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Canada Emergency Rent Subsidy (CERS)

Expenses you can claim

On February 24, 2021, the Government announced a proposed change to make lockdown support available to an eligible property owner whose tenant is not at arm’s length but uses the qualifying property that is subject to a lockdown. The property owner must meet all other applicable conditions to qualify for the lockdown support.

If this change applies to your situation, you may amend an application you previously submitted.

On this page

The CERS covers a portion of eligible expenses in respect of a claim period for each qualifying property, subject to certain maximums. The CERS is calculated on a property by property basis.

Qualifying property

Properties that do qualify include any "real or immovable property" (buildings or land) in Canada that your business or organization:

  • owns or rents, and
  • uses in the course of your ordinary activities

Properties that do not qualify, include:

  • your home, cottage, or other residence used by you, your family members, or other non-arm’s-length persons;
  • any properties you own that are primarily used to earn rental income from arm’s-length parties; or
  • any properties that are primarily used to earn rental income directly or indirectly from a non-arm’s length party, that are primarily used by that party to earn rental income

Eligible expenses

For each claim period, you can claim eligible expenses up to a maximum of:

  • $75,000 per business location (base and top-up)
  • $300,000 in total for all locations (including any amounts claimed by affiliated entities)
    • applies to the base subsidy only
    • there is no maximum for the top-up subsidy

Eligibility criteria for expenses

There are a few criteria expenses need to meet, in order to be eligible to be included in your claim for a particular claim period.

  • Only amounts paid or payable to an arm’s-length party can be included
  • The expense must be in respect of the claim period
  • The expense must be paid or payable under a written agreement entered into before October 9, 2020 (or a renewal on substantially similar terms or assignment of such an agreement)

If you have not paid the amounts due for your eligible expenses yet, you must attest (confirm) that these amounts will be paid within 60 days of receiving your rent subsidy payment.

You cannot claim expenses that were paid or payable:

  • to non-arm’s-length entities
  • for a timeframe that falls outside of the claim period you are applying for

If you earned any revenue from sub-leasing space on the property to arm’s-length parties, you must subtract that revenue from your eligible expenses.

Your eligible expenses are different for qualifying properties you rent than for qualifying properties that you own.

Do you rent or own this property?

Non-arm's length

Related persons are deemed not to deal with each other at arm’s length. For non-related persons, it is a question of fact whether they are dealing with each other at arm’s length.

Learn more about what non-arm’s length means:

Examples

Related corporations – retail store

Hold Co and Retail Co are related corporations and therefore do not deal at arm’s length with each other.

Retail Co rents a building that is owned by Hold Co.

Retail Co pays rent to Hold Co for use of the building to operate its retail store. Retail Co uses the building for its business operations and does not use the building primarily to earn rental income.

Retail Co cannot claim the rent it pays to Hold Co for CERS because the rent is paid to a non-arm’s-length person.

Hold Co may be able to claim the CERS for eligible expenses in respect of the property it owns and rents to Retail Co, as long as Hold Co meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

Hold Co’s rent subsidy is calculated based on its own eligible expenses and not the commercial rent paid or payable by its non-arm’s length tenant(s).

If Hold Co has not experienced a drop in revenue based on its own qualifying revenue, it may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.18 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

One person owns 100% of a corporation’s shares

Mr. A owns 100% of the shares of Op Co.

Op Co rents a building that is owned by Mr. A.

Mr. A and Op Co are related persons since Mr. A controls Op Co.

This means that Mr. A and Op Co do not deal at arm’s length with each other.

Op Co cannot claim the rent it pays to Mr. A for CERS because the rent is paid to a non-arm’s-length person.

Mr. A may be able to claim the CERS for eligible expenses in respect of the property he owns and rents to Op Co, as long as Mr. A meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

Mr. A’s rent subsidy is calculated based on his own eligible expenses and not the commercial rent paid or payable by his non-arm’s length tenant(s).

If Mr. A has not experienced a drop in revenue based on his own qualifying revenue, he may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.17 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

A person with a controlling interest in a partnership

Mr. A has a controlling interest in Partnership A.

This means that Mr. A is not dealing at arm’s length with Partnership A.

Partnership A rents a building that is owned by Mr. A.

Partnership A cannot claim the rent it pays to Mr. A for CERS because the rent is paid to a non-arm’s-length person.

Mr. A may be able to claim the CERS for eligible expenses in respect of the property he owns and rents to Partnership A, as long as Mr. A meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

Mr. A’s rent subsidy is calculated based on his own eligible expenses and not the commercial rent paid or payable by his non-arm’s length tenant(s).

If Mr. A has not experienced a drop in revenue based on his own qualifying revenue, he may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.43 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

One corporation owns another corporation

Mr. A and Mrs. A (spouses) each own 50% of the shares of Hold Co.

Hold Co owns 100% of the shares of Op Co.

Op Co rents a building that is owned by Hold Co.

Mr. A and Mrs. A are related by virtue of marriage. Mr. A and Mrs. A are a related group that controls Hold Co.

Because Hold Co owns all of the shares of Op Co, Hold Co controls Op Co.

This means that Hold Co and Op Co do not deal at arm’s length.

Op Co cannot claim the rent it pays to Hold Co for CERS because the rent is paid to a non-arm’s-length person.

Hold Co may be able to claim the CERS for eligible expenses in respect of the property it owns and rents to Op Co, as long as Hold Co meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

Hold Co’s rent subsidy is calculated based on its own eligible expenses and not the commercial rent paid or payable by its non-arm’s length tenant(s).

If Hold Co has not experienced a drop in revenue based on its own qualifying revenue, it may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.17 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

Corporation owned equally between unrelated persons

Mr. A, Mr. B, and Mr. C are not related. They each own 1/3 of the voting shares of Op Co.

Op Co rents a building that is owned by Mr. C.

Mr. C and Op Co are not related.

It is a question of fact whether Mr. C and Op Co are dealing at arm’s length. Additional factors will need to be considered.

For example, if Mr. C and Op Co are acting in concert without separate interest in respect of the rental transaction they may not be dealing at arm’s length.

If Mr. C and Op Co are not dealing at arm’s length, it means that Op Co will not be able to claim the rent that it pays to Mr. C for CERS.

Mr. C may be able to claim the CERS for eligible expenses in respect of the property he owns and rents to Op Co, as long as Mr. C meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

Mr. C’s rent subsidy is calculated based on his own eligible expenses and not the commercial rent paid or payable by his non-arm’s length tenant(s).

If Mr. C has not experienced a drop in revenue based on his own qualifying revenue, he may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.37 to 1.40 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

One person owns 2 corporations

Mr. A owns 100% of the shares of Op Co and 100% of the shares of Hold Co.

Op Co rents a building that is owned by Hold Co.

Op Co and Hold Co are related, because both corporations are controlled by the same person (Mr. A).

Op Co and Hold Co do not deal at arm’s length.

Op Co cannot claim the rent it pays to Hold Co for CERS because the rent is paid to a non-arm’s length person.

Hold Co may be able to claim the CERS for eligible expenses in respect of the property it owns and rents to Op Co, as long as Hold Co meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

Hold Co’s rent subsidy is calculated based on its own eligible expenses and not the commercial rent paid or payable by its non-arm’s length tenant(s).

If Hold Co has not experienced a drop in revenue based on its own qualifying revenue, it may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.18 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

Separate corporations owned by spouses

Mr. A owns 100% of the shares of ABC Inc. Mrs. A (Mr. A’s spouse) owns 100% of the shares of XYZ Inc.

ABC Inc. rents a building that is owned by XYZ Inc.

ABC Inc. and XYZ Inc. are related since the individual that controls ABC Inc. (Mr. A) is married to the individual that controls XYZ Inc. (Mrs. A).

Therefore, ABC Inc. and XYZ Inc. do not deal at arm’s length.

ABC Inc. cannot claim the rent it pays to XYZ Inc. for CERS because the rent is paid to a non-arm’s-length person.

XYZ Inc. may be able to claim the CERS for eligible expenses in respect of the property it owns and rents to ABC Inc., as long as XYZ Inc. meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

XYZ Inc.’s rent subsidy is calculated based on its own eligible expenses and not the commercial rent paid or payable by its non-arm’s length tenant(s).

If XYZ Inc. has not experienced a drop in revenue based on its own qualifying revenue, it may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.18 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length

One person is related to each person in an unrelated group

Mr. A owns 100% of the shares of ABC Inc.

Mr. X and Mr. Y (both grandchildren of Mr. A) each own 50% of the shares of XYZ Inc.

Mr. X and Mr. Y are cousins who act in concert to control XYZ Inc. Cousins are not related for tax purposes.

ABC Inc. rents a building that is owned by XYZ Inc.

Mr. A controls ABC Inc., and XYZ Inc. is controlled by an unrelated group.

However, ABC Inc. and XYZ Inc. are related because Mr. A is related to each member of the unrelated group that controls XYZ Inc. – his grandchildren .

Therefore, ABC Inc. and XYZ Inc. do not deal at arm’s length.

ABC Inc. cannot claim the rent it pays to XYZ Inc. for CERS because the rent is paid to a non-arm’s-length person.

XYZ Inc. may be able to claim the CERS for eligible expenses in respect of the property it owns and rents to ABC Inc., as long as XYZ Inc. meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

XYZ Inc.’s rent subsidy is calculated based on its own eligible expenses and not the commercial rent paid or payable by its non-arm’s length tenant(s).

If XYZ Inc. has not experienced a drop in revenue based on its own qualifying revenue, it may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.18 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

Unrelated groups include people who are related to members of the other group

Mr. A and Mr. B are not related and each own 50% of the shares of Op Co. Mr. A and Mr. B act in concert to control Op Co.

Mrs. A and Mrs. B (spouses of Mr. A and Mr. B) each own 50% of the shares of Hold Co. Mrs. A and Mrs. B act in concert to control Hold Co.

Op Co rents a building that is owned by Hold Co.

Op Co and Hold Co are related because each member of the unrelated group that controls Op Co is related to at least one member of the unrelated group that controls Hold Co.

Op Co and Hold Co do not deal at arm’s length.

Op Co cannot claim the rent it pays to Hold Co for CERS because the rent is paid to a non-arm’s-length person.

Hold Co may be able to claim the CERS for eligible expenses in respect of the property it owns and rents to Op Co, as long as Hold Co meets all of the eligibility criteria to receive the rent subsidy and the property is a qualifying property.

Hold Co’s rent subsidy is calculated based on its own eligible expenses and not the commercial rent paid or payable by its non-arm’s length tenant(s).

If Hold Co has not experienced a drop in revenue based on its own qualifying revenue, it may still qualify by making use of one of the elective special rules for calculating eligible revenue.

Learn more in paragraph 1.18 of the Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

Lockdown support for eligible property owners with tenants not at arm’s length New

The lockdown support portion of the CERS may be available to eligible property owners with tenants not at arm’s length, if:

  • the tenant uses the qualifying property in the course of its regular activities
  • that property is subject to a lockdown
  • the tenant must shut their doors or significantly restrict their activities under a public health order, and
  • the property owner meets all other applicable conditions required to qualify for lockdown support

The lockdown support for an eligible property owner with tenants not at arm’s length is calculated based on its own eligible expenses and not the commercial rent paid or payable by its non-arm’s length tenant(s).

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