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For those businesses and employers that are not eligible for the 75% Canada Emergency Wage Subsidy, the Federal Government announced a 10% temporary wage subsidy for Employers. This subsidy is a three-month measure that will allow eligible employers to reduce the number of payroll deductions required to be remitted to the Canada Revenue Agency (CRA). 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. The 10% is calculated manually, either by the business owner/employer or whoever is responsible for making payroll remittances. The CRA will not automatically calculate the allowable subsidy. Remember, this subsidy is taxable so if you receive the subsidy, you have to report the total amount as income in the year in which the subsidy is received.

 

In order to be eligible for the temporary subsidy, employers are:

  • An individual (excluding trusts),
  • In a partnership (if their members consist exclusively of individuals, registered charities, or eligible CCPCs),
  • A non-profit organization,
  • A registered charity, or
  • Canadian-controlled private corporation (including a cooperative corporation);
    • Only eligible for the subsidy if they have 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)
  • Have an existing business number and payroll program account with the CRA on March 18, 2020; and
  • Pay salary, wages, bonuses, or other remuneration to an eligible employee.
  • Have employees that are employed in Canada.

To receive the subsidy you do not need to apply! You simply 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 then calculated when you remit these amounts to the CRA. Once your subsidy is calculated, you reduce your current payroll remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy.

To calculate the subsidy, multiply the total gross pay for the payroll period by 10%.  Compare this number to the total income tax withheld on behalf of the employees.  If it is less than the income taxes withheld, reduce the total remittance by the calculated amount.  Note that the subsidy is limited to $1,375 per employee and $25,000 for the entire company.
As an example, if total gross pay for a pay period was $100,000, there were 30 employees and the total income taxes remitted was $20,000 the following would be the calculations:
Subsidy Amount: $100,000 X 10% = $10,000.
Subsidy Limits: $1,375 X 30  = $41,250 (however with the maximum per company being $25,000 the limit would be $25,000.)
Total Income Taxes Withheld: $20,000, total subsidy – $10,000.  Therefore the subsidy claim for the period is $10,000.
Total Remittance Calculated: $40,000 – subsidy amount – $10,000 – actual remittance – $30,000.
For the specified payroll period, the subsidy claimed was $10,000.  That would leave the potential to claim an additional $15,000 in future payroll periods before reaching the maximum subsidy amount.

However, if you choose not to 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.

You can track your amounts for the subsidy here.

To report the subsidy you must provide supporting documents. The CRA is currently updating reporting requirements. More information will be released in the near future. For now, assume that you need to provide the CRA with the following documents:

  • the total remuneration paid from March 18, 2020, to June 19, 2020;
  • the federal, provincial, or territorial income tax that was deducted from that remuneration; and
  • the number of eligible employees employed in that period.

 

There are specific nuances to every government assistance program(s). We recommend going over your documents with your financial advisor and/or accountant. As always, we will provide timely updates as they are released. For details and information on how to apply. visit our post here.

For information on some frequently asked questions, you may visit the CRA website here.

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