COVID-19: Canada Emergency Wage Subsidy – important upcoming filing deadlines
As COVID-19 continues to impact Canadians, critical filing dates for claiming the Canada Emergency Wage Subsidy (CEWS) are soon approaching. The federal government recently announced some key changes regarding the CEWS in response to the ongoing pandemic. Legislation was passed on January 13, 2021, providing an update to existing guidelines.
For the latest comprehensive breakdown of CEWS, see our previous CEWS article, COVID-19: Changes to the Canada Emergency Wage Subsidy (CEWS).
Eligibility dates and deadlines
The filing deadline to claim the CEWS for periods 1 to 5 (encompassing  March 15, 2020 to August 1, 2020) is Sunday, January 31, 2021. To receive the CEWS for these 5 periods, eligible applicants must file their CEWS claims before this deadline. For periods 6 and onwards, the deadline to apply is 180 days after the period ends.
CEWS applications for period 11 opened on Sunday, January 17, 2021. Below is a table that breaks down the reporting periods and their associated deadlines. Guidelines for period 14 and onward are still under review by legislators.
| Claim period | Eligible dates | Deadline to apply |
|---|---|---|
| Period 1 | March 15, 2020 – April 11, 2020 | January 31, 2021 |
| Period 2 | April 12, 2020 – May 9, 2020 | January 31, 2021 |
| Period 3 | May 10, 2020 – June 6, 2020 | January 31, 2021 |
| Period 4 | June 7, 2020 – July 4, 2020 | January 31, 2021 |
| Period 5 | July 5, 2020 – August 1, 2020 | January 31, 2021 |
| Period 6 | August 2, 2020 – August 29, 2020 | February 25, 2021 |
| Period 7 | August 30, 2020 – September 26, 2020 | March 25, 2021 |
| Period 8 | September 27, 2020 – October 24, 2020 | April 22, 2021 |
| Period 9 | October 25, 2020 – November 21, 2020 | May 20, 2021 |
| Period 10 | November 22, 2020 – December 19, 2020 | June 17, 2021 |
| Period 11 | December 20, 2020 – January 16, 2021 | July 15, 2021 |
| Period 12 | January 17, 2021 – February 13, 2021 | August 12, 2021 |
| Period 13 | February 14, 2021 – March 13, 2021 | September 9, 2021 |
| Period 14 and onwards* | TBA | TBA |
*The CEWS has been extended to June 2021.
To reflect the changing nature of the pandemic and its impact, guidelines surrounding the calculations of the CEWS base rate and additional top-up rate have also been adjusted.
Updates to base CEWS
The table below shows the claimable base CEWS rate depending on an employer’s revenue drop. The multiplication factor for revenue drops of less than 50% is 0.8 for period 8 onwards. This is an increase from the previous factor of 0.4 for periods 9 onwards to reflect the current economic situation and to provide more support for businesses.
Reminder: in determining the revenue drop for a period, employers can use the corresponding month’s revenue drop or the previous month’s revenue drop, whichever is greater.
| Base CEWS rate | ||||
|---|---|---|---|---|
| Period | Revenue drop of 50% or more | Revenue drop of less than 50% | ||
| Periods 5 and 6 | 60% | 1.2 x revenue drop | ||
| Period 7 | 50% | 1.0 x revenue drop | ||
| Periods 8 to 13 | 40% | 0.8 x revenue drop | ||
Updates to top-up CEWS
For periods 5 to 7, the additional CEWS top-up rate was calculated based on the 3-month revenue reduction test. This is the average revenue drop for the 3 months before the reference period begins compared to the same 3-month period in the previous year.
This calculation has been updated to correspond to the base revenue drop CEWS calculation. Beginning in period 8, the top-up rate and base rate are now calculated using the same 1 -month revenue drop as the base CEWS.
A safe harbour rule has been introduced for periods 8 to 10 to calculate the top-up subsidy rate. For periods 8 to 10, the top-up wage subsidy can be calculated using the greater of the preceding 3-month average revenue drop AND the new base revenue drop rate. For period 11 onwards, the top-up subsidy rate must be calculated using the base revenue drop rate.
The top-up rate has also been increased to 35% for periods 11 to 13. This means that the hardest hit employers can claim a maximum 75% (40% base + 35% top-up) wage subsidy, an increase from the previous 65% (40% base + 25% top-up).
| Top-up CEWS rate | ||||
|---|---|---|---|---|
| Revenue drop % | Periods 5 to 10 | Periods 11 to 13 | ||
| 70% or more | 25% | 35% | ||
| 50.01% – 69.99% | 1.25 x (revenue drop – 50%) | 1.75 x (revenue drop – 50%) | ||
| 50% or less | 0% | 0% | ||
Corner store sample
Below is the data for a corner store impacted by COVID-19. Although business began to pick up in August, the fall months proved to be difficult for the store. The owner wants to apply for the CEWS for period 8. The corner store plans to continue business and wants to determine their CEWS rate for their period 8 claim. Below is information regarding their 2020 revenues compared to the previous year and the corresponding revenue drop percentage.
| Corner store ‘19 and ‘20 revenue | ||||||
|---|---|---|---|---|---|---|
| Month | 2020 | 2019 | Revenue drop % | |||
| October | $500 | $900 | 44.40% | |||
| September | $300 | $800 | 62.50% | |||
| August | $600 | $1,000 | 40.00% | |||
| July | $250 | $700 | 64.30% | |||
To determine the base CEWS rate, the revenue drop for the period must first be determined. For period 8 (October), the actual revenue drop was 44.4%, but for the purposes of calculating the base CEWS rate, the previous month’s revenue drop of 62.5% (September) is used because it is greater. As the base revenue drop is greater than 50%, a maximum base CEWS rate of 40% applies.
The store then calculates the top-up CEWS rate for period 8, which is determined by calculating 1.25 x (revenue drop – 50%). For periods 8 to 10, the store will choose the greater of the preceding 3-month’s average revenue drop (54.0%), and the drop from the base CEWS applied (62.5%), when determining their top-up rate. Using the larger 62.5% base revenue drop, the top-up CEWS rate is calculated to be 15.63%.
Top-up CEWS rate
= 1.25 x (62.5% – 50%)
= 1.25 x (12.5%)
= 15.63%
This means the corner store can claim an overall CEWS rate of 55.63% (40% base + 15.63% to-up) for period 8.
Summary
If you think your business may be eligible for the CEWS, or have any related COVID-19 inquiries, the Tax group at Fuller Landau is ready to answer your questions.
About the authors
Ben Schwarz is a Senior Tax Specialist in our Tax group. He can be reached at 647-417-0353 or bschwarz@fullerllp.com.
Matthew Maxin is a Junior Tax Specialist in our Tax group. He can be reached at 647-417-0415 or mmaxin@fullerllp.com.