COVID-19 Tax Update: Federal Wage Subsidy Details and Filing Extension for T2 Corporate Tax Returns
(Released April 2, 2020)
As mentioned in our initial March 30, 2020 newsletter, Hogg, Shain & Scheck will provide updates between weekly newsletter releases on days of major announcements or for matters of particular interest to clients. With that in mind, this update covers:
- new details and guidance for the Canada Emergency Wage Subsidy
- filing extension for T2 corporate tax returns and
- filing extension for T3 trust and estate returns.
Canada Emergency Wage Subsidy (CEWS)
On April 1, 2020, Ministers Bill Morneau and Navdeep Bains provided the following details on the evolving 75% wage subsidy:
Concrete Details About the Canada Emergency Wage Subsidy:
The CEWS will be in place for 12 weeks from March 15 to June 6, 2020.
Amount of Canada Emergency Wage Subsidy:
Subsidy equal to 75% of the first $58,700normally earned by employees (the “Salary Threshold”). Salary Threshold to include remuneration generally subject to source deductions but excludes:
- severance pay;
- stock option benefits; and
- taxable benefits from personal use of an employer-owned vehicle.
The maximum weekly subsidy per employee will be $847/week[i] ($58,700 x 75% / 52 weeks). Maximum subsidy per employee over 12 weeks would be $10,164.
Revenue Decline Eligibility
Available to all employers[ii], including charities and NPOs, who suffer a decline in revenues of at least 30% in either March, April or May 2020 compared to the same month in 2019. For this purpose, revenues are gross revenues excluding extraordinary items and capital gains or losses.
Interaction with the 10% Wage Subsidy
CEWS ineligible employers may claim the previously announced and cancelled 10% wage subsidy. When initially announced last week, the federal government stated the 75% subsidy was meant to replace the 10% subsidy. With today’s release, however, the 10% wage subsidy remains in effect.
Where an employer is eligible for both the CEWS and the 10% subsidy, any amount received pursuant to the 10% subsidy would reduce the amount available under the CEWS.
Restriction on CEWS for Furloughed Employees
The CEWS cannot be claimed for remuneration paid to a specific employee for a specific week if that week falls within 4 weeks, during which the employee spent any time furloughed and eligible for the $2,000/week Canadian Emergency Response Benefit.
Canada Emergency Wage Subsidy Details Needing Specifics:
The federal government stated it will continue working with charities and NPOs to determine a definition of revenue that is relevant and appropriate to their circumstances for purposes of the 30% decline threshold. It is unclear whether different sectors within the space (i.e.: aid and social service organizations, the arts, housing co-ops, industry groups, etc.) will have unique revenue definitions.
Application dates for the CEWS were not provided, however, the process is expected to open soon online via:
- Canada Revenue Agency’s My Business Account feature; and
- a new web-based application.
Funds are expected to start flowing in approximately 6 weeks, but no formal dates or timetables were given at this time.
Filing Extension for T2 Corporate Tax Returns
Originally the CRA was not providing any filing extensions for corporate returns, but their website now indicates that any T2s due between March 18 and June 1, 2020 has a revised due date of June 1, 2020.
Filing Extension for T3 Trust and Estate Returns
Trust and estates with filings due dates in April or May 2020 now have until June 1, 2020 to file their T3s.
[i] If 75% of an employee’s pre-crisis weekly income is less than $847/week, the subsidy received by the employer is the lesser amount.
[ii] Except public sector employers.