Here Are The Highlights:
- When the applications will open:
- Update: Applications are open as of November 23, 2020.
- What you will need to apply:
- Your monthly qualifying revenue amounts from 2020 and 2019 (the same calculation that is done for CEWS applications),
- Your eligible expenses are broken down by business location,
- If your business has affiliated businesses or entities and you have agreed with those affiliated entities on how you will split the rent subsidy maximum, documentation of how the subsidy will be split.
- How the application will be submitted to CRA:
- Before you can apply, you will need a CERS (business) number as part of your first application. This number can be obtained through My Business Account or via Represent a Client and is provided instantly. The link to apply is at the bottom of the page after you login.
For more details, read on below.
The new proposed Canada Emergency Rent Subsidy is aimed to provide direct relief to businesses, non-profits, and charities that continue to be economically impacted by COVID-19. The new rent subsidy would be available retroactive to September 27, 2020, until June 2021.
The government is providing the proposed details for the first 12 weeks of the program, until December 19, 2020. The proposed program mirrors the Canada Emergency Wage Subsidy. The new rent subsidy would provide benefits directly to qualifying renters and property owners, without requiring the participation of landlords.
The following provides information for organizations that have experienced a revenue decline and may qualify for the Canada Emergency Rent Subsidy. If your organization has been subject to a public health order issued under the laws of Canada, a province or territory, you may be eligible for additional resources under the new Lockdown Support.
For each qualifying property, you will need the:
- amounts you owe or have paid for all eligible expenses
- property address
- name and contact information of your
- mortgage holder if you have a mortgage on the property
- landlord if you rent the property
The application form will accept information for up to 3 properties. If you have more than 3, enter information for the 3 properties with the highest eligible expenses.
Rent Subsidy for Organizations Impacted by the Crisis
Qualifying organizations that have suffered a revenue drop would be eligible for a subsidy on eligible expenses. The maximum base rate subsidy would be 65% and available to organizations with a revenue drop of 70% or more. The base rate would then decline to a rate of 40% for organizations with a revenue drop of 50% and then would gradually reduce to zero for those not experiencing a decline in revenues. This structure mirrors the Canada Emergency Wage Subsidy rate structure.
Eligible expenses for a location for a qualifying period would include:
- Commercial rent,
- Property taxes,
- Property insurance, and
- Interest on commercial mortgages for qualifying property.
Any sales tax (e.g., GST/HST) component of these costs would not be an eligible expense.
Eligible expenses would be limited to those paid under agreements in writing entered into before October 9, 2020, and would be limited to expenses related to real property located in Canada.
Payments made between non-arm’s-length entities would not be eligible expenses.
Mortgage interest expenses used to earn, directly or indirectly, rental income from arms-length entities would not be eligible.
Expenses for each qualifying period would be capped at $75,000 per location and be subject to an overall cap of $300,000.
Eligible entities include:
- Taxable corporations and trusts,
- Non-profit organizations and registered charities.
- Public institutions are generally not eligible for the subsidy.
Eligible entities also include the following groups:
- Partnerships that are up to 50% owned by non-eligible members;
- Indigenous government-owned corporations that are carrying on a business, as well as partnerships where the partners are Indigenous governments and eligible entities;
- Registered Canadian Amateur Athletic Associations;
- Registered Journalism Organizations; and
- Non-public colleges and schools, including institutions that offer specialized services, such as art schools, driving schools, language schools or flight schools.
In addition, an eligible entity must meet one of the following criteria:
- Have a payroll account as of March 15, 2020,
- Have a business number as of September 27, 2020, or
- Meet other conditions that may be prescribed in the future.
Revenues will be calculated in the same manner as under the Canada Emergency Wage Subsidy program.
- An entity’s revenue for the purposes of the rent subsidy is its revenue from its ordinary activities in Canada earned from arm’s-length sources, determined using its normal accounting practices.
- For registered charities and non-profit organizations, the calculation includes most forms of revenue, excluding revenues from non-arm’s length persons. These organizations are allowed to choose whether to include revenue from government sources as part of the calculation. Once chosen, the same approach would have to apply throughout the program period.
- Special rules for the computation of revenue are provided to take into account certain non-arm’s-length transactions, such as where an entity sells all of its output to a related company that in turn earns arm’s-length revenue.
- Affiliated groups that do not normally compute revenue on a consolidated basis may elect to do so. (This could include related parties where the building is owned in one corporation and the tenant’s business in another).
Reference Periods for the Drop-in-Revenues Test
Eligibility would be determined by the change in an eligible entity’s monthly revenues, year-over-year.
Alternatively, one can choose to calculate its revenue decline by comparing its current reference month revenues with the average of its January and February 2020 revenues.
Once an entity has chosen to use either approach, they must use that approach for each of the first three periods (further guidance is expected as future periods are opened up). The approach chosen would apply to both the base Canada Emergency Wage Subsidy and the Canada Emergency Rent Subsidy.
The entity would use the greater of its percentage revenue decline for the current qualifying period and that for the previous qualifying period in order to determine its subsidy rate. This would provide certainty to businesses regarding their expected minimum subsidy rate and aligns with the practice under the Canada Emergency Wage Subsidy.
The following table outlines each qualifying period and the relevant reference period for determining the change in revenue.
|Qualifying period||General approach||Alternative approach|
|Period 8||September 27 to October 24, 2020||October 2020 over October 2019 or September 2020 over September 2019||October 2020 or September 2020 over the average of January and February 2020|
|Period 9||October 25 to November 21, 2020||November 2020 over November 2019 or October 2020 over October 2019||November 2020 or October 2020 over the average of January and February 2020|
|Period 10||November 22 to December 19, 2020||December 2020 over December 2019 or November 2020 over November 2019||December 2020 or November 2020 over the average of January and February 2020|
|Note: The period numbers align with those used for the Canada Emergency Wage Subsidy, for simplicity.|
All applications must be made on or before 180 days after the end of the qualifying period.
How Much Could Your Subsidy Be?
The amount you can claim for your expenses (your rent subsidy rate) is based on the revenue drop you experienced between:
- The corresponding month of 2019 method: the months of 2019 and 2020 that relate to the claim period you’re applying for
- Alternative method: January and February 2020 compared to the months of 2020 that relate to the claim period
This revenue drop is then scaled to calculate your rent subsidy rate:
|Calculate your rent subsidy rate|
|Your revenue drop||How to calculate your rate|
|Revenue drop of 70% or more||The maximum subsidy rate of 65%|
|Revenue drop of 50 to 70%||(Your revenue drop – 50%) x 1.25 + 40%|
|Revenue drop of less than 50%||0.8 x your revenue drop|
Here’s an example we shared with one of our clients:
If revenues drop 40% then the subsidy is 80% X 40% = 32% of the eligible expenses
If revenues drop 60% then the subsidy is 60% – 50% X 1.25 + 40% = 52.5% of eligible expenses
If revenues drop 75% then the subsidy is 65% of eligible expenses.