COVID-19 Tax Update: Finance Announces Changes to Canada Emergency Wage Subsidy (CEWS)

UPDATE: Legislation implementing the CEWS was enacted into law on April 11, 2020. See our Tax Alert on that update here

On April 8, 2020 the federal government released additional and revised details on the Canada Emergency Wage Subsidy (CEWS) (see our initial Tax Alert on the CEWS here). The changes provide greater flexibility and incentives for eligible employers to qualify for the CEWS. Most notably, the government proposes to: (i) reduce the revenue loss benchmark for the month of March 2020 from 30 per cent to 15 per cent; and (ii) provide eligible employers with a 100 per cent refund for certain contributions made to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan and the Quebec Parental Insurance Plan.

Additional details include the following: (i) employers can use an accrual or cash accounting method for measuring revenues; (ii) employers can compare business revenue of March, April and May 2020 to the same months in 2019, or to average revenue earned in January and February of 2020 (with special rules for calculating revenue from non-arm’s length sources and remuneration paid to non-arm’s length employees); and (iii) charities and non-profit organizations can choose to include or exclude government funding in determining revenue.

The government confirmed that the subsidy would apply at a rate of 75 per cent of wages or salaries (to a maximum) paid during the 12-week period between March 15 to June 6, 2020. Legislation to implement the CEWS has not yet been released.