The federal 10% Temporary Wage Subsidy for Employers is generally available to smaller employers for wages paid from March 18 to June 19, 2020. Eligible employers must self-report their eligibility and claim amounts to the Canada Revenue Agency.
Employers who are eligible for the 10% Temporary Wage Subsidy are required to complete and file a self-identification form demonstrating their eligibility for the program. The form can be accessed here and can be filed via My Business Account or by mail or fax.
10% Wage Subsidy for All Eligible Employers
On March 25, 2020, Parliament passed Bill C-13, An Act respecting certain measures in response to COVID-19. One of the measures set out in the legislation is a wage subsidy for certain Canadian employers. In substance, the subsidy will give eligible employers a 10% credit on any salaries, wages or other remuneration paid to employees during a three-month period, from March 18, 2020 to June 19, 2020 (the “Eligible Period”). Employers should take steps to confirm whether they are eligible for this subsidy.
For the subsidy to be available, the employer must meet three requirements. First, the employer must employ one or more individuals in Canada. Second, as of March 18, 2020, the employer must have had a business number registered with the Canada Revenue Agency (the “CRA”) to remit payroll deductions. Finally, the employer must be:
- an individual (other than a trust);
- a Canadian-controlled private corporation that had a business limit (for small business deduction purposes) greater than zero for its most recently concluded taxation year;
- a registered charity or certain non-profit organizations; or
- a partnership, if all of the partners would otherwise be an eligible employer.
Limits and Delivery Mechanism
The 10% wage subsidy is capped at $1,375 per employee, up to a total of $25,000 per employer, and only applies to remuneration paid during the Eligible Period. In practical terms, an employer who pays at least $13,750 to each of 19 employees during this period would receive the maximum benefit from the subsidy.
Bill C-13 adds a new subsection to section 153 of the Income Tax Act, which requires employers to withhold and remit income tax from salary, wages and other remuneration paid to employees. An employer’s withholding obligations remain unchanged (e.g. the employer must still deduct the same amounts from the employee’s paycheque). However, the new rules give the employer a credit towards the amount it would otherwise be required to remit for income tax purposes, equal to 10% of the amount of remuneration paid.
To illustrate, consider an employer who pays an employee $1,000 and would normally be required to withhold and remit income tax equal to 30% ($300). Under the temporary rules, the employer is given credit for 10% of the remuneration, or $100, meaning that the employer need only remit $200 of income tax to the Federal Government on behalf of the employee. The credit results in an economic benefit of $100 to the employer, easing some of cash flow constraints resulting from business disruptions related to COVID-19. Please note that the value of the subsidy must be included in the taxable income of the employer.
The CRA has indicated that employers can elect to: (i) reduce their income tax remittances by the amount of the subsidy (either during the Eligible Period or throughout the 2020 calendar year), (ii) request that the subsidy be paid to them at the end of the year; or (iii) claim the subsidy amount as a credit on the employer’s 2021 remittances. Employers who intend to claim the subsidy must keep thorough records of:
- total remuneration paid to individuals employed in Canada from March 18 to June 19, 2020;
- the amount of all amounts that were deducted during the Eligible Period; and
- the number of individuals employed in Canada during the Eligible Period.
Eligible employers must also complete a self-identification form, containing details of their claim, and submit it to the CRA.
The 10% subsidy may be available to a broad range of employers, including corporations who offer professional services such as medical, dentistry, accounting and legal services, provided that certain conditions are met.
As you evaluate your employee compensation policies during these challenging times, you should consider the subsidies that may be available to your organization. In making these decisions, MLT Aikins LLP would be pleased to assist with determining whether your business structure is eligible for this emergency relief program.
This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.