The developments on the COVID-19 pandemic have been numerous and developing rapidly since the Government of Canada passed the first COVID-19 Emergency Response Act approximately one month ago.

This Tax Update looks at some of the more recent measures intended to provide relief to Canadian small businesses and taxpayers:

  1. the Canada Emergency Wage Subsidy
  2. the Canada Emergency Business Account loan program
  3. the Business Credit Availability Program
  4. Canada Emergency Commercial Rent Assistance

We encourage you to speak to your Grewal Guyatt advisor to examine all the options available and determine whether you or your business is eligible to apply for any of these relief measures.  Grewal Guyatt continues to closely monitor new developments, and we will provide updates as new information becomes available.


On April 11, 2020, the COVID-19 Emergency Response Act, No. 2 was enacted, implementing the 75% Canada Emergency Wage Subsidy (CEWS).  Applications for the CEWS opened on April 27, 2020.

Eligible Employers

The CEWS will provide “eligible employers” a 75% wage subsidy for up to a twelve-week period, retroactive to March 15, 2020 until June 6, 2020 (with a possibility for extension until September 30, 2020).  To qualify for the CEWS, eligible employers must see a drop in gross revenues of at least 15% in March 2020 and no less than 30% in April and/or May 2020, either (i) on a year-over-year basis or (ii) compared to an average of revenue earned in January and February 2020.  An employer must choose one of these comparative benchmarks for the entire duration of the CEWS program and will not be able to toggle between them.

Employers must have a payroll business number as of March 15, 2020 to qualify for the CEWS.

Qualifying Periods

The CEWS is available for three claim periods, each of which must be examined independently to determine eligibility, as follows:

  Claim Period Required Reduction in Revenue Reference Period for Eligibility
Period 1 Mar. 15 to Apr. 11 15% Mar. 2020 over: (i) Mar. 2019
OR: (ii) avg. of Jan. and Feb. 2020
Period 2 Apr. 12 to May 9 30% Apr. 2020 over: (i) Apr. 2019

OR: (ii) avg. of Jan. and Feb. 2020

Period 3 May 10 to Jun. 6 30% May 2020 over: (i) May 2019

OR: (ii) avg. of Jan. and Feb. 2020

Once an employer is found eligible for a Qualifying Period, the employer will automatically qualify for the next Qualifying Period.  For example, an employer with a revenue drop of more than 15% in March will qualify for Period 1 and Period 2, but must see a 30% drop of revenue in April or May to qualify for Period 3.

Calculating Revenues

For the purposes of the CEWS, qualifying revenues exclude amounts from extraordinary items, as well as capital gains and losses and amounts derived from non-arm’s length sources.  However, where at least 90% of an employer’s revenues are derived from persons or partnerships not dealing at arm’s length, the parties can determine eligibility on a consolidated basis.  Revenues can be calculated on an accrual basis or a cash basis, but not a combination.  Once a method is chosen, an eligible employer must use that method for the entire duration of the program.

Employers that engage in artificial transactions to reduce revenue for the purpose of claiming the CEWS will be subject to a penalty equal to 25% of the subsidy claimed (in addition to a repayment in full of the subsidy that was improperly claimed).

Calculation of Subsidy

The subsidy amount an eligible employer can receive under the CEWS is based on the number of employees employed during a Qualifying period (there is no set maximum per employer).  The available CEWS in respect of salary paid to an “eligible employee” is the greater of:

  1. the least of:
    1. 75% of the amount of actual remuneration paid;
    2. $847; and
    3. nil, if the employee does not deal at arm’s length with the employer; and
  2. the least of:
    1. 100% of the amount of actual remuneration paid;
    2. the amount of remuneration paid, up to a maximum benefit of $847 per week; and
    3. or 75% of the employee’s pre-crisis weekly remuneration.

In effect, different CEWS computation rules apply to existing employees, non-arm’s length employees, and new employees.  Generally, for existing arm’s length employees, 100% of salary can be covered by the CEWS up to the maximum amount of $847/week, provided the employee’s pre-crisis weekly salary was at least $1,130.  New employees are capped at 75% of remuneration up to the weekly maximum of $847.  Non-arm’s length employees are capped at 75% of their pre-crisis weekly remuneration.  The CEWS cannot be claimed in respect of new non-arm’s length employees.

In addition, the CEWS has been expanded to include a 100% refund of the employer paid portion of CPP, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan for furloughed employees.  Furloughed employees will be those on leave, with pay throughout the week, but who do not perform any work for the employer in that week.

Any amount received under the CEWS will be taxable to the employer.

Interaction with the 10% Temporary Wage Subsidy

Some employers may be eligible for both the CEWS and the Temporary 10% Wage Subsidy.  The 10% subsidy reduces the amount of income tax source deductions that employers have to remit to CRA on behalf of their employees by up to 10% of their remuneration (to a maximum of $1,375 per employee and $25,000 per employer).

Where an employer qualifies for both programs, the benefit available under the CEWS will be reduced by the amount of the 10% subsidy that the employer is eligible to claim.  That is, the CEWS will be reduced to account for the 10% wage subsidy even if the employer has not claimed it yet.  If the 10% subsidy has not yet been claimed by a qualifying employer, the employer can reduce future payroll remittances to claim any “missed” subsidy payments.

How to Apply

Eligible employers can apply for the CEWS in three ways:

  • Most businesses may apply using My Business Account
  • If you represent a business, you may apply using Represent a Client
  • Through a separate online application form

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


The Government of Canada has recently launched the new Canada Emergency Business Account (CEBA) loan program, which has been implemented by eligible financial institutions in cooperation with Export Development Canada (EDC).

This $25 billion program provides interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover their operating costs during a period where their revenues have been temporarily reduced due to the economic impacts of the COVID-19 virus.

Applications for loans started on April 9, 2020, and can be made by businesses through their banks and credit unions.  If the loan is repaid by December 31, 2022, 25% of it will be forgiven, up to $10,000.  If the loan is not repaid by December 31, 2022, the remaining balance will be converted to a three-year term loan at 5% interest.

Eligibility Requirements

The CEBA is available to a small businesses or not-for-profit organization that:

  • is a Canadian operating business in operation as of March 1, 2020;
  • has a federal tax registration;
  • has total employment income paid in the 2019 calendar year was between $20,000 and $1,500,000;
  • has an active business chequing/operating account with a participating lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the lender by 90 days or more as at March 1, 2020;
  • has not previously used the Program and will not apply for support under the Program at any other financial institution;
  • acknowledges its intention to continue to operate its business or to resume operations; and
  • agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

Certain organizations are excluded from the CEBA, such as government bodies, unions, or charitable, religious or fraternal organizations.

Restrictions on Use of Funds

The funds from CEBA loans may only be used to pay non-deferrable operating expenses of the borrower, such as payroll, rent, utilities, insurance, property tax and regularly scheduled debt service.  The loans may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.


The Government of Canada has also established the Business Credit Availability Program (BCAP) to provide additional support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).  As part of the BCAP, BDC and EDC are working with Canadian chartered banks and other qualified financial institutions to coordinate on credit solutions for creditworthy businesses whose access to financing would otherwise be restricted.

Applications for the BCAP are made through the eligible business’s existing bank or other authorized financial institution with whom the applicant has an existing banking relationship.

This program includes:

Loan Guarantee for Small and Medium-Sized Enterprises

EDC is working with financial institutions to guarantee 80% of new operating credit and cash flow term loans of up to $6.25 million to small and medium-sized enterprises (SMEs).

This financing support is to be used for operational expenses and is available to both exporting and non-exporting companies.

Co-Lending Program for SMEs

BDC is working with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements.  The program offers differing maximum finance amounts based on business revenues.

80% of the financed amount is provided by BDC with the remaining 20% being provided by the SME’s financial institution.  This support is available until or before September 30, 2020.


On April 24, 2020, Prime Minister Justin Trudeau announced the Canada Emergency Commercial Rent Assistance program (CECRA) for small businesses affected by COVD-19.  In effect, the federal government in partnership with the provinces and territories will lower commercial rents by up to 75% for eligible small businesses.

Under the CECRA, CMHC will provide forgivable loans to qualifying commercial property owners covering 50% of monthly rent for May, June and July.  Eligible small business tenants will be expected to pay up to 25% of their monthly rent with the effect that commercial property owners will receive up to 75% of their pre-coronavirus rental revenues for these months.

The CECRA will only apply in respect of tenants and subtenants who meet the following criteria:

  • pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement);
  • generate no more than $20 million in gross annual revenues, calculated on a consolidated basis; and
  • have temporarily ceased operations or have experienced at least a 70% decline in pre-COVID-19 revenues.

As with the CEWS, revenue declines can be calculated by comparing revenues to the same month in 2019 or by comparing average revenues for January and February of 2020.

Generally, for a landlord to be able to make application under the CECRA, the landlord must have a mortgage loan secured by the commercial real property.  If a property owner does not have a mortgage secured by a commercial rental property, the property owner should contact CMHC to discuss program options.

Notably, participation in the CECRA program is voluntary, and it remains to be seen how many commercial landlords opt into the program and elect to forgive up to 25% of applicable rents.

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