Canada Emergency Wage Subsidy (CEWS) is a $73 Billion emergency program set up the Canadian government to provide assistance to Canadian businesses, prevent job-losses and encourage employers to rehire laid-off workers. As a Canadian employer whose business has been affected by COVID-19, you may be eligible for a subsidy of 75% of employee wages for up to 12 weeks, retroactive from March 15, 2020, to June 6, 2020.
The Details of the Program are as follows[1]:
- The Canada Emergency Wage Subsidy would apply at a rate of 75 per cent of the first $58,700 normally earned by employees – representing a benefit of up to $847 per week. The program would be in place for a 12-week period, from March 15 to June 6, 2020.
- Eligible employers who suffer a drop in gross revenues of at least 30 per cent in March, April or May, when compared to the same month in 2019, would be able to access the subsidy.
- Eligible employers would include employers of all sizes and across all sectors of the economy, with the exception of public sector entities.
- For non-profit organizations and registered charities similarly affected by a loss of revenue, the government will continue to work with the sector to ensure the definition of revenue is appropriate to their circumstances. The government is also considering additional support for non-profits and charities, particularly those involved in the front line response to COVID-19. Further details will be announced in the near term.
- An eligible employer’s entitlement to this wage subsidy will be based entirely on the salary or wages actually paid to employees. All employers would be expected to at least make best efforts to top up salaries to 100% of the maximum wages covered.
Organizations that do not qualify for the Canada Emergency Wage Subsidy may continue to qualify for the previously announced wage subsidy of 10 per cent of remuneration paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
The program will be administered by the CRA.
Strict Compliance
The federal government has implemented strong penalties if a business is found not to have met the CEWS eligibility requirements after receiving the subsidy. Audits will be conducted by the Canada Revenue Agency to verify the amounts related to the subsidy including revenue and salary calculations. If a business is not compliant with the rules, the consequences can include:
- Repayment of amounts received.
- Significant fines of up to 25% of the CEWS received (and up to an additional 200% in the case of fraudulent claims).
- Penalties for up to five years in prison for individuals who submitted fraudulent claims.
Furthermore, the individuals who have the principal responsibility for the financial activities must attest that the application is complete and accurate. As such, the individual(s) that make the attestation can be held personally responsible for the application that is filed and will also be subject to penalties for incorrect and/or fraudulent claims.
Tax Havens and Wage Subsidies
Poland, Denmark and France have adopted policies preventing companies registered in known tax havens to take advantage of Covid-19 relief schemes being offered.[2]
While these three countries have been clear in their messaging, the same cannot be said for Canada. The liberal government has sent mixed signals regarding this question. First, they did not respond to calls for Canada to take the same position as Denmark, France and Poland. Then on Tuesday, April 28, the prime minister, speaking during the first-ever electronic session of the House said, in French: “We will continue to assure that those who need help get it, but those who practice tax avoidance or evasion will not receive aid”. However, the very next day, Justin Trudeau would not make the same commitment in English[3]. The question of eligibility for the CEWS thus remains open.
[1] https://www.canada.ca/en/department-finance/news/2020/04/government-announces-details-of-the-canada-emergency-wage-subsidy-to-help-businesses-keep-canadians-in-their-jobs.html
[2] The EU list of tax havens consists of the Cayman Islands, Palau, Seychelles, Panama, American Samoa, Fiji, Guam, Samoa, Oman, Trinidad and Tobago, Vanuatu and the U.S. Virgin Islands. https://www.law360.com/articles/1266196
[3] https://www.thestar.com/politics/federal/2020/04/29/justin-trudeaus-position-on-covid-19-bailouts-for-tax-haven-companies-gets-murkier.html