unpaid leave (taking a furlough) to cope with the decline in work due to COVID-19. In such a case, you may continue to receive other benefits such as medical benefits from the employer and still be eligible for CERB.

4. I have my job, but I don’t feel comfortable going to work as a result of risk associated with COVID-19. For example, what if I have someone at home who has a compromised immune system and I cannot risk infecting them. Am I eligible to apply for CERB in such a case?

You can apply for CERB only if you meet the eligibility requirements. One of the qualifying conditions is that you cannot voluntarily quit your job.

If you are concerned about the safety of your working conditions, you should discuss the situation with your employer and refer to legislative framework for information on your rights and the process you may follow. The Canadian Centre for Occupational Health and Safety (https://www.ccohs.ca/) is another possible resource.

5. I am a student who was working part-time and lost my job for reasons related to COVID-19? Am I eligible to apply for CERB?

Yes, provided you lost your job as a result of COVID-19 and meet the other eligibility criteria.

Student loans and bursaries do not affect eligibility for CERB, so you may continue to receive these payments while receiving CERB.

6. I have been in an apprenticeship program, receiving funding through the EI Program, and lost my job as a result of COVID-19. Am I eligible for CERB?

No, but you may be eligible to continue receiving your EI benefits.

7. What types of income make up the $5,000 threshold?

The income threshold of $5,000 in 2019 or in the 12 months prior to the date of application may come from employment and/or self-employment, which may include among others:

• tips declared as income;
• dividends from corporations subject to small business tax rate (i.e., non-eligible dividends);
• honoraria, for example, nominal amounts paid to emergency service volunteers; and
• royalties, for example royalties paid to artists as compensation for using or allowing the use of a copyright, patent, trademark, formula or secret process that is a result of their own work or invention. Other royalties (i.e., from investment activities) do not count toward the income limit.

The income does not have to be earned in Canada, but you need to reside in Canada.

If you are not eligible for EI, you may also include maternity and parental benefits under the EI program and/or similar benefits paid in Quebec under the Quebec Parental Insurance Plan.

Pensions, student loans and bursaries are not employment income and therefore, should not be included.

8. What is included in the $1,000 of income I can earn while receiving CERB?

The $1,000 comprises of employment and/or self-employment income, which may include among others:

•  tips you may earn while working
• dividends from corporations subject to small business tax rate (i.e., non-eligible dividends);
• honoraria (e.g., nominal amounts paid to emergency service volunteers); and
• royalties (e.g., paid to artists). Royalty payments received from work that took place before the period for which you applied for CERB do not count as income during that specific benefit period.
  

The following amounts received in a benefit period are not considered income for the purposes of CERB and do not affect eligibility for the benefit:

•  pensions;
• student loans and bursaries; and
• disability benefits.
  

Applications will be verified against tax records to confirm income.

9. What are the considerations for self-employed, small business owners?

Small business owners can receive income from their business in different ways, including as salary, business income or dividends. In determining their eligibility for CERB:

• Owners who take a salary from their business should consider their gross salary.
• Owners who draw business income should consider their net, pre-tax income (gross income less expenses).
• Owners who rely on dividend income should consider this as self-employment income provided it comes from non-eligible dividends (generally, those paid out of corporate income taxed at the small business rate).

While in receipt of CERB, small business owners may still have a small amount of income coming into their business account to pay for business expenses (commercial rent, utility costs, etc.). They may be eligible for CERB as long as the income they are paying themselves from the business, as noted above, is less than $1,000 and they have stopped working as a result of COVID-19.

10. I am not a Canadian citizen or permanent resident. Can I receive CERB?

To be eligible for CERB, you must reside in Canada and have a valid Social Insurance Number. Temporary foreign workers and international students may be eligible to receive CERB if they meet the eligibility requirements..

Application

11. When can I apply for CERB?

Applications are being accepted since April 6th. You cannot apply after December 2, 2020.

12. How do I apply?

The best way to apply is online. Applicants will be asked simple questions and will be directed to either Service Canada’s or CRA’s portal. For online applications, you will need to set up a My Service Canada Account or CRA’s My Account.

Alternatively, you can apply through the automated toll-free line at 1-833-966-2099.

13. Is it a one-time application?

No, you will need to apply and confirm your eligibility for CERB every 4 weeks (to a maximum of 16 weeks) if your situation continues. If you are receiving CERB through Service Canada, you must complete your EI Report Card to confirm your eligibility.

The 4-week benefit periods are:

• March 15 – April 11, 2020
• April 12 – May 9, 2020
• May 10 – June 6, 2020
• June 7 – July 4, 2020
• July 5 – August 1, 2020
• August 2 – August 29, 2020
• August 30 – September 26, 2020
  

14. Can I apply for CERB once through Service Canada and once through CRA?

No, you should not apply through both. You can either apply for CERB through Service Canada or through CRA.

15. There are dedicated days to apply for CERB. What are those?

To avoid system overload, CRA has set up specific days for you to apply.

16. Do I need to provide any documentation when applying for CERB?

You only need to provide your personal contact information, your Social Insurance Number and confirm that you meet the eligibility requirements. You may be asked to provide additional documentation to verify your eligibility at a future date.

No. While ROE is not required for CERB application, employers are encouraged to submit ROE should employees subsequently need to apply for EI benefits.

No. You only need to complete the online application and confirm that you meet the eligibility criteria. Information provided during the application process may be verified at a later time.

19. Do I need a proof of income for last year when applying for CERB? What if I have not declared that I earned any money in the last year?

At the time of applying for CERB, you only need to confirm that you meet the eligibility criteria. You may be asked to verify, at a later date, that you had at least $5,000 in employment and/or self-employment income in 2019 or in the 12 months prior to the date of your application. Income tax return filed for 2019 is one way to substantiate last year’s income but is not an eligibility requirement.

Receiving CERB Payments

20. By when can I receive payments under CERB?

If you have signed up for direct deposit, you can expect to receive payment into your bank account within three to five business days. Payment by cheque will be received within 10 business days.

21. How much will I receive?

You will be paid $500 per week, up to a maximum of 16 weeks.

22. What period is covered by CERB?

The benefit covers a maximum of 16 weeks and is available retroactively from March 15, 2020 until October 3, 2020.

23. Does the 16-week period start when I apply or when I receive my first payment?

The 16 weeks start with the first week for which you are receiving CERB, but they do not have to be counted consecutively. For example, you could receive CERB for the 4-week period beginning March 15, 2020 and reapply for your second benefit period a few months later, depending on your personal situation.

The 16-week period does not restart when you reapply for CERB after taking a break because you had employment/self-employment income in the intervening period.

24. Will I receive text or email notification of payment?

CRA will NOT send you an email with a link to your payment or communicate with you through text or instant messaging. Beware of scams involving such communication.

25. Is CERB taxable income?

Yes, the benefit will be reported as income in the tax return for 2020. An information slip will be made available for the 2020 tax year in CRA My Account.

26. What happens if I get a CERB payment twice because I applied once to CRA and once to Service Canada?

There will not be any penalty if you have received a payment in error. However, you will have to repay CERB to which you are not entitled.

27. What will happen if I am considered ineligible for CERB at a later date?

You will be required to pay it back.

28. What do I do if I received CERB payment but returned to work during the benefit period?

You will be required to repay CERB.

If you still have the original CERB cheque, you can return the cheque by mail to the address below.

If you received CERB payment by direct deposit, or deposited the cheque, you can mail your repayment to CRA. Be sure to:

•  Make payment out to “Receiver General for Canada”
• Indicate it is for “Repayment of CERB”
• Include your Social Insurance Number (SIN) or your Temporary Tax Number (TTN)
  

Please do not send cash through the mail.

Please mail your payment to

Revenue Processing – Repayment of CERB

Sudbury Tax Centre

1050 Notre Dame Avenue

Sudbury ON  P3A 0C1

CERB or EI

30. I am receiving EI benefits. Can I also receive CERB payments?

No, you cannot be paid EI benefits and CERB for the same period. If you are already receiving EI regular and sickness benefits, you will continue to receive them until the end of your benefit period and should not apply for CERB in the meantime.

If your EI benefits end before October 3, 2020 and you are unable to return to work due to COVID-19, you can apply for CERB at that time if you meet the eligibility requirements.

31. I have stopped working because of COVID-19. Should I apply for EI benefits or claim CERB?

If you meet the eligibility requirements, you should apply for CERB, whether or not you are eligible for EI.

32. I have applied for EI benefits but have not yet received payment. Should I apply for CERB?

No, you should not submit another application for the same benefit period. If you became eligible for EI regular or sickness benefits on or after March 15, 2020, your claim will be automatically processed through CERB. If you became eligible for EI prior to March 15, your claim will be processed under the pre-existing EI rules.

33. I stopped working before March 15 but applied for EI after March 15. Which benefit will I receive?

It’s your eligibility date and not the claim date that matters. If you became eligible for EI regular or sickness benefits prior to March 15, your claim will be processed under the pre-existing EI rules.

34. I stopped working before March 15, 2020 due to COVID-19 but am not eligible for EI benefits. Will I receive CERB payments?

Yes, but the benefit will be available for a maximum of 16 weeks starting March 15 and not before that.

35. I lost my job due to COVID-19 and have been working while on claim. Which benefit will I receive?

If you lost your job for reasons related to COVID-19, you may be eligible for CERB provided you meet the eligibility criteria. You will no longer be eligible for EI benefits as part of working while on claim.

36. If I would be entitled to less than $500 per week under EI, will I get $500 under CERB?

Yes. When you apply for CERB, you will receive $500 per week, regardless of what you may have been eligible to receive through EI.

37. If I would be entitled to more than $500 per week under EI, will I get this higher amount under CERB?

No. When you apply for CERB, you will receive $500 per week, regardless of what you may have been eligible to receive through EI.

38. Can I apply for EI benefits after I have received payments under CERB?

Individuals who have received CERB but are still unemployed after October 3, 2020 can apply for EI, if they are eligible for EI regular and sickness benefits. The period over which you receive CERB does not impact your EI entitlement, but you cannot receive EI benefits and CERB for the same period.

39. If I am on special benefits such as maternity/parental, am I eligible to apply for CERB?

You cannot receive maternity or parental benefits at the same time as CERB. If work is not available as a result of reasons related to COVID-19 upon conclusion of your maternity/parental leave, you may apply for CERB if you meet the eligibility requirements.

40. I am part of work-sharing agreement with my employer and Service Canada. Am I eligible for CERB?

No, you are not eligible as you cannot receive EI benefits and CERB at the same time.

This information will be updated as more details are made available by the Government.

The Government has introduced a temporary wage subsidy for eligible employers to reduce their payroll cost over a three-month period during the ongoing economic downturn induced by COVID-19. Let’s call it the 10% wage subsidy (to distinguish it from the 75% wage subsidy also announced by the Government).

This is how the 10% wage subsidy will work.

1. Who is an eligible employer?

Only the following employers having an existing business number and payroll program account with CRA as on March 18, 2020 are eligible to claim the 10% wage subsidy:

• a non-profit organization,
• a registered charity,
• a sole proprietor;
• a partnership; or
  
• a corporation that has a business limit greater than nil (and determined without reference to passive income business limit reduction) for small business deduction for its last taxation year that ended before March 18, 2020.
  

Partnerships are only eligible for the subsidy if their members consist entirely of individuals (excluding trusts), registered charities, other partnerships eligible for the wage subsidy, or CCPCs eligible for small business deduction.

2. Which payments qualify for 10% wage subsidy?

These would be salary, wages, bonuses, or other remuneration paid by an eligible employer to an eligible employee (i.e. an individual employed in Canada) between March 18, 2020 and June 19, 2020.

If no remuneration has been paid between March 18, 2020, and June 19, 2020 – for example, if employees have been dismissed or they are on unpaid leave over this period – there is no entitlement to wage subsidy, even if the employer otherwise qualifies as an eligible employer.

3. How much subsidy can be claimed by an eligible employer?

The subsidy is equal to 10% of remuneration paid by an employer over a three-month period starting March 18, 2020, up to $1,375 per eligible employee and with an overall cap of $25,000 per employer. The calculation is based on the total number of eligible employees employed at any time during the three-month period.

Eligible employers that are associated CCPCs do not share the maximum limit of $25,000. In other words, each employer is entitled to a maximum of $25,000 in wage subsidy regardless of whether or not it is an associated CCPC.

4. How can an employer receive the 10% wage subsidy?

To claim the subsidy, eligible employers will reduce the amount of payroll deductions required to be remitted to CRA by the amount of subsidy they have calculated. Only the income tax portion of payroll tax remittance can be reduced, but not the CPP contributions or the EI premiums.

The 10% wage subsidy can only be claimed against payroll tax remittances to CRA, and not against those made to Revenu Québec by QC-based employers.

5. When can the 10% wage subsidy be claimed?

Eligible employers can reduce payroll tax remittance by the amount of subsidy in the first remittance period for salary paid between March 18, 2020, and June 19, 2020. For example, a regular remitter can claim subsidy against payroll tax remittance due to CRA by April 15, 2020.

Alternatively, an eligible employer that does not reduce its payroll tax remittance to CRA in 2020 may ask CRA that 10% wage subsidy on remuneration paid between March 18, 2020, and June 19, 2020 be paid to the employer at the year-end or transferred to its payroll account for 2021. CRA will require eligible employers to fill out a self-identification form, that will be published in the coming months, to credit their payroll program account by the amount of the subsidy.

6. Can an eligible employer reduce payroll tax remittance to CRA for salary paid after June 19, 2020?

Yes, this is possible if the income tax remittance for salary paid between March 18, 2020, and June 19, 2020 is not adequate to cover the amount of 10% wage subsidy which the employer is entitled to claim. For example, if you have calculated a subsidy of $5,000 on remuneration paid between March 18, 2020, and June 19, 2020, but have only deducted income tax of $3,250 from salaries paid to employees, you can reduce future income tax remittance by $1,750 even though such remittance is in respect of salary paid after June 19, 2020.

7. Does 10% wage subsidy affect net salary calculation for employees?

No, it doesn’t. An eligible employer will continue to deduct income tax, CPP contributions, and EI premiums from gross salary earned by employees in the same manner as before. It’s only when these deductions are to be remitted to CRA that the employer may reduce the income tax portion by the amount of subsidy and remit the balance to CRA.

8. Can an employer paying tax-exempt remuneration claim the 10% wage subsidy?

Yes, wage subsidy is available for remuneration paid from March 18, 2020 to June 19, 2020, even if all or part of this remuneration is tax-exempt. The eligible employer will, in this case, ask CRA to pay the amount of subsidy at the end of 2020.

9. How does the 10% wage subsidy affect an employer’s claim for the 75% Canada Emergency Wage Subsidy (CEWS)?

Employers who qualify for both subsidies will reduce the amount available to be claimed under CEWS by the amount of 10% temporary wage subsidy that they are eligible to claim, whether or not they have taken advantage of the 10% wage subsidy. CEWS and the 10% wage subsidy are intended to provide total support of up to 75%, not 75% + 10%. This means that the maximum benefit for an eligible employer cannot exceed its entitlement under CEWS.

10. Is the 10% wage subsidy considered taxable income?

Yes, an eligible employer will report the subsidy as income in the year in which it has been received.

11. What recordkeeping should eligible employers maintain?

Employers will need to keep information to support subsidy calculation. This includes:

•  the total remuneration paid from March 18, 2020 to June 19, 2020;
• the income tax that was deducted from that remuneration; and
• the number of eligible employees employed in that period.

CRA is currently updating reporting requirements and will provide more information on how to report this subsidy.

The Government has introduced 75% wage subsidy for employers whose businesses have been hit by COVID-19, in a bid to encourage them to retain or recall their workers. It would provide a benefit of up to $847 per week per employee over a 12-week period starting March 15, 2020. This relief measure has recently been enacted into a law by the Parliament and is expected to be rolled out soon.

This is how the Canada Emergency Wage Subsidy (CEWS) will work.

1. Who is an eligible employer?

Employers, having an existing business number and payroll program account with CRA as on March 15, 2020 and whose revenue has reduced by at least 15% in March and 30% in April and May, can apply for CEWS if they are one of the following:

• taxable corporations, irrespective of their size;
  
• sole proprietors;
  
• partnerships consisting entirely of eligible employers;
  
• registered charities;
  
• non-profit organizations; and
  
• other organizations exempt from Part I tax, such as unions.
  

Public bodies, including municipalities and local governments, Crown corporations, municipal corporations, public universities, colleges, schools and hospitals, do not qualify for CEWS.

2. Which payments qualify for wage subsidy?

These would be salary, wages, bonuses, or other remuneration paid by an eligible employer to an eligible employee for the period between March 15 and June 6, 2020. Severance pay or items such as stock option benefits or personal use of a corporate vehicle are not included.

3. Who is an eligible employee?

An eligible employee is an individual who is employed in Canada and who has not been without remuneration for 14 or more consecutive days in the claiming period, i.e., from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6.

4. Given that eligibility for CEWS is based on revenue fluctuation, what should revenue comprise of?

Revenue, for the purpose of CEWS, is:

• the revenue from an employer’s business carried on in Canada and earned from arm’s-length sources (special rules have been provided for group businesses trading among each other);
  
• calculated using the employer’s normal accounting method – this could be accrual method or cash method but not a combination of both;
  
• exclusive of extraordinary items and amounts received on sale of capital assets; and
  
• exclusive of 10% temporary wage subsidy or the CEWS received by the employer in a given month.
  

Employers will calculate revenues using the cash method or the accrual method when first applying for CEWS and will be required to use that method for the entire duration of the program.

Rules for group businesses: Affiliated entities may jointly elect to calculate revenue on a consolidated basis and use the fluctuation in consolidated revenue for determining each entity’s eligibility for CEWS. Another special rule has been provided where an eligible employer derives its revenue from sale of output to a related company that in turn sells to third party, arm’s length customers.  In such a situation, the employer may apply revenue test to arm’s length revenue earned by the related company.

Rules for NFPs and charities: Revenue, for the purposes of CEWS, will include most forms of contributions and receipts, but will exclude revenue from non-arm’s length persons. It will be up to these organizations to include revenue from government sources as part of the calculation. Once chosen, the same approach will apply over the entire period of the program.

5. How is the 15% or 30% drop in revenue calculated?

To qualify for CEWS, revenue of eligible employers must have dropped by at least 15% in March 2020 and 30% in April and May 2020 (eligible periods).

The table below summarizes the calculation of revenue fluctuation, with details to follow.

Once an employer has been found eligible for CEWS for a specific period, it would automatically qualify for the next period.  For example, if an employer has experienced a revenue reduction of more than 15% in March, it would qualify for the first and second periods of the program, covering remuneration paid between March 15 and May 9.

The reduction in revenue can be determined using one of the following two methods:

• Method I: Calculating change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. For example:

• If revenue in March 2020 is 20% lower compared to March 2019, the employer would be allowed to claim CEWS for the first and second claiming periods.
• If revenue for April 2020 is down 35% compared to April 2019, the 30% threshold is met and CEWS can be claimed on remuneration for the second and third claiming periods, regardless of revenue fluctuation in May.
  

• Method II: Comparing monthly revenue of an eligible employer to the average of its revenue earned in January and February 2020. For example:

• A corporation that started its operations in October 2019 and reported revenues of $100,000 in January and $140,000 in February (for a monthly average of $120,000) can claim CEWS for the first and second claiming periods if its revenue in March is lower than $102,000 (i.e. reduction of 15%).
• If its revenue in April 2020 dropped to $80,000, this is 33% lower than average monthly revenue of $120,000 and the employer will continue to be eligible for CEWS for the third claiming period.
  

Eligible employers will select one of the two methods when first applying for CEWS and will be required to use the same method for the entire duration of the program

6. How much subsidy can be claimed by an eligible employer?

There is no overall cap on the subsidy that an eligible employer may claim. Instead, CEWS limits are defined per employee.

As such, subsidy for a given employee on remuneration paid for the period between March 15 and June 6, 2020 is the greater of:

• 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
•  the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.

The pre-crisis remuneration for a given employee is the average weekly remuneration paid between January 1 and March 15 inclusive, excluding any seven-day periods in respect of which the employee did not receive remuneration.

In effect, employers may be eligible to fully claim the first 75% of pre-crisis salaries (of up to $58,700 per annum) for existing employees under CEWS. The employers are expected, where possible, to top up the remaining 25% to provide existing employees their pre-crisis salary amounts.

7. Can subsidy be claimed under CEWS for new employees?

Yes, employers will also be eligible for a subsidy of up to 75% of salaries paid to new employees.

8. Is CEWS available for salaries paid to owner-employees?

Yes, provided such employees who do not deal at arm’s length with the employer (including owner-employees and their spouses) have been employed prior to March 15, 2020.

For such employees, subsidy will be limited to remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.

The Government has expanded CEWS so that:

• eligible employers may receive 100% refund for their contributions to Employment Insurance, Canada Pension Plan, Quebec Pension Plan, and Quebec Parental Insurance Plan, paid in respect of eligible employees who are on leave with pay; and
• there is no overall cap or maximum limit per employee on the refund that an eligible employer may claim.

The refund would cover 100% of employer’s contributions for each week throughout which employees are on leave with pay and over which period the employer is eligible to claim CEWS for those employees. This refund would not be available for employees who are on leave with pay for only a portion of a week.

The refund will not affect how employers collect and remit employer and employee contributions. The contributions will be remitted to CRA as usual, but eligible employers will apply for a refund at the same time that they apply for CEWS.

10. How can an employer receive CEWS?

Eligible employers will be able to apply through CRA’s My Business Account as well as using a web-based application. Employers will be required to attest to the decline in revenue at the time of application.

More details about the application process will be made available by the government.

11. Is CEWS considered taxable income?

Yes, an eligible employer will report the subsidy as income in the year in which it has been received.

12. Can an employer eligible to receive CEWS claim the 10% temporary wage subsidy as well?

Eligible employers who qualify for both subsidies will reduce the amount available to be claimed under CEWS by the amount of 10% temporary wage subsidy claimed by them in the same period. This means that the maximum benefit for an eligible employer cannot exceed its entitlement under CEWS.

13. Does Canada Emergency Response Benefit affect CEWS claim?

The Government has been encouraging eligible employers to rehire employees and apply for CEWS, so that those employees do not need to apply for Canada Emergency Response Benefit. To achieve this end, the Government may consider implementing a process to limit duplication, such as by allowing individuals rehired by their employer during the same eligibility period to cancel CERB claim and repay that amount to the Government.

14. How does Work Sharing Program affect CEWS claim?

For employers and employees that are participating in a Work-Sharing program, Employment Insurance benefits received by employees through the Work-Sharing program will reduce the benefit that their employer is entitled to receive under CEWS.

15. What recordkeeping should eligible employers maintain?

Employers will need to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. CRA will specify its requirements in this regard.

16. What will happen if CEWS has been incorrectly claimed?

Employers would be required to repay amounts received under CEWS if they do not meet the eligibility requirements. Penalties (including fines or even imprisonment) may apply in cases of fraudulent claims.

Employers that engage in artificial transactions to reduce revenue for the purpose of claiming CEWS would be subject to a penalty equal to 25% of the value of the subsidy claimed, in addition to the requirement to repay in full the subsidy that was improperly claimed.

In a bid to mitigate the economic impact of COVID-19, the Federal and the Provincial Governments have announced several relief measures for Canadian businesses. Below is a summary of key economic measures that are particularly useful to small businesses.

Launching the Canada Emergency Business Account

Providing lending facilities through BDC and EDC

The Government will provide lending to cash stripped businesses through BDC and EDC. The new SME Loan and Guarantee program will provide up to $40 billion to small and medium-sized companies, which require greater help in meeting their operational finance requirements, through guaranteed loans.

Introducing 75% Canada Emergency Wage Subsidy

Wage subsidy at 75% of remuneration has been proposed for employers whose monthly revenue for March, April or May 2020 has reduced, but who continue to retain their workers. This 75% Canada Emergency Wage Subsidy is yet to be rolled out, but will be applicable retroactively from March 15, 2020 for a 12-week period. The maximum benefit is $847 per week for a given employee, with no cap on the overall benefit claimed by an eligible employer.

Providing 10% wage subsidy to small employers

Extending the due date for payment of GST/HST

Businesses have been allowed to defer GST/HST payments until June 30, 2020. With this extension, amounts becoming due as early as March 31 are not payable until the end of June.  The extension applies to all types of filers (i.e. those filing annually, quarterly, or monthly) in respect of GST/HST amounts due for payment between March and June 2020. CRA will not charge interest on unpaid amounts of tax due over this period.

It may be noted that the deadline to file GST/HST returns remains unchanged. However, recognizing the difficult circumstances faced by businesses, CRA will not impose penalties where a GST/HST return has been filed not later than June 30, 2020.

Extending the due date for payment of income tax

Businesses have also been allowed to defer, until September 1, 2020, the payment of any Part I income tax that becomes due between March 18, 2020 and before September 2020. The extension will apply to amounts owing for previous fiscal year as well as installments for current fiscal year that become due over this period. CRA will not charge interest or penalties on unpaid amounts of tax during the extension.

Extending the due date for filing of income tax returns

The applicable dates are as follows:

• Corporate tax returns (T2), as well as forms such as T1134, elections, and responses to information requests, that are due for filing after March 18, 2020 can now be filed up to June 1, 2020.
  
• The filing deadline for charity information returns (T3010), due between March 18, 2020 and December 31, 2020, has been extended until December 31, 2020.
  
• For trusts with taxation year ended on December 31, 2019 or later, the tax return (T3) filing due date has been deferred until May 1, 2020.
• The filing deadline for partnership information return (T5013) has been extended to May 1, 2020.
  
• The income tax filing deadline for sole proprietors remains unchanged at June 15, 2020.
  

Regardless of the flexibility to delay the filing of return, a business that is expecting a refund may expedite filing the income tax return to have its refund claim processed sooner rather than later.

Suspending tax collections and CRA audits

CRA has suspended collections activities on new debts until further notice. Moreover, it will not initiate any post-assessment GST/HST or income tax audit of small businesses for now. The obligation for banks and employers to comply or remit on existing Requirements to Pay (RTPs) has also been suspended.

Extending the due date for payment of GST and customs duties on imports

GST and customs duty payments owing on imported goods have been deferred until June 30, 2020. The extension will apply to amounts owing for March, April and May 2020.

Extending the due date for WSIB premium reporting and payment

Ontario businesses have been allowed to defer, until August 31, 2020, WSIB premium reporting and payments due between March 26, 2020 and August 2020. The relief is automatic and applies to all employers covered by WSIB, whether they report and pay on monthly, quarterly or annual basis. No interest or penalty will be charged on outstanding premium payments over this period. Additional details about the relief will be shared by WSIB.

Doubling the EHT exemption

The Ontario Government has increased EHT exemption to $1 million for private-sector employers in 2020. EHT exemption would return to its current level of $490,000 on Jan 1, 2021. Please note that only the exemption amount has increased; eligibility criteria for EHT exemption, tax rates and other conditions remain the same as before.

Enhancing the Work-Sharing Program

Employers that have suffered at least a 10% decline in business activity due to COVID-19 may benefit from the enhancements to the Work-Sharing Program. The maximum duration of Work-Sharing agreements has been extended to 76 weeks across Canada, over which period eligible employers and employees will agree to a reduction in working hours (by at least 10% and up to a maximum of 60%) while income support will be provided to employees by Service Canada.

Making it easier for banks to lend to consumers

As a concerted effort, the banking regulator and the central bank have introduced measures that will allow Canada’s large banks to inject additional lending into the economy at lower interest rates (interest rate has now been reduced to 0.25%). These measures are designed to provide Canadians with easier and cheaper access to financing. The government has also put in place actions to provide long-term stable funding to banks and mortgage lenders, so that they can continue to provide lending to businesses and households.

These are uncertain times, but do not hesitate to reach out to us if you have any questions.

Best regards,

J-MAK CPA Team