COVID-19: Small Business Relief
Bryan & Company has long been committed to providing exceptional service to business owners in Western Canada. In response to a number of inquiries received since the onset of the current COVID-19 pandemic, this memorandum is intended to provide distilled information that can be used ‘at a glance’ to inform yourself and your business of available relief measures and programs.
As this is not client-specific, this document is merely informational and not legal advice. It is intended to serve only as a guideline in creating your business continuity strategy for what has quickly become one of the more turbulent economic times that our region has faced. We encourage you to contact our office and seek specific legal advice prior to implementing any of these, or other, measures.
Canada Emergency Wage Subsidy
On March 18th the Federal Government announced plans to implement a 10% wage subsidy, whereby eligible employers could receive immediate relief by offsetting employee income tax remittances paid to Federal, Provincial and Territorial governments. On March 27th the Federal Government announced plans to implement a wider-ranging, 75% wage subsidy. Details are being provided on an ongoing basis, but here is what has been announced as of April 2nd:
- Employers eligible for the wage subsidy include individuals, taxable corporations, partnerships consisting of otherwise eligible employers, non-profit organizations, and registered charities;
- Eligible employers, regardless of number of employees, can apply for the wage subsidy if their gross revenue has decreased by at least 30% in March, April, or May, as compared to the same months during 2019. The Federal Government has indicated that it will not be necessary for employers to submit proof of the decrease with their application. Rather, the employer should maintain records demonstrating the decrease, and Canada Revenue Agency expects to audit recipients of the subsidy following conclusion of the pandemic;
- The 75% subsidy will only apply to the first $58,700.00 of annual earnings for each employee, equating to a maximum benefit of the lesser of: (a) $847.00/week per employee, (b) 75% of the employee’s pre-crisis average weekly wage, or (c) the amount the employee was in fact paid per week during the period that the subsidy was applied for;
- Employers will only be entitled to the subsidy for a maximum of three months, retroactive to March 15, 2020. There is discussion about extending the program should it be required;
- The Federal Government has suggested that there will not be a cap on the total amounts an eligible employer can receive under this subsidy; and
- Employers will be required to attest to the fact that (i) they have suffered the requisite revenue decrease, and (ii) they will do everything possible to pay the 25% of wages not covered by this subsidy. The Canada Revenue Agency will then remit the applicable subsidy to the employer within 6 weeks of the application’s submission. An online application portal is expected to be up and running sometime in the next 6 weeks.
The Prime Minister has warned there will be “severe consequences” to any employers who seek to improperly claim or abuse the subsidy. Anti-abuse rules are being crafted to ensure the subsidy is not inappropriately obtained.
Canada Emergency Business Account
On Friday, March 27th 2020, the Federal Government announced that they will provide $25 Billion to eligible financial institutions to facilitate lending to small and medium sized enterprises, and not-for-profit organizations. These loans will be interest free, and up to a maximum of $40,000.00 in principal. While there is ongoing discussion about eligibility, the Federal Government has currently indicated that to qualify, businesses will need to demonstrate that they paid between $50,000.00 and $1 Million in total payroll during 2019. In the event that enterprises are able to repay the outstanding balance of their CEBA loan by December 31, 2022, up to 25% (i.e. a maximum of $10,000.00) will be forgiven.
EDC Business Credit Availability Program (BCAP) Guarantee
Export Development Canada (“EDC”) has partnered with a number of major financial institutions (see here for the list of approved lenders) to increase available credit for small and medium sized enterprises. EDC will provide guarantees on your behalf to these lenders, providing greater access to credit for operational costs such as payroll and other working capital amounts, in exchange for what amounts to 1.8% of the loan amount. Importantly, the current eligibility criteria are as follows:
- The EDC BCAP is aimed at (a) direct, (b) indirect, or (c) future exporters. This means that your business (a) sells directly to consumers, businesses, or distributors in a foreign country, (b) sells to a Canadian company that redistributes your product (including by way of integration) for export to a foreign country, or (c) plans to export to a foreign country in the future; and
- Your company must apply for a one-year term loan with principal equal to or less than $5 Million from your financial institution.
Deferrals on Corporate Income Taxes, Sales Taxes and Import Duties
Corporate income tax amounts that become due between March 18 and August 31, 2020, including instalment payments at both the Federal and Provincial level, may now be deferred until August 31, 2020. Note, that the Federal Government has stated payments may be deferred until “after” August 31, 2020, indicating a further deferral may be announced, while the Alberta Government has stated that the tax payments may be deferred “until” August 31, 2020. Corporations taking advantage of this deferral will not be subject to interest or penalties on deferred amounts, however, it should be noted that Governments have not reduced corporate tax rates or the instalment base used for calculating instalment payments (which is still the prior year’s income), despite a now anticipated reduction in income for 2020. Businesses will also be permitted to defer payment to the federal government of GST remittances and customs duties owing on imports until June 30, 2020.
CRA has also indicated that they will not contact small or medium enterprises to initiate post assessment GST/HST or income tax audits for the next 4 weeks. The exception will be those cases deemed by the CRA to be ‘high risk’ or ‘exceptional’, of which there remains no definition.
WCB Premium Relief
The Worker’s Compensation Board of Alberta (“WCB”), in conjunction with the Provincial Government, has announced that all private sector employers will have their 2020 WCB premiums deferred until 2021, without interest. In addition, small and medium sized private sector employers (for these purposes, being employers with $10 million or less in insurable earnings during 2020) will have 50% of their 2020 premiums waived when invoicing resumes (anticipated as being in February 2021). Invoices will then include premium balances owing for 2020, in addition to any new balances owing for 2021. Eligibility is calculated based on the earnings figure reported in your 2020 annual return.
The Federal Government recently announced changes to its work-sharing program. This is a wage adjustment program instituted by the Federal Government that is designed to help employers and employees avoid lay-offs or termination if there is a reduction in the normal level of business activity due to circumstances outside of the employer’s control. Employers can apportion reduced work and wages amongst employees, and employees can access the benefits of Employment Insurance while maintaining some measure of employment. However, work-sharing programs must be approved by Service Canada prior to implementation, and the approval process can be detailed and arduous. In addition, the implementation of these programs raises various concerns from a general employment law perspective, such as constructive dismissal. Our firm has previously published detailed materials on this, so please contact us if you would like to discuss further.
These are only some of the various business relief measures being instituted by our Federal and Provincial Government. For more information on these topics or any other matters please contact one of the below lawyers from Bryan & Company LLP or access our Corporate Law group here and it would be our pleasure to assist.
|JASON E. MAY
|LIAM A. LISTON
|MATTHEW J. COWAN