COVID-19 Tax Measures: Extension to the Canada Emergency Wage Subsidy

On July 17, 2020, the Department of Finance introduced significant changes to the Canada Emergency Wage Subsidy (CEWS). These modifications primarily affect self-employed individuals and incorporated physicians with consistent employee payroll.

Key Highlights:

Duration: The updated CEWS will be in effect from July 5 to December 31, 2020. The announcements pertain to the timeframe from July 5, 2020, to November 21, 2020 (Periods 5 – 9). Information regarding November 22 to December 31, 2020 (Period 10) has not been disclosed.

Eligibility Changes: All qualifying employers witnessing a decrease in revenue can now avail the CEWS support as a base subsidy. The previously mandated 30% drop in revenue under the old CEWS guidelines has been removed. The new CEWS support will fluctuate based on the extent of revenue decline.

Subsidy Structure: The revised CEWS comprises two components: a base subsidy and a top-up subsidy. The base subsidy is accessible to all eligible employers experiencing a revenue dip, with the subsidy amount varying based on the magnitude of the revenue drop. Additionally, a top-up subsidy of up to an extra 25% is available for employers most severely impacted by COVID-19. The maximum CEWS amount is capped at $960 per employee weekly (for remuneration up to $1,129 weekly).

Base Subsidy Calculation: The base CEWS is determined by a specified rate, contingent on the revenue decline and period, applied to the remuneration paid to the employee during the eligibility period, capped at $1,129 weekly. The maximum base CEWS rate is offered to employers with a revenue drop of 50% or more. This rate will gradually decrease from 60% in Periods 5 and 6 to 20% in Period 9.

Top-up Subsidy: In addition to the base subsidy, a top-up CEWS of up to 25% is available for the most affected employers. The top-up CEWS rate is determined based on the revenue drop over the preceding three months compared to the same months in the previous year or the average monthly revenue in January and February 2020.