COVID-19: Employer Tax Relief

The Canadian Revenue Agency has implemented a Three-Month Temporary Wage Subsidy for Employers

The Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the number of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).

Employers are eligible for the temporary wage subsidy if they:

• are a non-profit organization, registered charity, or a Canadian-controlled private corporation (CCPC);
• have an existing business number and payroll program account with the CRA on March 18, 2020; and
• pay salary, wages, bonuses, or other remuneration to an employee.

Note: CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.

Amount of the subsidy

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and a maximum of $25,000 total per employer. Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

For example: If you have five employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.

Calculating the subsidy

The subsidy must be calculated manually.

For example: If you have five employees earning monthly salaries of $4,100 for a total monthly payroll of $20,500, the subsidy would be 10% of $20,500 or $2,050.

Receiving the subsidy

Once you have calculated your subsidy, you can reduce your current remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy.
Important: You cannot reduce your remittance of Canada Pension Plan contributions or Employment Insurance premiums.

For example: If you calculated a subsidy of $2,050, you would reduce your current remittance of federal, provincial, or territorial income tax by $2,050. You could continue reducing future income tax remittances, up to the maximum of $25,000, for all remuneration paid before June 20, 2020.

When you can start reducing remittances

You can begin reducing remittances of federal, provincial, or territorial income tax in the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020.

For example: If you are a regular remitter, you can reduce your remittance that is due to the CRA on April 15, 2020.

When the subsidies exceed your remittances

If the income taxes you deduct are not sufficient to offset the value of the subsidy in a specific period, you can reduce future remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 20, 2020).

For example: If you calculated a subsidy of $2,050 on remuneration paid between March 18, 2020, and June 20, 2020, but only deducted $1,050 of federal, provincial, or territorial income tax from your employees, you can reduce a future income tax remittance by $1,000, even if that remittance is in respect to remuneration paid after June 20, 2020.

The subsidy will not affect your deductions from employees

You will continue deducting income tax, Canada Pension Plan contributions, and Employment Insurance premiums from salary, wages, bonuses, or other remuneration paid to your employees, as you currently do. The subsidy is only calculated when you remit these amounts to the CRA.

You can choose not to reduce remittances during the year

If you are an eligible employer, but decide not to reduce your payroll remittances during the year, calculate the temporary wage subsidy on remuneration paid between March 18, 2020, and June 20, 2020. You can then ask for the subsidy to be paid to you at the end of the year; or transferred to the next year’s remittance.

Books and records needed to support the subsidy

You will need to keep information to aid your subsidy calculation. This includes:
• the total remuneration paid between March 18, 2020, and June 20, 2020;
• the federal, provincial, or territorial income tax that was deducted from that remuneration; and
• the number of employees paid in that period.

The CRA is currently updating reporting requirements. Rise Advisors will keep you updated as the CRA releases new reporting requirements in the future.

The subsidy is considered taxable income

If you receive the subsidy, you have to report the total amount as income in the year in which the subsidy is received.

There is no subsidy for businesses that are closed and did not pay salary, wages, bonuses and other remuneration

If you did not pay salary, wages, bonuses, or other remuneration to an employee between March 18, 2020, and June 20, 2020, you cannot receive the subsidy, even if you are an eligible employer.

Read more in detail about the Temporary Wage Subsidy here:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html.

We are more than happy to guide you with any of your business queries. Feel free to contact us.