On March 25, 2020, the federal government amended the Income Tax Act to provide eligible businesses with the ability to deduct up to 10% of employee wages from their source deductions. This measure was included in the COVID-19 Emergency Response Act, which is currently in full force and effect.
The total subsidy amount can only be deducted from federal or provincial/territorial tax source deductions. Employers must still remit the full amount of their employees' CPP and EI source deductions, as well as the employer's contributions to these plans. Any subsidy amount remaining can be applied to future remittances, even on remittances after June 19, 2020. The subsidy can be remitted after June 19, 2020 so long as the subsidy amount itself is with respect to remuneration paid between March 18 and June 19, 2020.
Businesses can start reducing payroll remittances of federal or provincial/territorial income tax “in the first remittance period that includes remuneration paid from March 18, 2020 to June 19, 2020.”
Employers who do not remit source deductions during the year will receive a payment from the CRA at the end of the tax year or the CRA will transfer the subsidy amount to that business’s next year’s remittance.
To be an eligible, the employer must be a/an (1) individual (excluding trusts), (2) partnership, (3) non-profit, (4) registered charity, or (5) Canadian-controlled private corporation (CCPC) eligible for the small business deduction. Partnerships only qualify if each partner also meets these same eligibility requirements.
The subsidy is considered taxable income in the year in which it is received.
Note: while this blog and the information above provides general information, it does not constitute legal advice. The best way to get guidance on your specific legal issue is to contact a lawyer. For more information about the wage subsidies available to your business, or if you have any other questions regarding your employment or other legal issues, please contact our office for a consultation with one of our lawyers.
How the Subsidy Works
Eligible employers are able to deduct 10% of the remuneration the business pays its employees from March 18, 2020 to June 19, 2020 up to $1,375 for each eligible employee, and to a maximum of $25,000 per employer. The employer is responsible for calculating the deduction itself, and simply remits less of its employees' federal or provincial income tax from source deductions. The CRA has provided many examples of how to calculate the subsidy amount.The total subsidy amount can only be deducted from federal or provincial/territorial tax source deductions. Employers must still remit the full amount of their employees' CPP and EI source deductions, as well as the employer's contributions to these plans. Any subsidy amount remaining can be applied to future remittances, even on remittances after June 19, 2020. The subsidy can be remitted after June 19, 2020 so long as the subsidy amount itself is with respect to remuneration paid between March 18 and June 19, 2020.
Businesses can start reducing payroll remittances of federal or provincial/territorial income tax “in the first remittance period that includes remuneration paid from March 18, 2020 to June 19, 2020.”
Employers who do not remit source deductions during the year will receive a payment from the CRA at the end of the tax year or the CRA will transfer the subsidy amount to that business’s next year’s remittance.
Eligibility
To be an eligible, the employer must be a/an (1) individual (excluding trusts), (2) partnership, (3) non-profit, (4) registered charity, or (5) Canadian-controlled private corporation (CCPC) eligible for the small business deduction. Partnerships only qualify if each partner also meets these same eligibility requirements.
Records and Taxation
The employer must keep records of: “(1) the total remuneration paid from March 18, 2020 to June 19, 2020; (2) the federal, provincial, or territorial income tax that was deducted from that remuneration; and (3) the number of eligible employees paid in that period.”The subsidy is considered taxable income in the year in which it is received.
Note: while this blog and the information above provides general information, it does not constitute legal advice. The best way to get guidance on your specific legal issue is to contact a lawyer. For more information about the wage subsidies available to your business, or if you have any other questions regarding your employment or other legal issues, please contact our office for a consultation with one of our lawyers.