COVID-19 Tax Update: Finance proposes further extension and revisions to CEWS program

On November 2, 2020, Parliament tabled Bill C-9 which, among other things, proposes to further extend and revise the Canada Emergency Wage Subsidy (CEWS) program. The proposals are in addition to the extensive CEWS revisions enacted on July 27, 2020; read our detailed blog post on those amendments here. Bill C-9 also proposes to introduce the Canada Emergency Rent Subsidy (CERS), and we will be publishing a blog post on that topic in the near future.

The CEWS amendments implemented by Bill C-9 are detailed and add significant complexity to an already-complex program. At a high-level, notable takeaways include:

  • The CEWS program will be automatically extended to December 19, 2020, with the ability to extend the program further to June 30, 2021.
  • The maximum base subsidy for wages paid during the ninth and tenth qualifying periods – being October 25 to November 21, 2020, and November 22, 2020 to December 19, 2020, respectively – will remain at 40% (providing a maximum weekly benefit per employee of approximately $452 for those employers who have a revenue drop of 50% or less).
  • For the eight qualifying periods onwards (i.e., starting September 27, 2020), the computation of top-up revenue reduction percentage (relevant for employers whose revenues have declined by more than 50%), previously based solely on a rolling three-month average, can be based on a year-over-year approach or a comparison to average revenues earned in January or February 2020.
  • For qualifying periods beginning on or after October 25, 2020, the formula for calculating the subsidy in respect of wages paid to a furloughed employee will be aligned with the employment insurance (EI) program. The subsidy for such employees will generally be equal to their eligible remuneration, up to a maximum of $573 per week.
  • For employees returning from certain leaves (e.g., parental or disability leave) which spanned the entirety of July 1, 2019 to March 15, 2020, the baseline remuneration period will be the 90 days prior to the date on which the employee commenced their leave (since there would otherwise be no baseline remuneration for such employees).
  • The CEWS application period will be extended to the later of: (i) January 31, 2021; and (ii) 180 days after the end of the relevant qualifying period. This will extend the application deadline for the sixth qualifying period (i.e., from August 2, 2020 to August 29, 2020) and beyond.
  • The asset purchase election in subsection 125.7(4.2) will be expanded to apply to the purchase of a single business, or a distinct part of a business, from an arm’s length vendor, even if the vendor continues to carry on business activities after the sale.
  • Eligible employees will be limited to only those employed primarily in Canada throughout the relevant qualifying period (except for CEWS applications submitted prior to the date on which Bill C-9 receives Royal Assent). Thus, remuneration paid to employees employed primarily (or wholly) outside Canada will not qualify for the CEWS.

The CEWS changes implemented by Bill C-9 will be advantageous to many employers, even those who have previously submitted applications. However, the amendments may also significantly increase compliance work and the overall number of calculations required.

Given the ever-increasing complexity of the CEWS, employers are well-advised to carefully consider every aspect of a CEWS application and seek professional advice where merited.

Prepared by: Alexander Demner

Alexander is a partner practicing in the firm’s Vancouver office. Alexander’s practice covers several areas of taxation, including estate planning, pre-sale and divestiture structuring, owner-manager remuneration, taxpayer representation, and tax litigation. Alexander routinely advises on and implements reorganizations for individuals,… more »