TAX ALERT |
Authored by RSM Canada
With several COVID-19 support measures now expired as of Oct. 23, 2021, the federal government announced new targeted measures that will continue to provide pandemic support to eligible businesses in hard-hit industries.
While the Canadian Emergency Wage Subsidy (CEWS) program and the Canadian Emergency Rent Subsidy (CERS) are among those that have now expired, the new measures introduced will be based on much of the same criteria and will produce similar supports.
Tourism and Hospitality Recovery Program
Among these new measures is the Tourism and Hospitality Recovery Program (THRP), which will provide support to an industry that suffered a significant decline in revenue due to ongoing lockdowns, border closures and other COVID-19 public health restrictions. While more details on the definition of a qualifying business under this program will be forthcoming, examples of eligible organizations have been released and will include hotels, restaurants, bars, festivals, travel agencies, convention centers, and more. To qualify for this program, organizations must meet the following eligibility criteria:
- An average monthly revenue reduction of at least 40% over the first 13 qualifying periods for the Canada Emergency Wage Subsidy (12-month revenue decline); and
- A current-month revenue loss of at least 40%.
The 12-month revenue decline will be calculated as the average of all revenue decline percentages for eligible organizations from March 2020 to February 2021. Any periods in which an entity was not carrying on its ordinary operations for reasons other than a public health restriction would be excluded from this calculation. Existing rules introduced for previous support programs would continue to apply for the purposes of calculating the current-month revenue decline.
Eligible businesses under this program will receive wage and rent support at rates ranging from 40% to a maximum rate of 75% from Oct. 24, 2021 to March 12, 2022 and the program will follow the same 28-day period structure as the previous CEWS and CERS programs. The subsidy rate will continue to be calculated based on current-month revenue decline when compared to revenue of the specified prior period and would increase proportionately with greater declines, consistent with the previous programs.
The rates will be reduced by half for the last two proposed periods covering the time-period from March 13 to May 7, 2022.
Hardest-Hit Business Recovery Program
The Hardest-Hit Business Recovery Program was also introduced and will target organizations that do not qualify for the THRP, but that have also suffered significant revenue decline throughout the pandemic. Under this program, rent and wage support will be paid to businesses that meet the following eligibility criteria:
- An average monthly revenue reduction of at least 50% over the first 13 qualifying periods for the Canada Emergency Wage Subsidy (12-month revenue decline); and
- A current-month revenue loss of at least 50%.
The 12-month revenue decline calculation will follow the same rules as under the Tourism and Hospitality Recovery Program. The subsidy rates under this program will start at 10% and will increase on a straight-line basis to a maximum of 50%. These rates will also be reduced by half for the last two proposed periods.
Proposed amendment to CERS
The government has also proposed to increase the aggregate monthly cap on eligible expenses that can be claimed under the CERS program. Currently, businesses are limited to an aggregate monthly cap of $300,000 on eligible expenses. To better respond to the needs of hard-hit businesses such as hotels and restaurants, this cap will be increased to $1 million, which will be available to all eligible organizations that meet the new eligibility requirements for the rent subsidies under the Tourism and Hospitality Program and the Hardest-Hit Business Recovery Program. The proposed start date for this amendment is Oct. 24, 2021.
In the event of a public health lockdown, eligible businesses can apply for support regardless of industry. The subsidy rates will be calculated under the THRP for businesses that meet all of the following criteria:
- One or more locations subject to a public health restriction;
- Lasting for at least seven days; and
- That requires the business to cease activities that account for approximately 25% of total revenues of the business during the prior reference period.
Eligible businesses will be required to demonstrate a current-month revenue decline, as opposed to a 12-month decline.
Canada Recovery Hiring Program
Lastly, the Canada Recovery Hiring Program has been extended beyond its planned expiry of Nov. 20, 2021, with a proposed extension to May 7, 2022 at an increased rate of 50%. The government has also requested authority for a further extension until July 2, 2022. The existing rules will continue to apply, including use of the existing baseline period of March 14 to April 10, 2021, as well as a required revenue decline of more than 10%.
Nov. 4, 2021 marks the filing deadline for CEWS period 15 and CERS period 8 making these and similar programs not yet a thing of the past. Businesses should begin considering their eligibility under the newly announced programs.
This article was written by Jen Reid, Danielle Wallace and originally appeared on 2021-10-26 RSM Canada, and is available online at https://rsmcanada.com/our-insights/tax-alerts/out-with-the-old-and-in-with-the-new-updated-subsidies-announced.html.
The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.