The COVID-19 pandemic greatly affects job stability across Canada. In only 9 days, Canada has registered more than 1.55 million new applications for employment insurance, with the unemployment rate rising from 5.6% to over 15%.
This article will summarize two exceptional measures implemented by the provincial and federal governments to provide economic support to businesses during the COVID-19 crisis.
Emergency Wage Subsidy
On March 18, 2020, Prime Minister Justin Trudeau initially announced an emergency wage subsidy equal to 10% of an employee’s income to help eligible businesses retain their employees. Following concerns raised by small business owners and unions, the Federal Government announced on March 27th that a temporary wage subsidy equal to 75% of an employee’s income would be implemented. A measure the Government estimates the cost at $71 billion. Finance Minister Bill Morneau detailed the eligibility criteria for this wage subsidy during a press conference in Toronto on April 1, 2020.
The wage subsidy is available to all types of businesses, both for-profit and non-profit, regardless of the number of employees. Contrary to what was initially announced, large businesses will also be subsidized. However, companies wishing to take advantage of the subsidy must demonstrate that they have suffered a loss of revenue equivalent to 30% or more of their gross revenue due to the economic impact of the COVID-19 pandemic. The decline in revenue will be calculated by comparing a given month with the same month the previous year, for each of March, April and May 2020.
The financial assistance announced could reach $847 per employee, per week, based on a maximum annual salary of $58,700. The Government also encourages businesses to provide full wages to their employees, if they can afford it. This subsidy is available for a maximum of 3 months and enters into effect retroactively to March 15, 2020.
The application must be made through a portal that will be available on the Canada Revenue Agency website, and businesses will have to renew their application monthly to demonstrate their decline in gross revenue. The government believes that it will be able to disburse funds to businesses within 6 weeks. In their respective speeches, both Justin Trudeau and Bill Morneau strongly encouraged businesses to re-hire employees who have been laid off, since this measure could allow businesses to keep their employees so they can quickly resume their activities once the crisis is over.
Québec has yet to announce a measure similar to the one of the Federal Government.
To reduce the tax burden on businesses, the Canada Revenue Agency and Revenu Québec have postponed payment of income tax amounts to September 1, 2020. This tax relief applies to both the tax balance payable only as on installments.
The Canada Revenue Agency has specified that no penalty would apply to these amounts during the defined period, while Revenu Québec will further define the terms of this relief. As for taxes, the Federal Government allows businesses to defer payments of the GST and HST, which were due as of the end of March, to June 30, 2020, as well as all customs and import duties.
Other measures have been implemented by both levels of Government. We invite you to read the article by Me Nicolas Lanthier, Measures Implemented by the Federal-Government and the CMHC to Alleviate the Economic Impact of COVID-19, which deals in particular with support measures for the real estate sector.