Please note: the federal government is constantly updating their website as new information is announced. Remember to check Canada’s official coronavirus webpage and CREA’s COVID-19 online hub to stay up to date.
As the spread of COVID-19 keeps Canadians at home for another week, the federal government is unveiling more initiatives that provide financial aid to both individuals and businesses affected by physical distancing requirements. Many of these programs have been calibrated over the past weeks, with eligibility criteria being broadened to capture a larger segment of Canadians in need.
Here are some of the questions we have been asked by members this week.
When can I apply for the Canada Emergency Wage Subsidy (CEWS)?
The Canada Revenue Agency (CRA) will open the application process on Monday, April 27, and funds will begin to be released on Tuesday, May 5. Claims will be subject to verification by the CRA.
To help businesses plan ahead, a calculator for potential applicants is available. You can enter amounts such as number of eligible employees and gross payroll to preview your subsidy claim. Today, the government also published a detailed FAQ to help businesses better understand how to apply for the subsidy.
The CEWS is a 75% wage subsidy for businesses, retroactive to March 15. It’s available to businesses that suffered a 30% drop in gross revenue in April or May (15% for March) when compared to the same month in 2019, or the average of January and February 2020.
The Canadian Real Estate Association (CREA) has consulted with an external accounting firm and CRA representatives on the application of the CEWS within the real estate industry.
Amended eligibility criteria for the CEWS provides that employers should determine its qualifying revenue in accordance with its normal accounting practices, with an option to use the cash basis, for the purpose of determining their CEWS eligibility. The basis must be applied consistently in all periods. Normal accounting practice would typically be the method used to record revenue on the employer’s external financial statements or filed tax returns, which is normally on an accrual accounting basis.
The normal conditions for revenue recognition under accrual accounting on a sale of real estate that must be met are:
- the sales agreement is signed by both parties and there are no conditions outstanding;
- the amount of the sales commission is measurable; and
- the amount is expected to be collected.
The two most common “normal accounting practices” for revenue recognition used in the real estate sector are:
- Deal Closed Basis—when the transaction closes; and
- Business Written Basis—when the sales agreement is signed and all conditions are met.
Both of these practices are consistent with accrual accounting. To determine CEWS eligibility, brokerages have the option of using their normal accounting practice or the cash basis. Brokerages do not have the option of switching between the Deal Closed Basis and the Business Written Basis.
Brokerages are encouraged to seek the advice of their own tax specialist so their individual situation can be assessed.
CREA continues to work with officials to ensure the CEWS and other programs provide the needed support to the real estate industry.
How can I access the Canada Emergency Commercial Rent Assistance (CECRA)?
While the program launch has yet to be announced, Prime Minister Justin Trudeau said he expects the CECRA will be operational by mid-May, with commercial property owners lowering the rents of their small business tenants payable for the months of April and May, retroactively, and for June.
CECRA will provide forgivable loans to qualifying commercial property owners to cover 50% of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.
The loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75% for the three corresponding months under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25% of the rent.
Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID-19 revenues.
Do I need to issue T4 slips to qualify for the Canada Emergency Business Account (CEBA)?
There are concerns about the way subcontractors figure into payroll requirements for the CEBA. This issue has been raised and the government is aware of it. CREA has discussed solutions with brokerages and recommended two options to key decision makers:
- Expand eligible payment structures to include wages (T4), commission payments (T4A) and dividend payments (T5), reflective of the diversity of business models impacted by COVID-19.
- Allow businesses to qualify by demonstrating expenses intended to be covered by the CEBA other than payroll, such as rent, utilities, insurance, property tax, or debt service.
In other developments related to the CEBA, last week Prime Minister Trudeau announced expanded eligibility criteria to include employers with $20,000 to $1.5 million in total payroll for 2019.
The CEBA provides eligible small businesses, operating as of March 1, with interest-free loans of up to $40,000—25% of which will be forgiven (up to $10,000) if the loan is repaid by December 31, 2022.
As an employer, can I apply for the CEWS for an employee who is receiving the Canada Emergency Response Benefit (CERB)?
Depending on the specific situation, rehired individuals who may have received, or continue to receive, the CERB could be required to repay some or all of the amounts. The government will provide additional information on this shortly. CERB recipients who already know they will need to repay the financial relief received can do so through the mail. An individual cannot receive both a subsidized salary through the CEWS and the CERB.
The CERB is a taxable benefit of $2,000 every four weeks for up to 16 weeks to eligible workers who have lost their income due to COVID-19.
The measures covered in this FAQ are part of the Government of Canada’s COVID-19 Economic Response Plan. The government is constantly assessing the evolving situation and is likely to introduce additional measures as it deems necessary. We are monitoring the implementation of existing measures and continue to advocate on behalf of REALTORS® as new initiatives are developed.
This email is for information purposes only and is not a substitute for professional advice. If you need professional advice you should consult a lawyer, accountant or other qualified professional.