Highlights of the Canada and Quebec COVID-19 Economic Response Plan

The information contained in the below publication was current at the time it was published. The COVID-19 programs evolve continuously, and the relevant information may have changed since publication. Readers are advised to discuss their particular situation with their Crowe BGK advisor.

MEMORANDUM

Date: Last updated on May 26, 2020

From: Crowe BGK Tax Group

Subject: Highlights of the Canada and Quebec COVID-19 Economic Response Plan

Below is a summary of the most recent tax measures that were announced by the Government of Canada to help Canadians facing hardship as a result of the COVID-19 outbreak. Specific measures were also announced by the Government of Quebec and have been identified separately below.

Support for Individuals

Temporary Income Support for Workers and Parents

The Federal Government has created the Canada Emergency Response Benefit (CERB). The CERB replaces the Emergency Care Benefit and the Emergency Support Benefit, previously announced on March 18, 2020. Below are the highlights of the CERB. For more details please consult our distinct publication on this matter.

The CERB consists of a taxable benefit of $2,000 per 4-week period for up to 16 weeks for workers who lost their income as a result of the COVID-19 pandemic. The CERB benefits Canadian workers (including wage earners, contract workers and self-employed individuals), whether or not they are eligible to Employment Insurance (“EI”) to the extent that they:

• Have stopped working because of COVID-19;

• Are still employed but are not receiving income because of disruptions to their work situation due to COVID-19;

• Are quarantined, sick with COVID-19 or taking care of someone who is sick with COVID-19; or

• Are parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures.

On April 15, the Federal Government announced changes to the eligibility rules to the CERB to:

• Allow people to earn up to $1,000 per month while collecting the CERB.

• Extend the CERB to seasonal workers who have exhausted their EI regular benefits and are unable to undertake their regular seasonal work because of COVID-19.

• Extend the CERB to workers who have recently exhausted their EI regular benefits and are unable to find a job because of COVID-19.

The legislation implementing the CERB has yet to be amended to accommodate these changes.

The CERB is an alternative to EI as the EI system was not designed to process the unprecedented high volume of applications. That being said:

• Canadians who are already receiving regular EI and sickness benefits as of today will continue to receive their benefits and should not apply for the CERB relief. If their EI benefits end before October 3, 2020, they can apply for the CERB once their EI benefits cease.

• Canadians who are eligible for regular EI and sickness benefits will still be able to access their normal EI benefits if they are still unemployed following the 16-week period covered by the CERB.

Canadians will begin to receive their CERB payments within 10 days of application. The CERB is paid every four weeks and is available from March 15, 2020 until October 3, 2020.

In addition, the Federal Government is:

• Waiving the one-week waiting period for those individuals in imposed quarantine that claim EI sickness benefits.

• Waiving the requirement to provide a medical certificate to access EI sickness benefits.

• Providing up to an extra $300 per child through the Canada Child Benefit (CCB) for 2019-20. This benefit is delivered as part of the scheduled CCB payment in May. Those who already receive the CBB do not need to re-apply.
  
  

Measures for Students

The Federal Government has created the Canada Emergency Student Benefit (CESB).

The CESB consists of a taxable benefit of $1,250 per month for eligible students from May through August 2020. This amount is increased to $2,000 for eligible students with dependents or disabilities.

The CESB is available for any individual who meets the following conditions:

• The individual is a Canadian citizen or permanent resident;

• The individual is enrolled, at any time between December 1, 2019 and August 31, 2020, in a post-secondary educational program that leads to a degree, diploma or certificate, OR has graduated from secondary school in 2020, has applied for enrollment in such a post-secondary educational program that is scheduled to begin before February 1, 2021 and plans to enroll in the program if their application is accepted;

• For reasons related to COVID-19, the individual is unable to work (as an employee or in self-employment), is seeking work and unable to find it, OR is working but paid less than $1,000 during the four-week period for which the individual applies for the CESB; and

• The individual does not, in respect of any part of that four-week period, receive other benefits such as the CERB or EI benefits.

The four-week periods to apply for the CESB are determined as follows:

Eligible students can now submit their application to the CESB to the Canada Revenue Agency (CRA). There are 2 ways to apply:

• Online with CRA My account

• Over the phone with an automated phone service

1-800-959-2019 or 1-800-959-2041

Applications for the CESB must be submitted by September 30, 2020.

The Federal Government also announced various other measures to help Canadian students. Please speak with your Crowe BGK advisor for more details.

Longer-Term Income Support for Workers

For Canadians who lose their jobs or face reduced hours as a result of COVID-19’s impact, the Federal Government is expanding the EI Work Sharing Program, to provide EI benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers, by extending the eligibility of such agreements to 76 weeks, easing eligibility requirements, and streamlining the application process.

Income Support for Vulnerable Individuals

To help low and modest income families, the Federal Government proposed to provide:

• a one-time special payment by early May 2020 through the Goods and Services Tax credit (“GSTC”), which will double the maximum annual GSTC payment amounts for the 2019-20 benefit year (increase of approximately $400 for single individuals and approximately $600 for couples).

• for families with children, an increase to the maximum annual Canada Child Benefit payment amounts, only for the 2019-20 benefit year, of $300 per child. The increase is to be paid with the May payment.

The Federal Government also proposed targeted help by:

• Placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.

• Reducing required minimum withdrawals from Registered Retirement Income Funds (“RRIFs”) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings.

Support for Seniors

The Federal Government announced that it will be providing a one-time payment of $300 for seniors eligible for Old Age Security (OAS) pension. An additional $200 will be provided for seniors eligible for the Guaranteed Income Supplement (GIS).

Quebec Low-Income Workers in Essential Sectors to Receive $100 per Week

The Government of Quebec announced the establishment of an incentive program to retain essential workers, which will offer a $100 weekly benefit for low-income earners working full or part time in the essential services.

The compensation seeks to ensure that full-time workers in sectors that are deemed essential receive a wage that exceeds what the Canada Emergency Response Benefit would provide.

The new benefit will be paid retroactive to March 15 for a maximum of 16 weeks. Through this compensation, workers will obtain, in addition to their wages, a taxable monthly lump sum of $400, or $1,600 for a period of 16 weeks.

To be entitled to the benefit, applicants must:

• Work in a sector declared essential during the period covered;

• Earn a gross salary of $550 a week for less;

• Have annual employment earnings of at least $5,000 and total annual income of $28,600 or less, calculated before the benefit.

Applicants can apply for this temporary benefit by means of an online Revenu Québec form that will be available starting May 19 and will be paid by direct deposit starting on May 27.

Support for Businesses

Temporary Wage Subsidy for Employers (10% subsidy)

The Federal Government implemented for eligible employers a temporary wage subsidy for a period of 3 months beginning on March 18 and ending on June 19, 2020 (the eligible period). The subsidy will be equal to 10% of eligible remuneration paid during the eligible period and, it is capped at a maximum of $1,375 per eligible employee and $25,000 per eligible employer. This subsidy is considered taxable income for the eligible employers.

An eligible employer means:

1. a corporation that qualifies as a Canadian-controlled private corporation and that had, for the purposes of the small business deduction, a business limit greater than NIL for its last taxation year that ended before March 18, 2020 (without considering the effect of the passive income grind-down of the business limit) (see note 1);
2. an individual (other than a trust);
3. a charity;
4. a non-profit organization; or
5. a partnership, all of the members of which are entities listed in 1 to 3 or 5.

Note 1: This criterion for corporations could cause an issue in certain circumstances involving groups of companies. A corporation would appear not to qualify for the subsidy if it had, for its last taxation year ending before March 18, 2020, a NIL business limit but otherwise met the eligibility criteria to claim the small business deduction for this taxation year. This would be the case where a corporation is part of an associated group of companies, and the group’s business limit was allocated to other members of the group to the exclusion of this corporation.

Moreover, an eligible employer must have an existing business number and payroll program account with the Canada Revenue Agency on March 18, 2020, and pay eligible remuneration to an eligible employee.

An eligible employee is an individual who is employed in Canada.

Eligible remuneration includes salary, wages, bonuses, or other remuneration. It also includes tax-exempt remunerations paid to an eligible employee during the eligible period.

Associated corporations are not required to share the maximum subsidy of $25,000 per employer.

How to claim the subsidy

Eligible employers can benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. All employers must continue deducting income tax, Canada Pension Plan (CPP) contributions, and EI premiums from remuneration paid to their employees. To benefit from the subsidy, eligible employers can reduce their current payroll remittance of federal, provincial, or territorial income tax that they send to Canada Revenue Agency (NOT to Revenu Québec) by the amount of the subsidy.

Example

If an eligible employer deducted $2,500 of income tax from its employees’ pay and calculated a subsidy of $2,050, the employer would reduce its current payroll remittance of federal, provincial, or territorial income tax by $2,050. The eligible employer would remit $450 of income tax to the Canada Revenue Agency. The remaining $2,050 that the employer keep would represent the subsidy.

If the income taxes deducted are not sufficient to offset the value of the subsidy in a specific period, the eligible employer can reduce future payroll remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the eligible period for the wage subsidy (after June 19, 2020). Also, if an eligible employer chooses to not reduce its payroll remittances during the eligible period, the Canada Revenue Agency will pay the temporary wage subsidy calculated for the eligible period at the end of the year or will transfer the amount to the next year’s remittance.

To support the claim of the temporary wage subsidy, an eligible employer must keep track of:

• the total remuneration paid in the eligible period;

• the federal, provincial, or territorial income tax that was deducted from that remuneration; and

• the number of eligible employees paid in the eligible period.

Canada Emergency Wage Subsidy (75% subsidy)

On April 1, 2020, the Federal Government provided details regarding the new Canada Emergency Wage Subsidy. We refer you to our distinct publication on this topic for more details.

Quebec Concerted Action Program for Job Retention

On April 6, the Government of Quebec has announced the creation of the Concerted Action Program for Job Retention (Programme actions concertées pour le maintien en emploi or PACME). The PACME is a subsidy of up to $300,000 per business. This is offered to businesses to help them cover the cost of eligible training activities. Eligible businesses will be those affected by the COVID-19 pandemic.

This subsidy will cover up to 100% of eligible expenses with regards to training activities, such as trainers’ fees (up to a maximum of $150/hour), material purchased and human resources management activities. The salary of workers participating in training activities (excluding social levies) will also be reimbursed up to a maximum of $25/hour. Depending on the business’ eligibility to claim the federal Canada Emergency Wage Subsidy and/or the federal Temporary Wage Subsidy for Employers, between 25% and 100% of the total hours paid to workers will be subsidized.

The PACME will be available from March 15, 2020 to September 30, 2020. This program could end sooner if the $100 million budget allocated to it is exhausted. Businesses can apply to the PACME with Service Quebec. More details regarding the eligibility conditions will be available on Quebec.ca. The following webpage provides further clarifications: https://www.quebec.ca/entreprises-et-travailleurs-autonomes/programme-actions-concertees-pour-le-maintien-en-emploi-pacme-covid-19/

Support for Specific Industries

The Federal Government has announced additional measures to benefit businesses in specific sectors such as agriculture, fisheries, cultures, sports, air transportation, tourism, energy and charities. Please speak with your Crowe BGK advisor for more details.

Ensuring Businesses Have Access to Credit

The Business Credit Availability Program will allow the Business Development Bank of Canada and Export Development Canada to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses.

Please make sure to consult our firm’s separate publication on Financial Relief Measures for a summary of all measures pertaining to credit and financing.