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10% Temporary Wage Subsidy Update

On May 15, 2020, the Government of Canada released new regulations (the “New Regulations”) relating to the 10% temporary wage subsidy (the “10% Temporary Wage Subsidy”) implemented on March 25, 2020 pursuant to Bill C-13, the COVID-19 Emergency Response Act.   The 10% Temporary Wage Subsidy is separate from (but reduces) the subsequently introduced Canada Emergency Wage Subsidy (“CEWS”).

Under the 10% Temporary Wage Subsidy, eligible employers (as described below) may be entitled to a subsidy in respect of remuneration paid between March 18, 2020 and June 19, 2020. The amount of the subsidy is calculated as a “prescribed percentage” of eligible remuneration paid during the applicable period, subject to  maximum “prescribed amounts” per eligible employee and per eligible employer.  Unlike the CEWS, no application is required and employers receive the 10% Temporary Wage Subsidy simply by deducting the subsidy amount from payroll withholdings payable to the Canada Revenue Agency (“CRA”) in respect of federal, provincial or territorial income tax.  Under the New Regulations, the maximum “prescribed amounts” are $1,375 per eligible employee and $25,000 per eligible employer.  This is consistent with previous statements made by the Government.

The New Regulations also provide that the default “prescribed percentage” is 10%, but that eligible employers may elect a lower percentage.

Prior to the release of the New Regulations, it was expected that the percentage would be fixed (i.e., the ability of an employer to elect a lower percentage was not contemplated), and the CRA took the position that an employer that was eligible for both the 10% Temporary Wage Subsidy and the CEWS would be required to reduce its CEWS claim by its entitlement under the 10% Temporary Wage Subsidy regardless of whether the employer took advantage of that entitlement (i.e., regardless of whether the employer, in fact, reduced its payroll remittances pursuant to the 10% Temporary Wage Subsidy).

Following the release of the New Regulations, the CRA has stated that an eligible employer will be considered to have elected a lower “prescribed percentage” if, in completing its CEWS application, it enters as its eligible claim for purposes of the 10% Temporary Wage Subsidy an amount that is less than what would otherwise be the employer’s full entitlement in respect of the 10% Temporary Wage Subsidy.  The CRA has also stated that, in such circumstances, the eligible employer should indicate the lower “prescribed percentage” on its self-identification form for the 10% Temporary Wage Subsidy.

To qualify as an eligible employer for purposes of the 10% Temporary Wage Subsidy, the employer must satisfy each of the following conditions:

  • be:
    • an individual (other than a trust)
    • a CCPC that is eligible for the small business deduction (i.e., simplified, a CCPC that, in its last taxation year ending before March 18, 2020: (i) had a positive annual business limit for purposes of claiming the small business deduction; and (ii) was not part of an associated group that had at least $15 million in taxable capital);
    • a registered charity;
    • a partnership all of the members (direct or through one or more other partnerships) of which are one or more of the foregoing; or
    • a non-profit organization exempt from tax pursuant to Part I because of paragraph 149(1)(l);
  • have an existing business number and payroll program account with the CRA on March 18, 2020; and
  • pay salary, wages, bonuses, or other remuneration to an eligible employee.

Additional tax commentary from our Firm on the 10% Temporary Wage Subsidy and on the CEWS can be found here and here.



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