FAQ – Temporary wage subsidy for employers: CRA and COVID-19

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  1. What is the 10% Temporary Wage Subsidy for Employers?
  2. Which employers are eligible?
  3. What if I pay tax-exempt remuneration?
  4. What if my business is closed?
  5. How much is the subsidy?
  6. How do I calculate the subsidy?
  7. How will I receive the subsidy?
  8. When can I start reducing remittances?
  9. Where subsidies exceed payroll remittances
  10. What if I don’t reduce payroll remittances during the year?
  11. What about payroll remittances made to Revenu Québec
  12. How does the 10% Temporary Wage Subsidy for Employers interact with the Canada Emergency Wage Subsidy?
  13. Is the subsidy considered taxable income?
  14. Do I need to report anything to the CRA?
  15. What if I reduce my remittances but the CRA determines that I’m not eligible for the subsidy?
  16. Is the subsidy considered taxable income?

Overview

1. What is the 10% Temporary Wage Subsidy for Employers?

The 10% Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).

Note: The Canada Emergency Wage Subsidy, which provides a 75% wage subsidy to eligible employers, is a separate program. For more information on that program, see Canada Emergency Wage Subsidy.

Eligibility

2. Which employers are eligible?

You are an eligible employer if you:

*Partnerships are only eligible for the subsidy if their members consist exclusively of individuals (excluding trusts), registered charities, other partnerships eligible for the subsidy, or eligible Canadian-controlled private corporations (CCPCs).

**CCPCs are only eligible for the subsidy if they would have had a business limit for their last taxation year that ended before March 18, 2020, greater than nil (determined without reference to the passive income business limit reduction). For more information on whether your CCPC would have a business limit, see Small Business Deduction in the T2 Corporation Income Tax Guide.

For more information on whether your corporation is a CCPC, see Type of Corporation.

***An eligible employee is an individual who is employed in Canada.

3. What if I pay tax-exempt remuneration?

If you pay tax-exempt salary, wages, bonuses, or other remuneration to an eligible employee, you can still calculate the 10% Temporary Wage Subsidy for Employers on remuneration paid from March 18, 2020 to June 19, 2020. At the end of the year, the CRA will pay the amount to you.

4. What if my business is closed?

If you did not pay salary, wages, bonuses, or other remuneration to an eligible employee from March 18, 2020 to June 19, 2020, you cannot receive the subsidy, even if you are an eligible employer.

Calculating your subsidy

5. How much is the subsidy?

The subsidy is equal to 10% of the remuneration you pay from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee to a maximum of $25,000 total per employer.

You may elect for the subsidy to be equal to a lower percentage of the remuneration you pay in order to only take advantage of the Canada Emergency Wage Subsidy. For more information, see question 12.

Note: Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

6. How do I calculate the subsidy?

The subsidy must be calculated manually, either by you or whoever is responsible for making your payroll remittances. The CRA will not automatically calculate the allowable subsidy.

Note: Your subsidy calculation is based on the total number of eligible employees employed at any time during the three-month period. See the examples below for more information.

Example 1

You pay 5 eligible employees monthly salaries of $4,100 for a total monthly payroll of $20,500. Your wage subsidy for the month will be 10% of $20,500, or $2,050.

For the three-month period, if all your payroll information remains the same in each month, you will pay $61,500 of remuneration. Therefore, 10% of the remuneration you pay in the three-month period is $6,150.

Since this amount is below the maximum allowable amount of $6,875 ($1,375 x 5 employees), your total wage subsidy for the three-month period will be $6,150.

Example 2

You pay 8 eligible employees monthly salaries of $4,750 for a total monthly payroll of $38,000. Your wage subsidy for the month will be 10% of $38,000, or $3,800.

For the three-month period, if all your payroll information remains the same in each month, you will pay $114,000 of remuneration. Therefore, 10% of the remuneration you pay in the three-month period is $11,400.

Since this amount is above the maximum allowable amount of $11,000 ($1,375 x 8 employees), your total wage subsidy for the three-month period will be capped at $11,000.

Example 3

You pay 5 eligible employees monthly salaries of $4,100 for a total monthly payroll of $20,500. Your wage subsidy for the month will be 10% of $20,500, or $2,050.

In the second month, you pay 7 eligible employees monthly salaries of $4,100 for a total monthly payroll of $28,700. Your wage subsidy for the second month will be 10% of $28,700, or $2,870.

In the third month, you also pay 7 eligible employees monthly salaries of $4,100 for a total monthly payroll of $28,700. Your wage subsidy for the third month will be 10% of $28,700, or $2,870.

For the three-month period, you will pay $77,900 of remuneration. Therefore, 10% of the remuneration you pay in the three-month period is $7,790.

Since this amount is below the maximum allowable amount of $9,625 ($1,375 x 7 employees), your total wage subsidy for the three-month period will be $7,790.

Reducing your payroll remittances

7. How will I receive the subsidy?

You do not need to apply for the subsidy.

You will continue deducting income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from salary, wages, bonuses, or other remuneration paid to your employees, as you currently do.

The subsidy is calculated when you remit these amounts to the CRA.

Once you have calculated your subsidy, you can reduce your current payroll remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy. 

Important

You cannot reduce your remittance of CPP contributions or EI premiums. You must continue remitting the CPP contributions and EI premiums that you deducted from your employees, as well as your share of CPP contributions and EI premiums, to the CRA.

Example

If you deducted $2,500 of income tax from your employees’ pay and calculated a subsidy of $2,050, you would reduce your current payroll remittance of federal, provincial, or territorial income tax by $2,050. You would remit $450 of income tax to the CRA. The remaining $2,050 that you keep would represent your subsidy.

You could continue reducing the income tax on future payroll remittances, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer, for all remuneration paid on or before June 19, 2020.

8. When can I start reducing payroll remittances?

You can start reducing payroll remittances of federal, provincial, or territorial income tax in the first remittance period that includes remuneration paid from March 18, 2020 to June 19, 2020.

Note: Payroll remittances are not subject to deferral as part of the tax measures to help support those affected by the COVID-19 outbreak. You must continue remitting payroll deductions by your remittance due date.

Example

If you are a regular remitter, you could have reduced your payroll remittance that was due to the CRA on April 15, 2020.

9. Where subsidies exceed payroll remittances

If the income taxes you deduct are not sufficient to offset the value of the subsidy in a specific period, you can reduce future payroll remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 19, 2020).

Example

If you calculated a subsidy of $2,050 on remuneration paid from March 18, 2020 to June 19, 2020, but only deducted $1,050 of federal, provincial, or territorial income tax from your employees, you can reduce a future payroll remittance by $1,000, even if that remittance is in respect to remuneration paid after June 19, 2020.

 

10. What if I don’t reduce payroll remittances during the year?

If you are an eligible employer, but you do not reduce your payroll remittances during the year, you can still calculate the 10% Temporary Wage Subsidy for Employers on remuneration paid from March 18, 2020 to June 19, 2020. At the end of the year, the CRA will pay the amount to you or transfer it to your next year’s remittance.

11. What about payroll remittances made to Revenu Québec

The 10% Temporary Wage Subsidy for Employers allows eligible employers to reduce payroll remittances made to the CRA only.

12. How does the 10% Temporary Wage Subsidy for Employers interact with the Canada Emergency Wage Subsidy?

The Canada Emergency Wage Subsidy (CEWS) provides a subsidy equal to 75% of the eligible remuneration paid by an eligible employer, up to a maximum of $847 per week for each eligible employee. For more information on the CEWS, see Canada Emergency Wage Subsidy .

You may be eligible for both the 10% Temporary Wage Subsidy for Employers and the CEWS. Employers who are eligible for both subsidies can only claim a maximum cumulative subsidy of 75% of the eligible remuneration that they pay. Therefore, if you are eligible for both subsidies, you must reduce your CEWS claim by any amount that you reduce your remittances by, under the 10% Temporary Wage Subsidy for Employers in the same period.

However, if you only want to claim the CEWS for a specific period, you may elect for the 10% Temporary Wage Subsidy for Employers to be equal to a lower percentage of the remuneration you pay, between 0% and 10%, for that period.

Example

You are eligible for both subsidies. You paid $20,500 of remuneration from April 12, 2020 to May 9, 2020, and calculated your 10% Temporary Wage Subsidy to be $2,050. For simplicity, you would only like to claim the CEWS. You may elect for the 10% Temporary Wage Subsidy for Employers to be equal to 0% of the remuneration you paid from April 12, 2020 to May 9, 2020. When you apply for the CEWS for the same period, you will not have to reduce your claim by the amount you were eligible for under the 10% Temporary Wage Subsidy for Employers.

Note: If you elect for the 10% Temporary Wage Subsidy for Employers to be equal to a lower percentage of the remuneration you pay, you must indicate the election on your self-identification form. For more information, see question 14.

Keeping Records, Reporting , and Year-end Requirements

13. What books and records do I need to support the subsidy?

You will need to keep information to support your subsidy calculation. This includes: 

14. Do I need to report anything to the CRA?

After the eligibility period ends on June 19, 2020, eligible employers will be required to complete a self-identification form for each payroll program account where remittances were reduced by an amount of the subsidy. The CRA will use this information to reconcile the subsidy with your payroll program account.

Eligible employers who did not reduce their remittances must also complete this form to allow the CRA to credit your payroll program account by the amount of the subsidy that you are eligible for.

If you elected for the 10% Temporary Wage Subsidy for Employers to be equal to a lower percentage of the remuneration you paid, you must indicate on your self-identification form that you reduced your remittances by a lower amount than what you were entitled to. If you fail to do so, you will be credited for the entire 10% subsidy and your CEWS claim may be reduced and recovered if necessary .

If you have a credit in your payroll program account after the subsidy is applied and your account is reconciled, the CRA will pay the amount to you or transfer it to your next year’s remittance.

The self-identification form will be posted on this page when it becomes available.

15. What if I reduce my remittances but the CRA determines that I’m not eligible for the subsidy?

If you reduced your payroll remittances, but it is later determined that you were not eligible for the subsidy, the CRA will assess you for the income tax that you deducted from your employees’ pay but did not remit. This assessment may include penalties and interest.

16. Is the subsidy considered taxable income?

Yes. If you receive the subsidy, you have to report the total amount as income in the year in which the subsidy is received.

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