Emergency commercial rent assistance – Updated October 4, 2021
The Canada Emergency Rent Grant(CERG) is a financial assistance program offered by the federal government to help businesses, non-profit organizations and charities that have experienced a drop in income finance their rent expenses.
Basic subsidy
The maximum rate of the basic subsidy is 65% of eligible expenses for companies with an income loss of 70% or more. The rate is reduced to 40% for companies with a drop in revenue of between 50% and 69%. The rate then gradually decreases to 0% for companies with no drop in revenues.
For periods 11 to 14, the company must experience at least a 10% drop in revenues to be entitled to SUCL.
This rate structure is harmonized with the structure put forward by the Canadian Emergency Wage Subsidy (CESS).
For periods 1 to 10
For periods 11 to 14
Additional subsidy
An additional 25% subsidy will be available for entities that have received a public health order requiring them to close their doors temporarily due to COVID-19. These include certain businesses located in red zones. The complementary subsidy is in addition to the basic subsidy, i.e. an entity that would have lost income for a period of 70% or more, and would have been obliged to close its doors temporarily, could benefit from a subsidy of 90% of eligible expenses.
Eligibility criteria
Eligibility criteria for the new rent subsidy are harmonized with those of the Canada Emergency Wage Subsidy. Eligible entities include individuals, corporations, taxable trusts, non-profit organizations and registered charities.
To qualify for the rent subsidy, companies must also meet the following criteria:
- Have a payroll account as of March 15, 2020 or use the services of a payroll service provider;
- Have a business number as of September 27, 2020;
- Apply in good faith to the Canada Revenue Agency for SUCL.
It should be noted that the federal government may establish new criteria in the future.
Reference periods
The program currently has 14 periods. These periods correspond to SSUC periods 8 to 10. The additional 25% subsidy applies to all 14 periods.
Expenses eligible for emergency assistance for commercial rent
Expenditure per location eligible for subsidy is as follows:
- Commercial rent for the use of real or immovable property;
- Property and similar taxes (including school and municipal taxes);
- Property insurance and interest on commercial mortgages on qualifying real estate (less sublease income).
Expenses must have been incurred under a written agreement dated before October 9, 2020 and must relate to real estate located in Canada. The building cannot be residential if it is used by the taxpayer, and the expenses must be incurred with arm’s length entities.
Expenses relating to a building that is used primarily to generate rental income are also ineligible, unless the lease is with non-arm’s-length entities. However, rental expenses for the non-arm’s length entity are not eligible. Consequently, in the situation where an entity leases a building it owns to an entity with which it does not deal at arm’s length, only the owner entity will be able to claim SUCL on building expenses.
Eligible expenses are subject to a ceiling of $75,000 per location, up to an overall ceiling of $300,000. It should be noted that this overall ceiling is shared between the entities in a group of affiliated entities.
Calculation of income and reference periods for the income decline criterion
To determine the percentage drop in a company’s revenues for SUCL purposes, the entity must follow the same rules established under the Canada Emergency Wage Subsidy.
Thus, only revenues from the company’s ordinary activities in Canada, determined using its normal method of accounting, need be taken into account. Income must therefore exclude amounts from extraordinary and capital items.
Special rules have been introduced to take into account entities whose source of income is the sale of goods or services to a non-arm’s-length company.
Affiliated entities will also have the option of considering their revenues on a consolidated basis.
To establish an entity’s eligibility, its monthly revenues must be compared with the previous year’s monthly revenues. However, as is the case for the wage subsidy, the company may choose to compare its monthly income with the average income for January and February 2020. However, the entity must use the same approach for the SSUC as for the SUCL.
In addition, to determine the basic subsidy rate, the entity must take the higher of the following two percentages: the drop in revenues during the current period and the drop in revenues during the previous eligible period.
Application deadline
To be eligible, companies must apply for the grant no later than 180 days after the end of the target period.
Don’t hesitate to contact us for assistance with your SUCL claim. Since many of the criteria for the SSUC and SUCL programs are similar, it is advisable to process both applications at the same time.
Read on for our latest article on the subject.
