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Canada Emergency Wage Subsidy (CEWS)

Canada Emergency Wage Subsidy (CEWS)

This subsidy-Grant– would be available to eligible employers that see a drop of at least 30% of their revenue and that pay wages to employees.  This grant as of now does not apply to dividends paid by corporations.

Note: The deadline for filing wage subsidy applications for periods 1 to 5 is January 31, 2021.

Period 1: March 15 to April 11, 2020
Period 2: April 12 to May 9, 2020
Period 3: May 10 to June 6, 2020
Period 4: June 7 to July 4, 2020
Period 5: July 5 to August 1, 2020

August 12, 2020 update: Improved online tool to help businesses apply for next period of CEWS
The Canada Revenue Agency, with the help of the Canadian Federation of Independent Business (CFIB), launched a new and improved online calculator to help all types of businesses apply for the next period of the CEWS program, which opens for applications on August 17.
Online Calculator:

August 10, 2020 update: New CRA form for CEWS
If you are eligible to receive the TWS, you should notify the CRA by submitting Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers, for each of your payroll program (RP) accounts. This form can be submitted at the end of the eligible period. If you already claimed the TWS, you will need to complete and submit this form to the CRA. If you are thinking of claiming the TWS, you will have to fill out and submit the same form. The form can help you calculate the TWS. If you have claimed the Canada Emergency Wage Subsidy (CEWS), and want to claim a reduced amount of the TWS, fill out form PD27 and mark the appropriate percentage of the TWS you have claimed (from 0% to 10%).

July 17, 2020 update: All businesses that have experienced a drop in revenue would qualify for support
Today the Finance Minister, Bill Morneau, announced proposed changes to the CEWS that would broaden the reach of the program and provide better targeted support so that more workers can return to their jobs quickly as the economy restarts. This support would continue to protect jobs and help Canadian businesses that are the most impacted.

The changes to the subsidy would do away with the requirement that businesses prove a 30 per cent decrease in revenue in order to qualify — allowing all Canadian companies that have experienced pandemic-driven revenue declines to access the program.

June 8, 2020 update:  CPA Canada: Amending CEWS claims, CEWS and corporate groups, DSLPs and time limits
In our discussions with the Canada Revenue Agency (CRA), we continue to learn more details about the Canada Emergency Wage Subsidy (CEWS) and other COVID-19 related issues.

  • the CRA’s new process for amending CEWS claims
  • guidance on CEWS claims on tax consolidation for corporate groups
  • draft proposals for extending tax deadlines
  • the CRA’s priorities as audit work resumes
  • the status of deferred salary leave plans (DSLPs) for employees on leave for over six years
  • administrative leeway for health care spending accounts
  • draft proposals for extending certain tax limitation periods
  • our update on outstanding COVID-19 tax measures (beyond those related to the CEWS

Click here for more details:

May 16, 2020 update:  Extension to August 29, 2020 Finance Minister Bill Morneau today announced that the Government of Canada will extend the CEWS by an additional 12 weeks to August 29, 2020. Extending the program will give workers greater confidence that they will continue to get the support they need during these difficult times. The Government will consult with key business and labour representatives over the next month on potential adjustments to the program to incent jobs and growth, including the 30 per cent revenue decline threshold. Any potential changes following the consultation will have as key objectives to maximize employment, ensure the CEWS reflects the immediate needs of businesses, and support the post-crisis economic recovery. … To bridge these gaps, the government proposes to amend the CEWS to allow employers to choose one of two periods when calculating the baseline remuneration of their employees. Specifically, employers would be allowed to calculate baseline remuneration for an employee as the average weekly remuneration paid to the employee from January 1 to March 15 of 2020 or, alternatively, as the average weekly remuneration paid to the employee from March 1 to May 31 of 2019, in both cases excluding any period of 7 or more consecutive days without remuneration. Employers would be able to choose which period to use on an employee-by-employee basis. This change is proposed to be retroactive to April 11, 2020, which means that it would apply to the first qualifying period starting March 15, 2020 and subsequent qualifying periods. Click here for more details:

May 15, 2020 update: Finance Minister Bill Morneau today announced that the Government of Canada will extend the CEWS by an additional 12 weeks to August 29, 2020. Extending the program will give workers greater confidence that they will continue to get the support they need during these difficult times. The Government will consult with key business and labour representatives over the next month on potential adjustments to the program to incent jobs and growth, including the 30 per cent revenue decline threshold. Click here for more details:

May 14, 2020 update: CPA Article “A Must Read on How to Mitigate Risk”:
There are many details of the program that are left to interpretation. The Canadian Tax Foundation and CPA Canada sent a list of 140 questions to the CRA and to date only 35 of them have been answered. As a result, there are many issues regarding the qualification for and calculation of the subsidy that are being left to interpretation.
We have identified three primary risks to accountants under this program…

April 21, 2020 update: CRA releases online calculator to help employers calculate potential Emergency Wage Subsidy. Click here to visit.

April 16, 2020 update: CRA’s plan is to open the portal for the Canada Emergency Wage Subsidy on April 27.


Potential Benefit: Generally, 75% of calculated gross payroll up to a maximum of $857.00 per week per employee

Period covered: 16 weeks (March 15, 2020 to June 6, 2020)

Taxation of Benefit: The business entity will receive a T4A from the government and the amounts will be Taxable

Eligibility: Drop in revenue is carried out by comparing the current month’s revenue with the corresponding month in the prior year and then calculating the difference and then the percentage change.

Eligible employers would include the following:

  •  Individuals;
  •  taxable corporations;
  • partnerships consisting of eligible employers;
  • nonprofit organizations;
  • Registered charities.

Revenue attributes:

  • Revenue is from its business carried on in Canada, does not include foreign income;
  • Revenue would exclude items earned from extraordinary items;
  • Revenue would exclude amounts considered to be on account of capital;
  • Generally Revenue would exclude amounts  earned from arm’s-length (ie: unrelated)
  • Sources, however a special rule will apply to employees that do not deal at arm’s length (related) with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration  Revenue would be calculated using the employer’s normal accounting method

Eligible Wages would be calculated as the gross calculated amount of wages paid to all employees calculated as the lessor of:

  •  75% of the employee’s average wage before March 15, 2020;
  •  The actual amount paid to the employee during the relevant application period;
  •  $847 per week.

To receive this subsidy-grant you have to make a claim monthly.  The claim is currently limited to three periods-months.  The claim can be made for any one or all months. The claim can be made when you calculated revenue reduction is at least 30%.  The claim periods are as follows along with the period in which you will be making the calculation can make the claim:

  • March 15, 2020 to April 11, 2020
    March 2020 compared of March 2019
  • April 12,,2020  to May 9,
    2020  April 2020 compared to April 2019
  • May 10, 2020 to June 6, 2020
    May 2020 compared to May 2019

If you are claiming under the Canada Emergency Wage Subsidy you cannot include the remuneration paid to an employee in a week that falls within a period for which you have made a claim under the Temporary Small
Business Wage Subsidy program.”

Eligibility Revenue Calculation: Please see ‘More Details’ below

How to Apply: You have to apply monthly, using “My Business Account”

When to Apply: On or after April 6, 2020

Records to Keep: Details on gross wages paid during the monthly period (copy of payroll journal) and a calculation of the benefit

What You Receive: A credit equal to Approximately 75% of your eligible gross payroll amounts. The Credit can either be transferred to your bank account or the government will send you a cheque (4 to 6 weeks after the application

CRA’s CEWS Excel Calculator:

CRA’s CEWS Online Calculator:


Canada Revenue Agency’s FAQ

More Details

The 75% Canada Emergency Wage Subsidy

Currently, the Bill provides for the CEWS program to end June 6, 2020, however, the Minister has the power to extend the CEWS program to September 30, 2020 without having to recall Parliament.

A “qualifying entity” may apply for CEWS. Taxable corporations, individuals, registered charities, most non-profit organizations, and partnerships with these entities as members may all potentially be qualifying entities.

To qualify, the entity must have a payroll remittance number with the Canada Revenue Agency (“CRA”) as of March 15, 2020, and the entity must meet the revenue decline test.

What is the maximum subsidy under CEWS?

Per employee, the maximum would be $847 per week * 12 weeks (March 15 to June 6, 2020, unless the government extends the program) = $10,164. There is no maximum per employer.

Revenue Tests

The below chart summarizes the revenue decline test for each of the three claim periods:

As described above, the revenue decline test looks at whether the “qualifying revenue” has declined at least 15% (for Period 1) or 30% (for Period 2 and 3).  For Period 1, the revenue decline test is met if the qualifying revenue during March 1 to March 31, 2020 was 15% lower than the qualifying revenue during March 1 to March 31, 2019. The same logic applies for Periods 2 and 3 but the required decline becomes 30%.

Alternatively, the month in 2020 may be compared to the average qualifying revenue in January and February 2020 in one of two situations:

  1. On March 1, 2019, the employer was not carrying on business or its ‘ordinary activities’;
  2. Or the employer makes an election to use the alternative method for consistently all of Claim Periods 1, 2 and 3.

This means that for an employer that was carrying on business or its ordinary activities on March 1, 2019, they either use the default method for all Claim Periods or make an election to use the alternative methods for all Claim Periods.  But for an employer who wasn’t in that position on March 1, 2019, that employer may flip flop between the methods, e.g. it can compare March 2020 qualifying revenue to March 2019 for Claim Period 1, then switch to comparing April 2020 qualifying revenue to January/February 2020 for Claim Period 2.

We are delighted to see that once an employer is found to be eligible for a specific period, the employer would automatically qualify for the next period. This removes the incentive for businesses from trying to recapture their lost revenues over the next couple months. Also, in some circumstances, it provides certainty to business owners that they will qualify for an upcoming month without having to ‘predict’ future revenues;

In addition, Companies may elect to use the cash method of accounting in determining if there was a decrease in qualifying revenue. Under the cash method, an unpaid invoice will not be part of the qualifying revenue in April 2020. However, if the election is made, the company must be consistent in using the cash method for all Claim Periods (including the previous March period).

Does it make sense for me to wait to apply for CEWS after I have determined monthly revenues for March, April, and May 2020?

Businesses may apply as soon as the portal is open for registration (which is said to be 2-4 weeks from April 12, 2020). However, if a business is not cash strapped, it may actually be advantageous to wait to apply for CEWS. In order to be a “qualifying entity”, an employer need only file an application for CEWS in respect of a qualifying period before October 2020.

Qualifying revenue

The revenue decline test is based on “qualifying revenue” during the months being tested. What does this term mean? The legislation defines “qualifying revenue” as the

  • inflow of cash, receivables or other consideration arising in the course of the ordinary activities of the [employer] – generally from the sale of goods, the rendering of services and the use by others of resources of the [employer] – in Canada in the particular period
  • It excludes, for greater certainty, extraordinary items
  • It excludes amounts derived from persons or partnerships not dealing at arm’s length with the [employer]
  • It excludes, for greater certainty, [any CEWS and the 10% wage subsidy received]

All of the above is to be determined in accordance with the employer’s “normal accounting practices” but an election can be made to determine revenue on the cash method instead for all Claim Periods. For some, the revenue determination may be very straight forward. But for some businesses, this elaborate definition raises many questions.

For organizations with multiple entities, the entity that employs people may not actually be the entity that earns revenue from customers. Since qualifying revenue excludes amounts derived from non-arm’s length persons (non-arm’s length generally means a close relationship), there were concerns that the revenue decline test would not be applied properly in those situations. To tackle this, the Bill provides several special rules for multi-enterprises, such as:

  • All members of an affiliated group (affiliation generally means common control by a person or spouse) may jointly elect to use the same consolidated qualifying revenue for the revenue decline test;
  • Where an employer entity receive substantially all (typically means 90% or more) of its revenue from non-arm’s length persons, a joint election may be made to calculate the employer’s decline in revenue based on the non-arm’s length person’s decline in revenue. A complicated formula is involved.
  • Alternatively, a group that normally prepares consolidated financial statements may choose to determine qualifying revenue separately for each member, but every member of that group must do the same.

Eligible employees and remuneration

An “eligible employee” means an individual employed in Canada by the employer in the Claim Period, other than an individual who is without remuneration by that employer in respect of 14 or more consecutive days in the Claim Period. In other words, if the employer has not paid any wages (or other remuneration) to that employee in respect of 14 or more consecutive days in a Claim Period, the employee is not an “eligible employee” and any wages the employer does pay in respect of the rest of the same Claim Period do not qualify for CEWS. This seems to be an imperfect measure to prevent the government from having to pay the Canada Emergency Response Benefit (“CERB”) to the employee while paying CEWS to the employer for part of the same four

Eligible remuneration” can include salary, wages, commissions and other remuneration like taxable benefits, but it does not include severance or stock option benefits.-week period. However, it also appears to prevent an employer from claiming CEWS for some new employees initially.

Wage subsidy calculation for different categories of employees

 After determining what eligible remuneration has been paid to eligible employees, what’s next? The employer needs to then separate those eligible employees into two categories:

  1. Arm’s length eligible employees hired on March 16, 2020 or after, and who were never an employee of the employer at any time between January 1 and March 15, 2020; and
  2. (i) Non-arm’s length eligible employees, or

(ii) arm’s length eligible employees who were employees of the employer at any time between January 1 and March 15, 2020.

Who are non-arm’s length employees? Generally speaking, that is an employee who controls the employer, is related to someone who controls the employer, or who acts in concert with a common interest with the employer.

New arm’s length employees

For arm’s length employees hired on March 16, 2020 or after and who was never an employee of the employer between January 1 and March 15, 2020, the CEWS amount for each week in the Claim Period will be 75% of the eligible remuneration paid to the eligible employee in respect of that week, up to $847 per week.

Non-arm’s length employees must have a “baseline remuneration” in order to be eligible for CEWS. Wages paid to non-arm’s length employees who do not receive regular employment income payments (more specifically, was not paid any salary or wages between January 1 to March 15, 2020) may not qualify for CEWS.

Pre-existing arm’s length employees

For arm’s length employees who were employees of the employer at any time between January 1 and March, 2020, the CEWS amount for each week in the Claim Period will be equal to the least of:

  • 100% of eligible remuneration paid to the eligible employee in respect of that week;
  • 75% of “baseline remuneration” in respect of the eligible employee; and
  • $847

An eligible employee has “baseline remuneration” only if she or he received remuneration from the employer at any time between January 1, 2020 and March 15, 2020. Baseline remuneration is equal to that person’s average weekly eligible remuneration during that period but excluding any period of 7 or more consecutive days for which the employee was not remunerated.

Non-arm’s length employees

The mechanics of the CEWS calculation for non-arm’s length employees is exactly the same as those for pre-existing employees, but it is useful to discuss this category separately. While the baseline remuneration works as a relieving provision for pre-existing employees who had their wage reduced (because it allows CEWS to be calculated on the higher pre-crisis wages), the baseline remuneration standard serves as a policing tool for non-arm’s length employees. It prevents businesses from adding family members as employees or artificially inflating their wages for the sake of obtaining CEWS.

Other adjustments to the CEWS amount

  • The CEWS is reduced by any amounts claimed under the 10% wage subsidy for the same Claim Period;
  • The CEWS is reduced by any amounts received by EI work-sharing benefit received by employees for the same Claim Period; and
  • The CEWS is increased by 100% of the employer-portion of CPP and EI for eligible employees who are “on leave with pay”. The CRA considers an employee to be on leave with pay if that employee is remunerated by the employer but does not perform any work for the employer. This part of the CEWS is not limited by the $847 per week cap, but the employer still has to first make all the required payroll withholding and remittance and then apply for CEWS to get back the employer-portion of CPP and EI.

To protect the integrity of the CEWS program, the Bill included many anti-abuse measures:

  • Eligible remuneration also excludes any amount paid to an employee that exceeds that employee’s baseline remuneration, if it is reasonably expected that after the Claim Period the employee will be paid a lower weekly amount than their baseline remuneration, and one of the main purposes for this arrangement is to increase the employer’s CEWS entitlement.
  • If the employer or a non-arm’s length person enters into a transaction, participates in an event, or takes an action that has the effect of reducing qualifying revenues for March, April or May 2020 (other than choosing between the multi-enterprise rules or choosing between cash vs accrual method as described earlier), and one of the main purposes of such transaction / event / action is to qualify for the revenue decline test, the entire CEWS application of the employer for the Claim Period is denied pursuant to new subsection 125.7(6). Additionally, the employer will be assessed a penalty of 25% of the CEWS applied for pursuant to new subsection 163(2.901).
  • Although not amended by the Bill, existing subsection 239(1.1) of the Act will likely cover an employer making a false or deceptive attestation in the CEWS application. This is a criminal offence potentially resulting in up to 200% of the improper CEWS claim and 2 years of jail for the attestor.
  • Note that the regular general anti-avoidance provision (the GAAR) – under section 245 of the Act – should be also applicable to a misuse or abuse of the CEWS legislation. That is because the GAAR applies to transactions that increases a refund or other amounts under the Act.
  • As if things can’t get more uncertain for a business owner trying to figure the revenue decline test, there is an anti-abuse measure which we will describe below that may deny the entire CEWS claim, with an additional 25% penalty, if the employer takes any action or participates in any transaction or event that has the effect of reducing March to May 2020 revenues.
  • The Bill gives the Minister the power to make public the name of any persons who applied for CEWS, presumably to punish those who the government think did not put the CEWS money to its intended use. This type of “name and shame” with a tax incentive program sets a dangerous precedent

Can I claim both the 10% subsidy and the CEWS?

Yes, but the amount of the 75% CEWS subsidy the employer receives will be reduced by the amount of the 10% subsidy claimed. For timing reasons, we recommend immediate use of the 10% subsidy if you qualify. More specifically, the 10% subsidy is claimed by a reduction in income tax remittance, up to $1,375 per employee and $25,000 for all employees of that business. This can be claimed in the next payroll remittance, whereas the application and the rebate for the 75% CEWS subsidy will likely not be available until May.

How can employers apply for CEWS?

A portal through CRA My Business Account should be developed in the next two to four weeks. Employers should make sure they register for My Business Account and direct deposit with the CRA if they have not already done so in the past.

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