Updated on November 21, 2020.
Created in response to COVID-19, the Canada Emergency Wage Subsidy (CEWS) provides a subsidy to employers to cover part of employee wages, as of March 15. The CEWS rules were revamped in July 2020 and again in November 2020.
Note: This video pertains to periods 1 – 4 of CEWS.
Who is eligible for the CEWS?
The CEWS is available to employers that meet the definition of an “eligible entity”:
- An individual other than a trust (e.g., sole proprietorships)
- A taxable corporation
- A taxable trust
- A registered charity, other than a public institution
- A non-profit organization, other than a public institution1
- A partnership, all of the members of which are described in points 1 through 52
- A prescribed organization3
The term “public institution” is also defined and would include municipalities, local governments, Crown corporations (both federal and provincial), public universities or colleges, schools, school boards, hospitals and health authorities, among others.
Since the start of the pandemic, additional types of entities have been designated as prescribed organizations such that they are now eligible for the CEWS. These are:
- Indigenous businesses that meet certain criteria
- Partnerships where no more than 50% of the members are non-eligible entities
- Registered Canadian amateur athletic associations
- Registered journalism organizations
- Non-public education and training institutions, such as private colleges and private schools (e.g., arts schools, driving schools and culinary schools)
How does an eligible entity qualify?
An eligible entity is required to file an application on CRA’s website (see application process details below). The application must include an attestation by the individual who has principal responsibility for the financial activities of the eligible entity that the application is complete and accurate in all material respects (this can also be done through a representative).
The application must be made by the later of:
- January 31, 2021, or
- 180 days after the end of the qualifying period.
When the rules were first introduced, they required an employer to have a payroll account set up as of March 15, 2020. However, changes were introduced that now allow an employer using third-party payroll providers (paymaster arrangements) to also qualify, provided the employer employed one or more individuals in Canada on March 15, 2020 and certain other criteria are met.
Decrease in revenues
When the CEWS was first introduced, it required a decrease in monthly revenues of at least 15% (March) or 30% (April and May) as compared to a prior reference period, either the same month of the prior year or an average of January and February 2020. Since then, the government has made key changes to this requirement.
As of June, new rules apply that no longer require the decrease in revenue to meet a specific threshold. Now, any drop in revenue will allow an employer to qualify for the wage subsidy, provided other requirements are met.
Depending on the choices made by the employer with respect to revenues, it could impact their ability to qualify for the subsidy. Considerations need to be made in the following areas:
- Revenue comparison: deciding which prior reference period to use for purposes of determining the drop in revenue
- Revenue calculation: entity-by-entity basis or consolidated
- Revenue calculation: cash method vs. accrual
- Revenue calculation: the effect of revenues from related parties
- Subsidy calculation: deciding which baseline remuneration period to use in the calculation of the wage subsidy
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 Specifically, the definition includes NPOs that are exempt from income tax due to paragraph 149(1)(e), (j), (k) or (l) of the Income Tax Act. Generally, this would include non-profit organizations, agricultural organizations, labour organizations, as well as others.
 Members of the partnership can also include other partnerships all of whose members are those noted in points 1-4, above
 This gives the government the flexibility to include other organizations that may have been unintentionally omitted.
Grant Thornton LLP wants to caution that these rules are still new and continue to evolve as the government continues to re-evaluate the economic impact caused by the COVID-19 pandemic. We may still see changes to these measures—as well as new measures—as the government attempts to address the issues that have been raised by us and the tax community. Therefore, any analysis included herein reflects our knowledge as of the date and time of this publication and may no longer be applicable if changes do occur. You should proceed with caution before making any decisions.
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