Date: Last updated on May 26, 2020
From: Crowe BGK Tax Group
Subject: Highlights of the Canada and Quebec COVID-19 Economic Response Plan
Below is a summary of the most recent tax measures that were announced by the Government of Canada to help Canadians facing hardship as a result of the COVID-19 outbreak. Specific measures were also announced by the Government of Quebec and have been identified separately below.
Support for Individuals
Temporary Income Support for Workers and Parents
The Federal Government has created the Canada Emergency Response Benefit (CERB). The CERB replaces the Emergency Care Benefit and the Emergency Support Benefit, previously announced on March 18, 2020. Below are the highlights of the CERB. For more details please consult our distinct publication on this matter.
The CERB consists of a taxable benefit of $2,000 per 4-week period for up to 16 weeks for workers who lost their income as a result of the COVID-19 pandemic. The CERB benefits Canadian workers (including wage earners, contract workers and self-employed individuals), whether or not they are eligible to Employment Insurance (“EI”) to the extent that they:
On April 15, the Federal Government announced changes to the eligibility rules to the CERB to:
The legislation implementing the CERB has yet to be amended to accommodate these changes.
The CERB is an alternative to EI as the EI system was not designed to process the unprecedented high volume of applications. That being said:
Canadians will begin to receive their CERB payments within 10 days of application. The CERB is paid every four weeks and is available from March 15, 2020 until October 3, 2020.
In addition, the Federal Government is:
The Government of Quebec implemented a similar but less generous measure, the Temporary Aid for Workers Program (Programme d’aide temporaire aux travailleurs or PATT), which provides financial assistance to eligible workers consisting of a lump-sum payment of $573 per week for a period of 14 days of isolation. The period of coverage can be extended to a maximum of 28 days, if justified by the eligible worker’s state of health.
To be eligible for PATT, the workers must be aged 18 or over, reside in Quebec and are in isolation for one of the following reasons:
In addition, workers who are in isolation or likely to satisfy the above criteria are eligible for PATT if:
Further to the implementation of the CERB, the Government of Quebec has now closed applications under the PATT program.
Measures for Students
The Federal Government has created the Canada Emergency Student Benefit (CESB).
The CESB consists of a taxable benefit of $1,250 per month for eligible students from May through August 2020. This amount is increased to $2,000 for eligible students with dependents or disabilities.
The CESB is available for any individual who meets the following conditions:
The four-week periods to apply for the CESB are determined as follows:
May 10 to June 6, 2020
June 7 to July 4, 2020
July 5 to August 1, 2020
August 2 to August 29, 2020
Eligible students can now submit their application to the CESB to the Canada Revenue Agency (CRA). There are 2 ways to apply:
1-800-959-2019 or 1-800-959-2041
Applications for the CESB must be submitted by September 30, 2020.
The Federal Government also announced various other measures to help Canadian students. Please speak with your Crowe BGK advisor for more details.
Longer-Term Income Support for Workers
For Canadians who lose their jobs or face reduced hours as a result of COVID-19’s impact, the Federal Government is expanding the EI Work Sharing Program, to provide EI benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers, by extending the eligibility of such agreements to 76 weeks, easing eligibility requirements, and streamlining the application process.
Income Support for Vulnerable Individuals
To help low and modest income families, the Federal Government proposed to provide:
The Federal Government also proposed targeted help by:
Quebec will follow suit with the federal government concerning its measure to reduce by 25% in 2020 the amount of mandatory withdrawal from a registered retirement income fund (RRIF). This measure will protect retirees who possess RRIFs who are put at a disadvantage by the state of stock markets.
Support for Seniors
The Federal Government announced that it will be providing a one-time payment of $300 for seniors eligible for Old Age Security (OAS) pension. An additional $200 will be provided for seniors eligible for the Guaranteed Income Supplement (GIS).
Quebec Low-Income Workers in Essential Sectors to Receive $100 per Week
The Government of Quebec announced the establishment of an incentive program to retain essential workers, which will offer a $100 weekly benefit for low-income earners working full or part time in the essential services.
The compensation seeks to ensure that full-time workers in sectors that are deemed essential receive a wage that exceeds what the Canada Emergency Response Benefit would provide.
The new benefit will be paid retroactive to March 15 for a maximum of 16 weeks. Through this compensation, workers will obtain, in addition to their wages, a taxable monthly lump sum of $400, or $1,600 for a period of 16 weeks.
To be entitled to the benefit, applicants must:
Applicants can apply for this temporary benefit by means of an online Revenu Québec form that will be available starting May 19 and will be paid by direct deposit starting on May 27.
Support for Businesses
Temporary Wage Subsidy for Employers (10% subsidy)
The Federal Government implemented for eligible employers a temporary wage subsidy for a period of 3 months beginning on March 18 and ending on June 19, 2020 (the eligible period). The subsidy will be equal to 10% of eligible remuneration paid during the eligible period and, it is capped at a maximum of $1,375 per eligible employee and $25,000 per eligible employer. This subsidy is considered taxable income for the eligible employers.
An eligible employer means:
Note 1: This criterion for corporations could cause an issue in certain circumstances involving groups of companies. A corporation would appear not to qualify for the subsidy if it had, for its last taxation year ending before March 18, 2020, a NIL business limit but otherwise met the eligibility criteria to claim the small business deduction for this taxation year. This would be the case where a corporation is part of an associated group of companies, and the group’s business limit was allocated to other members of the group to the exclusion of this corporation.
Moreover, an eligible employer must have an existing business number and payroll program account with the Canada Revenue Agency on March 18, 2020, and pay eligible remuneration to an eligible employee.
An eligible employee is an individual who is employed in Canada.
Eligible remuneration includes salary, wages, bonuses, or other remuneration. It also includes tax-exempt remunerations paid to an eligible employee during the eligible period.
Associated corporations are not required to share the maximum subsidy of $25,000 per employer.
How to claim the subsidy
Eligible employers can benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. All employers must continue deducting income tax, Canada Pension Plan (CPP) contributions, and EI premiums from remuneration paid to their employees. To benefit from the subsidy, eligible employers can reduce their current payroll remittance of federal, provincial, or territorial income tax that they send to Canada Revenue Agency (NOT to Revenu Québec) by the amount of the subsidy.
If an eligible employer deducted $2,500 of income tax from its employees’ pay and calculated a subsidy of $2,050, the employer would reduce its current payroll remittance of federal, provincial, or territorial income tax by $2,050. The eligible employer would remit $450 of income tax to the Canada Revenue Agency. The remaining $2,050 that the employer keep would represent the subsidy.
If the income taxes deducted are not sufficient to offset the value of the subsidy in a specific period, the eligible employer can reduce future payroll remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the eligible period for the wage subsidy (after June 19, 2020). Also, if an eligible employer chooses to not reduce its payroll remittances during the eligible period, the Canada Revenue Agency will pay the temporary wage subsidy calculated for the eligible period at the end of the year or will transfer the amount to the next year’s remittance.
To support the claim of the temporary wage subsidy, an eligible employer must keep track of:
Canada Emergency Wage Subsidy (75% subsidy)
On April 1, 2020, the Federal Government provided details regarding the new Canada Emergency Wage Subsidy. We refer you to our distinct publication on this topic for more details.
QUEBEC – Health Services Fund
To complement the Canada Emergency Wage Subsidy, a credit on employers contribution to the Health Services Fund (HSF) will be established for employers that can benefit from the Canada Emergency Wage Subsidy and that maintain an establishment in Québec.
The credit on employers contribution to the HSF will be granted for a period of up to 12 weeks, retroactive to March 15, 2020. As is the case for the reimbursement of certain employer contributions granted by the federal government, it will be equal to the total amount of the contribution to the HSF paid by a specified employer with respect to the wages paid to certain employees on paid leave.
The Minister of Revenue will pay to a specified employer the credit on employers contribution to the HSF, for the year 2020, after the submission of an application by the employer. The application must be submitted to the Minister of Revenue when the employer submits the Summary of Source Deductions and Employer Contributions (Relevé 1) for 2020.
A specified employer can reduce the amount that it has to remit to the Minister of Revenue after April 30, 2020 as a periodic payment of employer contribution to the HSF by the amount of this credit. In such a case, the amount that will be paid to the specified employer, following the application for the credit, will be equal to the surplus, where applicable, of the amount of the credit over the total amounts that reduced the periodic payments of contribution to the HSF for the year 2020.
Quebec Concerted Action Program for Job Retention
On April 6, the Government of Quebec has announced the creation of the Concerted Action Program for Job Retention (Programme actions concertées pour le maintien en emploi or PACME). The PACME is a subsidy of up to $300,000 per business. This is offered to businesses to help them cover the cost of eligible training activities. Eligible businesses will be those affected by the COVID-19 pandemic.
This subsidy will cover up to 100% of eligible expenses with regards to training activities, such as trainers’ fees (up to a maximum of $150/hour), material purchased and human resources management activities. The salary of workers participating in training activities (excluding social levies) will also be reimbursed up to a maximum of $25/hour. Depending on the business’ eligibility to claim the federal Canada Emergency Wage Subsidy and/or the federal Temporary Wage Subsidy for Employers, between 25% and 100% of the total hours paid to workers will be subsidized.
The PACME will be available from March 15, 2020 to September 30, 2020. This program could end sooner if the $100 million budget allocated to it is exhausted. Businesses can apply to the PACME with Service Quebec. More details regarding the eligibility conditions will be available on Quebec.ca. The following webpage provides further clarifications: https://www.quebec.ca/entreprises-et-travailleurs-autonomes/programme-actions-concertees-pour-le-maintien-en-emploi-pacme-covid-19/
Support for Specific Industries
The Federal Government has announced additional measures to benefit businesses in specific sectors such as agriculture, fisheries, cultures, sports, air transportation, tourism, energy and charities. Please speak with your Crowe BGK advisor for more details.
Ensuring Businesses Have Access to Credit
The Business Credit Availability Program will allow the Business Development Bank of Canada and Export Development Canada to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses.
Through Investissement Québec, the Government of Quebec implemented the Concerted temporary action Program for businesses in order to provides ad hoc and exceptional support for businesses affected by the repercussions of COVID-19.
To be eligible, a Business will have to show that its cash flow issues are temporary, and that the liquidity shortage stems from:
Please make sure to consult our firm’s separate publication on Financial Relief Measures for a summary of all measures pertaining to credit and financing.