The Canadian Federal government has been malleable in its approach to addressing the economic impact of Covid 19, which has meant that there has been a rapid succession of changes to the government funding available to address the economic impact of Covid 19. It also means that it is possible that this stimulus package may be amended in the near future. It can be challenging to constantly keep up to date on what is available to businesses, employees and independent contractors. This aims to give you a comprehensive breakdown of the Canadian government’s stimulus package, current as of April 4, 2020.
On March 11, 2020, the World Health Organization (“WHO”) declares Covid 19 a global health pandemic. On the same day, the Federal Government issued a $1 billion package, aimed at bolstering Canada’s health care system. In his announcement, Trudeau announced that the economic repercussions of Covid 19 will be addressed. On March 18, 2020, the Federal Government announced a tentative $82 billion economic stimulus package. This was subsequently revised and on March 25, 2020, the Houses of Common passed legislation enacted the Covid 19 Emergency Response Act (the “CERA”). Some of the relief is available immediately (i.e. deferring tax payments); some of the relief will become available in April.
As we start to understand the impact of Covid 19 on Canada, it is quite possible that the timelines originally stated by the government may change, as well as the programs themselves. In addition, the eligibility requirements to some of the programs noted below are also being determined, which may impact the availability of the programs to your specific situation.
Understanding the Covid 19 Emergency Response Act
This legislation enables the government to make temporary changes to already established legislation (i.e. the Income Tax Act) and also creates two new legislation, which I summarize below:
- Canada Emergency Response Benefit Act (“CERBA”)
- This is a temporary piece of legislation that provides new economic support programs that are specific to Covid 19.
- It provides income support from between March 15, 2020 and October 3, 2020.
- Public Health Events of National Concern
- This is a new piece of legislation that enables the Government to act immediately should a future global pandemic happen.
- It enables the government to acquire medical supplies, provide assistance to provinces and territories, provide income support and to fund public health-related programs.
Our analysis will focus on the temporary changes made to existing legislation and also through CERBA.
What is Available for Canadian Businesses, Employees and Contractors?
As previously mentioned, this information is current as of April 4, 2020. There may be additional funds/programs issued by the government.
The Federal Government is proceeding with a $107 billion economic stimulus package. This package can be broken into two categories:
- $52 billion set aside as direct support for Canadian workers and businesses
- $55 billion set aside as liquidity support in the way of tax deferrals
The CERBA program will not be available until as of April 6, 2020 and it is foreseeable that there may be additional regulations and/or eligibility requirements.
On multiple occasions, Trudeau has stated that this has been created on a trust system and those individuals/businesses that take advantage of the program will be penalized.
Contract workers, self employed and some employees
If you have lost your pay because of Covid 19, you are eligible to receive $2000 per month capped at 16 weeks. Here is who would be eligible for this program:
- workers who have stopped working because of Covid 19 (i.e. sick, quarantined),
- care givers to someone who has Covid 19,
- working parents taking care of a dependent without pay,
- shift work employee who has no shifts, and/or
- contractors/self employed.
You will need to confirm your status on a month to month basis. You can start to apply to this program on April 6, 2020 and payout is anticipated to start within 10 days of your application being processed. There are eligibility requirements:
- You must reside in Canada with a valid Social Insurance Number
- You must be at least 15 years old
- You must have had an income of at least $5000 earned in 2019 or in the past 12 months
- You must have received no income for at least 14 days within a 4 week period with no expectation to receive income.
Employees Eligible for EI
Overall, the existing EI programs remains in tact. However, as part of the the Covid 19 stimulus package, the one week period to wait to apply for EI has been waived. In addition, the requirement for a medical certificate to qualify for EI sickness benefits has also been waived. A leave of absence from work can extend up to 16 weeks, if related to Covid 19.
Small Business Wage Subsidies
Retroactive to March 15, 2020, the government is providing a 75% wage subsidy to qualifying businesses for up to 3 months. Businesses that have experienced a 30% decrease in revenue due to Covid 19 are eligible. The government will provide a wage subsidy that is capped at 75% of the first $58,700 of salary for each employee. Trudeau was strong in his messaging that there is an expectation on businesses to do more than less to keep their employees and to also use best efforts to top up the remaining 25% wage. Trudeau was also very clear that this money is intended for employee wages – not for other business costs.
Work Sharing Program
This is an existing program whereby the government provides income support to employees who are eligible to EI in instances where there is a temporary reduction in business beyond the control of the employer. In order to participate in this program,
- both the employer and employee must agree to a reduced schedule of work for the employee
- the employer must be at least 2 years in business
- there has been a 10% decrease in profits
- the slow down is not cyclical, seasonal or recurring
- the employee is eligible for EI
- the employee is part of core personnel
- the employee has agreed to the reduction in work.
In response to Covid 19, participation in this program has been increased from 38 weeks to 76 weeks.
The deadline to file your personal taxes is extended until June 1, 2020. Payment of taxes owed to the government is deferred until August 31, 2020. It is recommended to speak with your accountant to discuss your tax planning strategy. Beware that it will be money owed, so be careful/conservative if you already have this money set aside.
Payment of corporate taxes owed to the government is deferred until August 31, 2020. Payment of HST and custom duties for imported products is deferred until June 30, 2020. It is recommended to speak with your accountant to discuss your tax planning strategy. Beware that it will be money owed, so be careful/conservative if you already have this money set aside.
Access to Debt Funding
The government has injected additional funds for loans to Business Development Canada and Export Development Canada. In addition, the scope of Export Development Canada has been temporarily expanded to also address domestic businesses.
The Canada Emergency Business Account will provide loans of up to $40,000 to small businesses and not for profit organizations to help with operating costs. In order to be eligible, they must pay between $50,000 and $1,000,000 in total payroll for 2019. The loan is interest free as long as the loan is paid back by December 31, 2022. If the loan is paid off in full, the government will provide a debt forgiveness of 25%. Basically, you’re receiving $40,000 for the cost of $30,000, as long as you pay it off by December 31, 2022. If you cannot pay if off by December 31, 2022, it can be converted to a 3 year term loan with a 5% interest rate.
Social Justice Issues
In addition the government has also included specific funding for specific demographic groups, such as:
- Increased child care benefits
- Deferred payment of student loans
- Increased funding for homeless shelters
- Increased funding for women and children fleeing abusive homes
- Increased funding for Kid’s Help Phone
- Increased funding for indigenous communities
If you need assistance with navigating the economic stimulus package, or with your legal issues, contact us at www.froeselaw.com or directly at firstname.lastname@example.org.
Please note that this is a summary of the economic stimulus package. For full details, we recommend that you review the Canadian government’s website.