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COVID-19 Federal Economic Relief Measures


This article has been updated as of October 16,  2020.

Over the last several months, the Federal Government has announced and implemented several measures to support Canadians and Canadian businesses through the economic turmoil associated with the COVID-19 pandemic. These measures are primarily intended to help with business liquidity in the short term so they can survive through the pandemic and to encourage job retention of employees.

Below is a list of the measures announced by the Government that we believe will be most relevant to our clients.

Filing Deferrals offered by the CRA:

Filing deadlines for personal and corporate returns and administrative actions were deferred until June 1.   Any balances owing related to these returns were due September 1, 2020.

  • For charities with a Form T3010, the deadline for any information return due between March 18, 2020 to December 31, 2020 is now extended to December 31, 2020.
  • The CRA has now announced that it will resume audit work with altered procedures in place to ensure safe distances (e.g. taxpayers may send information via email).
  • For a summary of the deadlines, click here.

The government also passed legislation on July 20, 2020 that included suspension of certain time limits and court proceedings.

Payment Deferrals offered by the CRA:

  • Income tax amounts owed by individuals and businesses were deferred to September 1, 2020. The amounts eligible for deferral were those owing between March 18 to September 2020. This relief applied to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties accumulated on these amounts during this period. This only applied to income taxes– being income tax installments and any income tax amounts due.
  • However, there are currently no deferrals for payroll remittances (though see comments below regarding the wage subsidy) or remittances of other tax withholdings such as non-resident withholdings under section 116 of the Income Tax Act which must still be remitted to the CRA . Unless the Government has specifically stated an amount payable to the CRA may be deferred, it should be assumed it is still payable.
  • For a summary of the deadlines, click here.

Administrative relief for residency by the CRA

The CRA has published administrative relief for international persons or transactions. Generally, for persons who cannot travel into or out of Canada due to COVID-19 travel restrictions, the days spent in Canada and transactions effected during those days will not “count” towards residency considerations.

This gives relief to persons who may inadvertently spend 183 days or more in Canada, even though it was not their intention, who would otherwise be deemed a Canadian tax resident. Also, where a director must meet in Canada when they usually would not, this will not imply Canadian residency for the corporation simply for that reason. Relief is also extended to non-resident companies that have employees in Canada who, due to the travel restrictions, are performing their duties in Canada – this will not create a permanent establishment simply for this reason.

For more information, see here.

Canada Emergency Wage Subsidy (“CEWS”) – 75%


  • Baseline remuneration” is the average weekly eligible remuneration, excluding any period of seven or more consecutive days for which the employee was not remunerated, paid to the eligible employee by the eligible entity during the period that is:
    • January 1, 2020 and March 15, 2020; or
    • If the eligible entity elects:
      • March 1, 2019 to May 31, 2019, in respect to CEWS being calculated for periods 1 to 3; or
      • March 1, 2019 to June 30, 2019, in respect to CEWS being calculated for period 4; or
      • July 1, 2019 to December 31, 2019, in respect to CEWS being calculated for periods 5 to 10;
  • Eligible employees” are those who are employed in Canada and have not been without eligible remuneration for 14 days or more during the qualifying period in which the CEWS is claimed. The 14 days without remuneration requirement is lifted for periods 5 to 10.
  • Eligible entities” mean employers that are:
    • Individuals (other than a trust for periods after May 9, 2020);
    • Taxable corporations (or trust for periods after May 9, 2020);
    • Partnerships consisting of eligible employers;
    • Not-for-profit organizations, chambers of commerce, labour organizations and societies, and benevolent or fraternal societies or orders;
    • Registered charities; and
    • “Prescribed organizations”. Regulations extend eligibility for the CEWS to the following groups:
      • Partnerships that are up to 50-per-cent owned by non-eligible members;
      • Indigenous government-owned corporations that are carrying on a business, as well as partnerships where the partners are Indigenous governments and eligible employers; 
      • Registered Canadian Amateur Athletic Associations;
      • Registered Journalism Organizations; and
      • Non-public colleges and schools, including institutions that offer specialized services, such as arts schools, driving schools, language schools or flight schools.
      • Note:
      • Public institutions will not be eligible for the subsidy. These include municipalities and local governments, Crown corporations, public universities, colleges, schools, school boards, hospitals, and health authorities.
      • The CRA indicated in a technical interpretation that corporations that have treaty-exempt Canadian source income are not precluded from being an eligible entity.
      • The most recent legislation included amendments that now ensures that CEWS applies appropriately to amalgamated corporations and aligns the treatment of trusts and corporations.
      • In order to be eligible for CEWS, the entity must have, on March 15, 2020, had a CRA business payroll number. If an entity does not have its own payroll/business number but instead uses a “payroll service provider” (who does have a payroll/business number), then it may still be eligible for CEWS. In these situations, the entity must have employed at least one individual in Canada to be eligible.
      • NEW CRA COMMENTARY: In many cost-sharing arrangements (often used by doctors and other professionals), there is more than one employer since there are multiple participants in the arrangement to share certain costs. The CRA has recently indicated that where the arrangement is, under common law, considered an “agency”, each of the employers may qualify for the CEWS in relation to the remuneration that each was responsible to pay through the cost-sharing arrangement/agency. Each employer still must meet the other criteria to be eligible. So long as the employers otherwise meets the requirements, including that the agency had a payroll number on March 15, 2020, then each of the employers may now still apply for the CEWS for prior periods. In order to apply, the employers must each now apply for their own payroll account.
  • “Eligible remuneration” means any employment earnings that would be subject to remittances and withholdings, such as salary, wages, etc. It excludes employee stocks options, retirement allowances, severance pay, etc.
  • Qualifying periods (all in 2020):
    • Period 1: March 15 to April 11;
    • Period 2: April 12 to May 9;
    • Period 3: May 10 to June 6;
    • Period 4: June 5 to July 4;
    • Period 5: July 5 to August 1;
    • Period 6: August 2 to August 29;
    • Period 7: August 30 to September 26;
    • Period 8: September 27 to October 24;
    • Period 9: October 25 to November 21; and
    • Period 10: November 22 to any time up to December 31, 2020.

Note: The government has announced its general intention to extend the CEWS “right through” next summer (2021). We will update once more details have been provided.

  •  “Qualifying revenue” is discussed in below in its own section.
  • Additional definitions are used for periods 5-10, such as “base percentage”, “base revenue reduction”, and “top-up percentage”, but these will be discussed below instead.

Qualifying Revenue

To calculate revenue, the employer can use their normal accounting method (which in most cases will be the accrual account method) or may elect to use the cash accounting method. Whichever method is selected will need to be applied to all qualifying CEWS periods and all comparison periods. For example, if you use the cash accounting method to determine revenue for March 2020 and are comparing it to March 2019’s revenue, March 2019’s revenue and all the other reference periods will also need to be calculated using the cash accounting method. Since in many cases the accrual method is the normal accounting method, this may mean the comparison periods’ revenue will need to be recalculated using the new chosen method.

As a quick explanation, accrual accounting would treat an issued invoice as revenue upon it being issued (and work performed) whereas cash accounting would only consider an invoice as revenue once cash has been received to pay for it. This means if a drop in revenue is going to affect billings but all your billings will be paid in a timely manner, the accrual method will likely be better. On the other hand, if invoices are not being paid in a timely manner, or at all, the cash method will likely be the more appropriate method of calculating revenue.

Extraordinary items and non-arm’s lengths revenues are excluded from the calculations of revenue. Extraordinary items are determined as a question of fact but, generally, would be those that are:[1]

  1. Not be expected to occur regularly or frequently within several years. Grants or other government assistance that an entity is eligible to receive on a regular or reoccurring basis would not meet this criteria.
  2. Not typical of the normal activities or risks inherent in the normal operations of the entity. Consideration should be given to the nature of the services or products offered by an entity and the normal environment in which it operates.
  3. Primarily out of the control of owners or management. Consideration should be given to the extent that inflows are influenced by the decision of owners or management.

Government funding related to COVID-19 assistance would likely meet these criteria and would likely be considered an extraordinary item.

Generally, “qualifying revenue” only includes the arm’s length revenue received in the course ordinary activities in Canada. This excludes extraordinary items, the CEWS and deemed remittances under the TWS program. However, there are a number of exceptions to this general rule.

  • Registered charities may include revenue from related businesses, gifts and other amounts received in the course of ordinary activities. They may exclude government funding amounts.
  • Not-for-profits, chambers of commerce, labour organizations and benevolent or fraternal societies may include membership fees and any other amounts received in the course of ordinary activities. They may exclude government funding amounts.
  • Organizations that normally present consolidated financial statements can have each member determine their respective qualifying revenue separately, provided that all members do so.
  • Members in an affiliated group can jointly elect that qualifying revenue of the group be determined on a consolidated basis.
  • If all of the interests in an employer is owned by participants in a joint venture and 90% or more of the employer’s qualifying revenue is from the joint venture, then the qualifying revenues of the joint venture (determined as if the joint venture were an eligible entity) may be used for the revenue test.

If at least 90% of the qualifying revenue (other than the fact that it is non-arm’s length) comes from non-arm’s length persons or partnerships, then the employer and the non-arm’s length persons or partnerships may all jointly elect to account for non-arm’s length revenue in the revenue test. There is a complicated weighted average formula to account for calculating the qualifying revenue in this case and we recommend contacting a tax practitioner to assist you in this regard. Note, this does not apply for non-arm’s length persons or partnerships who are in a multi-tiered structure or where there is a chain of entities and all of the claimant’s qualifying revenue is also received from persons or partnerships that are not dealing with each other at arm’s length.

Qualifying for CEWS and Amount

The qualifying periods 1 to 4 are dealt with in the earlier legislation and periods 5 to 10 are part of the  more recent legislation. As such, we divide the discussion for each group of periods into two sections.

Periods 1 – 4: March 15 to July 4, 2020

For periods 1 to 4, the CEWS program will pay qualifying employers the greater of:

  1. 75% of an arm’s length employee’s “eligible remuneration” up to a weekly maximum of $847; or
  2. whichever is less:
    1. 75% of any employee’s (including non-arm’s length) “baseline remuneration”; or
    2. 100% of “eligible remuneration” up to a weekly maximum of $847.

The two “tests” in this CEWS calculation (for periods 1 – 4) mean that arm’s length employees can be hired or be given increased remuneration after March 15, 2020 provided their employer pays the final 25% of their remuneration. However, any employees hired before March 15, 2020, including non-arm’s length employees, can be paid 75% of their baseline remuneration meaning employers would not need to necessarily pay that final 25%.

Note, non-arm’s length employees hired after March 15, 2020 will not be eligible for the CEWS (because their “baseline remuneration” would be $0.00).

All amounts paid are adjusted for amounts received under the TWS program (see below) and work-share EI program.

Qualification Criteria

In order to qualify for the CEWS for in any of period 1 to 4, an employer must:

  1. be an “eligible employer”;
  2. have a CRA payroll account as of March 15, 2020 (see note under eligible entity definition); and
  3. be able to show its revenue has dropped below (this is referred to as “Revenue Reduction”):
    1. 85% of March 2019 revenue in March 2020 to be eligible for CEWS for the period between March 15, 2020 and April 11, 2020 (Period 1);
    2. 70% of April 2019 revenue in April 2020 to be eligible for CEWS for the period between April 12, 2020 and May 19, 2020 (Period 2);
    3. 70% of May 2019 revenue in May 2020 to be eligible for CEWS for the period between May 10, 2020 and June 6, 2020 (Period 3);
    4. 70% of June 2019 revenue in June 2020 to be eligible for CEWS for the period between June 6, 2020 and July 4, 2020 (Period 4).

Revenue Test

To determine if there’s been a qualifying Revenue Reduction, the employer must compare the qualifying revenue of the qualifying period (period 1 to 4) against a “prior reference period”.

By default, the prior reference period for each of periods 1 to 4 is the respective month of that period in the prior year (i.e. compare Period 1 to March 2019). However, they may elect instead to use January to February 2020 as the prior reference period instead. If they elect to compare to January and February 2020 instead, then they must use it as the prior reference period for all of periods 1 to 4.

Finally, an eligible employer that qualifies for the CEWS for one qualifying period (1 to 4) will automatically be deemed to qualify for the next qualifying period (1 to 4). This deeming rule eliminates the retrospective uncertainty of the subsidy. For clarity, if the employer qualifies for the period 1, then they are deemed to qualify for the period 2. The “deeming” does not extend to the period 3 because the deeming rule can only apply to the next immediate period. This deeming rule for periods 1 to 4 apply even if there has not actually been a qualifying Revenue Reduction in the subsequent period. See here, under #5, Table 2, for a table that breaks this down.

Periods 5 – 10: July 5 to November 21, 2020 (and potentially up to December 31, 2020)

For periods 5 to 10, the CEWS has 3 components:

  1. Base percentage;
  2. Top-up percentage;
  3. Pay for employees on leave with pay.

(All amounts paid are adjusted for amounts received from the EI work-share program)

  • Base percentage is calculated by applying a multiplier to the Base Revenue Reduction the qualifying period, up to a maximum set for each qualifying period.
    • e.g. In period 5, base subsidy is 1.2 x Base Revenue Reduction, up to a maximum subsidy of 60%.
  • Top-up percentage is calculated by applying a 1.25 multiplier to half of the Top-up Revenue Reduction of that qualifying period, up to a maximum of 25%.

See Qualification Criteria below for description of Base Revenue Reduction and Top-up Revenue Reduction.

If the eligible employee is active, then the CEWS for that employee is the least of:

  1. Eligible remuneration x (Base percentage + Top-up percentage);
  2. $1,129 x (Base percentage + Top-up percentage); and
  3. If the employee is non-arm’s length, the baseline remuneration.

Note, if the active eligible employee’s employer would otherwise been better off using the tests in period 1 to 4, then the employer can still use those tests to calculate CEWS in period 5 and 6. This has been referred in the media as the “safe harbour provision”.

If the eligible employee is on leave with pay, then the CEWS for that employee for periods 5 to 6 will be calculated on the same basis as for period 1 to 4. For periods 7 to 10, the intention, based on government announcements, is to align the CEWS program with the benefits provided through the CERB program and/or through EI programs. This latter part will be implemented through regulations. 

Qualification Criteria

In order to qualify for the CEWS for in any of period 5 to 10, an employer must:

  1. be an “eligible employer”;
  2. have a CRA payroll account as of March 15, 2020 (see note under eligible entity definition); and
  3. be able to show a Base Revenue Reduction and, if applicable, a Top-up Revenue Reduction:
    1. its revenue in the period has been reduced by some amount compared to a prior reference period (Base Revenue Reduction);
    2. its revenue from the prior 3 months (leading up to the qualifying period) has been reduced compared to those same 3 months in the prior year or compared to the period of January to February 2020 (Top-up Revenue Reduction). 

The amount of CEWS available will depend on the amount of the Revenue Reduction.

Revenue Test

To determine if there’s been a qualifying Base Revenue Reduction, the employer must compare the qualifying revenue of the qualifying period (period 5 to 10) against a “prior reference period”. The prior reference periods options are the same as for period 1 to 4.

However, the deeming rule is different. If the Base Revenue Reduction in a period (5 to 10) is lower than the Base Revenue Reduction of the immediately preceding period, then it will adopt the Base Revenue Reduction of the immediately preceding period instead.

How to get the CEWS

  • Applications are now live and can be done through My Business Account, Represent a Client or a web form. These can be found here. Employers will need to apply for each period.
  • Employers will need to keep records supporting their revenue calculations, remuneration paid to specific employees, and number of employees.
  • The CEWS is paid by the CRA treating the amount of the CEWS as an overpayment of income taxes. The CRA may refund that “overpayment”, but no interest will apply. Note, if an employer currently has outstanding amount payable to the CRA, the CRA could potentially use the CEWS to pay off that liability. This should not apply to deferred amounts but could apply to other amounts owed by the CRA.
  • Employers are encouraged to set up for direct deposits from the CRA. Otherwise, the payments will be by cheque.

Other important considerations of the CEWS

  • The CEWS is included in taxable income but will be offset by the associated deductible employment expenses.
  • Employers that engage in “artificial transactions” to reduce revenue for the purpose of claiming the CEWS or to increase their CEWS amounts may be subject to a penalty equal to 25% of the value of the subsidy claimed, in addition to the requirement to repay in full the subsidy that was improperly claimed.
  • Employers will also be able to apply for a 100% refund on the employer-portion of CPP and EI remittances for any furloughed employees (i.e. employees receiving their remuneration but not working) and for any eligible employees under CEWS program in periods where the CEWS may be claimed. Employers will still need to collect and remit the CPP and EI amounts but then can apply for a refund for the employer-portion when they apply for CEWS each period.
  • The government may publish the name of anyone who applies for the CEWS.

Other notes

The government has provided a “calculator” to assist with calculating the eligible CEWS here. You will need Excel or access to Excel (like Google Docs) to use this calculator.

  • For the Government website for CEWS, click here and for Frequently Asked Questions, click here.

The CEWS program and calculations are complex and will likely be subject to audit scrutiny by the CRA. As such, it is vitally important to maintain good records and, if needed, consult with an accountant or lawyer to understand whether your business qualifies.


The CRA has begun to audit CEWS claims. These audits are initiated by sending out an information request letter which requires the claimant to provide information such as:

  • corporate documents from the minute books, including agreements, shareholder registers, governance documents;
  • supporting documentation on 2019 and 2020 revenue and for the calculations for the decline in revenue;
  • payroll information.

The claimant will have 15-21 days to respond with the requested information. This is not a lot of time therefore it is more important than ever to ensure that claimants are maintaining organized, complete and thorough documentation as they go.

Temporary Wage Subsidy (“TWS”) – 10%

The TWS provides for a 10% TWS for eligible employers from March 18, 2020 to June 19, 2020 (eligible period), up to a maximum of $1,375 per employee with an aggregate maximum of $25,000 per eligible employer. Any benefit received from the TWS will reduce the CEWS. Employers who do not qualify for the CEWS can apply for this TWS instead. Any TWS received will simply reduce the CEWS receivable.

  • Eligible employers for the 10% wage subsidy are:
    • Individuals (other than trusts)
    • Non-profit organizations;
    • Registered charities;
    • Canadian-controlled private corporations eligible to claim any small business deduction; and
    • Partnerships, if the members of the partnership are comprised of individuals, registered charities, partnerships, or Canadian-controlled private corporations as described above.
  • Eligible employers must have an existing business number and payroll program account with the CRA on March 18, 2020 and must pay salary, wages, bonuses, or other remuneration to an eligible employee. Note, not-for-profits that share their business number and payroll account with a non-eligible employer (i.e. public institution) may not qualify. It is unclear if the government will provide relief for these situations.
  • The TWS is “paid” to employers by decreasing the amount that such employer needs to be remit in income tax withholdings. Employers cannot reduce their CPP and EI remittances (see CEWS – Other important considerations)
    • For example, if you have 3 employees and their total payroll (their remuneration) for the three-month period is $120,000 ($40,000 per month). The TWS maximum would be the lesser of $12,000 (10% x $120,000), $4,125 ($1,375 x 3 employees), and $25,000. The TWS maximum is therefore $4,125. To claim this you can reduce your income tax remittance by up to $4,000 (10% x $40,000) in the first month but then you would only be able to reduce the remittance by $125 in the second month and nothing in the third month (because your total limit for the three months is $4,125).
    • If your TWS exceeds the income tax remittance for that period (note EI and CPP remittances may not be reduced), then the excess can be carried over to periods after June 19, 2020.

As noted in the CEWS section, the stated goal of the government for these subsidies was to get funds out as quickly as possible – so they rely on businesses self-assessing whether they qualify. However, the government has indicated there will be harsh penalties for businesses that try to game the system and take advantage of the subsidies when they don’t qualify or use it for anything other than paying employees. At minimum, amounts claimed when an employer did not qualify will need to be repaid. In addition to the penalties described for CEWS, there would likely also be penalties applied in other circumstances where the CRA believes there was any abuse, especially where funds were never paid to the employees.

Therefore, it is critically important that employers maintain records showing revenue, the remuneration paid during the eligible periods, the income tax that was deducted from this remuneration, and the number of employees for which either subsidies applied. This will likely be crucial to protecting yourself from future audit grief.

The CRA has provided a self-identification form to report the TWS amounts. Employers using this program should reduce their remittances and send this form to the CRA (they may send this form at the end of the eligible period). See here for the form.

Information on the 10% Temporary Wage Subsidy can be found on the CRA website here.

Canada Emergency Response Benefit

 The CERB was a program offered to individuals who were experiencing decreased income due to the pandemic. This program has now ended and applicants are being re-directed to apply for Employment Insurance or the Canada Recovery Benefit. For more information, see here.

Availability of credit for Canadian businesses:

  • An increase to the credit available to small, medium, and large Canadian businesses through the Business Credit Availability Program (BCAP), which will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses.

   For information from BDC click here.
   For information from EDC click here.

  • The EDC will be guaranteeing new operating credit and cash flow term loans that financial institutions extend to small and medium enterprises. The guarantee is limited to $6.25 million.
  • The BDC will be co-lending term loans with financial institutions for small and medium enterprises. These are intended to assist with operational cash flow. The BDC’s portion of the loan will be up to $6.25 million per loan. Interest rates will be normal commercial interest rates.
  • To further encourage banks to make loans, the Office of the Superintendent of Financial Institutions (OSFI) announced it is lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately. This will allow Canada’s large banks to inject $300 billion of additional lending into the economy.
  • The Bank of Canada has cut its interest rate to 0.25%.
  • The Canada Emergency Business Account is available through eligible financial institutions (with cooperation of EDC).  The application deadline for this loan has been extended to December 31, 2020.
    • This account provides for a loan up to $40,000, interest-free, to qualifying businesses and not-for-profits. Most major banks have stated that the loan will convert to an interest-bearing term loan after December 31, 2022.
    • If the borrower repays the balance on or before December 31, 2022, 25% of the loan will be forgiven (up to $10,000).
    • To qualify, the small business or not-for-profit must demonstrate that they have paid between $20,000 to $1.5 million in total payroll in 2019.
    • The loan may only be used for operating costs. See here for more details on eligible and ineligible uses of funds.
  • All of these loans are now accessed through your own financial institutions. You will therefore need to contact your normal bank to see if you qualify. Note, however, as each bank is administering these programs to their own customers, how the programs will work, including specific terms and especially practical questions regarding how to apply may vary between banks.

For more information See for example: 

  National Bank of Canada

Loan reliefs offered by financial institutions:

  • The Department of Finance Canada indicated Canada’s large banks have confirmed that this support will include up to a six-month payment deferral for mortgages, and the opportunity for relief on other credit products.
  • Information provided by the banks has been changing rapidly as the banks decide how to proceed. Information has been slowly made its way down to front line bank employees, so their message to clients has not been consistent over the last several weeks. This means if you were told last week that you do not qualify for a deferral, that may no longer be the case today.
  • However, the latest news suggests that while payment deferrals will be available, the banks will continue to charge interest which will compound if no payments are made. As a result, likely not only will individuals and businesses who take advantage of this option still owe all the deferred payments they will likely owe more.
  • If you are in a cash crunch, you may still need to take advantage of these options, but you likely want to do it as little as possible.

You will need to contact the individual financial institutions. 

Other relief

The Federal government has also provided funding to various industries and sectors, such as the media industry, the cultural, heritage and sports industries, agriculture, and women entrepreneurs. To review support for all the various sectors, see here.

There is also additional funding for large employers via the Large Employer Emergency Funding. See here.

If you have any questions in the interim regarding these measures, please reach out to MaryAnne LoneyMichelle Fong, Mohamed Denny, Pat Haughian, or Dani Fialkov.

[1] CRA Interpretation 2020-0846711I7.

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