The CRA has released details on how the temporary wage subsidy for employers, which was announced by the federal government last week, is going to be managed.
To be eligible, an employer must:
- Be a non-profit, a registered charity, or a Canadian controlled private corporation (CCPC);
- Have a payroll account with the CRA on March 18th 2020; and
- Pay salary, wages, bonuses, or other remuneration to an employee.
Note: CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year (this would be 2019) calculated on an Associated group basis, is less than 15 million.
To receive the subsidy, remittances for federal, provincial or territorial income tax that would normally be sent to the CRA will be reduced by 10% of the gross pay employees. The subsidy will not reduce remittances for CPP or EI.
The subsidy is equal to 10% of the wages paid to employees between March 18, 2020 and June 20, 2020, up to $1,375 per employee to a maximum of $25,000 per employer. Note these caps are not per pay run, but rather for the full period.
Associated CCPCs will not be required to share the subsidy of $25,000 per employer.
For example, if you have five employees earning monthly salaries of $4,100 each, for a monthly payroll total of $20,500, the subsidy would be 10% of $20,500 or $2,050. This would apply for each payrun that takes place between March 18th and June 20th.
There is no application process for this subsidy and if remittances are not reduced by the employer, subsidy will automatically be credited to the payroll account. This credit could be applied against the 2021 remittances or refunded.
Lastly, it is important to note that the subsidy is considered taxable income, and so must be included as income on next year’s tax return.
The CRA’s FAQ can be found here: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html
If you have any questions please feel free to reach out to us.
Andrew de Verteuil, CPA, CGA
de Verteuil & Company Inc.