The federal government has granted a temporary wage subsidy to eligible small business employers for a period of three months. Here are the details applicable to this grant:
The subsidy is equal to 10% of the remuneration paid over a three-month period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. The period runs from March 18, 2020 to June 19, 2020.
Eligible employers
The employers benefiting from this measure are :
- Canadian-controlled private corporations (CCPCs)* eligible for the small business deduction (SBD);
- non-profit organizations (NPOs);
- registered charities;
- Individuals other than a trust;
- partnerships where all the partners are the persons referred to above.
AND, they must :
- Have a business number and payroll account withCRA as of March 18, 2020;
- Have paid wages, salaries, bonuses or any other remuneration to an employee during the period covered by the program.
Note that CCPCs are eligible for the subsidy only if their taxable capital employed in Canada for the previous taxation year, calculated according to the associated group, is less than $15 million.
*It is important to note that CCPCs that are associated with other companies do not have to share their maximum subsidy of $25,000 per employer. The $25,000 limit is therefore per employer, not per group of companies.
Calculate the subsidy
CRA has confirmed that the calculation of the temporary 10% wage subsidy must be done on a paid salary basis. In other words, an eligible company that would have paid its employees on March 19, for the period worked from March1 to March 14, can claim the 10% subsidy on these wages. Conversely, an eligible employer who would have paid his employees on June 25, for the period worked from June 7 to June 20, will not be able to claim the 10% wage subsidy on these wages, as they are paid after the end of the program.
Employers eligible for the Temporary Wage Subsidy who are also eligible for the Canada Emergency Wage Subsidy (CESS) must deduct the 10% subsidy amount from their CESS calculation. However, it is possible for an employer who is eligible for both programs to elect to apply only for the 75% subsidy.
It may be advantageous for an employer with several employees who are not eligible for SSUC to apply for the temporary wage subsidy for these employees.
How to apply
Companies could benefit immediately from this support measure by reducing their federal income tax payments withheld from their employees’ remuneration. It’s important to note that the subsidy does not apply to Canada Pension Plan (CPP) or Employment Insurance (EI) contribution payments. Nor can it be applied against Quebec income tax payments withheld from employee remuneration.
Eligible employers will be required to retain information to support their calculations, including :
- the total remuneration paid from March 15, 2020 to June 20, 2020;
- the amount of federal, provincial or territorial income tax deducted from this remuneration;
- the amount of Canada Pension Plan(CPP) and Employment Insurance (EI) contributions deducted from remuneration paid;
- the number of employees paid during this period.
Form to complete
If you are an eligible employer, you may be required to file form PD27 – Self-identification form for the temporary 10% wage subsidy for employers. A separate form must be completed for each of an employer’s payroll deduction program accounts.
The form can be submitted online via the “My Business Account” portal or via the CRA’s “Represent a Client” portal. It can also be sent to the CRA by mail or fax.
The CRA recommends that you file Form PD27 before submitting the T4 information return (T4 Summary) for 2020, to avoid receiving a notice of discrepancy corresponding to the SSTC. It is therefore advisable to submit form PD27 before February 28, 2021 (the deadline for filing T4s).
If you are an eligible employer, there are 3 situations in which you are required to produce the PD27:
Situation 1
You have benefited from the subsidy and have already reduced your payments.
If you have already reduced the SSTC of your payments, you must complete PD27 by indicating in the “Additional information” section how you reduced your payments.
Situation 2 You want to benefit from the subsidy, but have not yet reduced your deduction payments.
If you have not reduced your deduction payments, you must complete PD27 by indicating in the “Additional Information” section how you wish the subsidy to be applied, i.e. :
- reduce the income tax portion of your future December 2020 payments, up to the total amount of the temporary wage subsidy to which you are entitled;
- ask ARC to pay you the full amount of the subsidy to which you are entitled;
- ask CRA to transfer the full amount of the grant to which you are entitled to the following year’s account (CRA will do this after processing the following year’s T4 information return).
Situation 3: You do not wish to receive the SSTC and have benefited from the SSUC
If you are an eligible employer and have applied for SSUC, but do not wish to receive SSTC, you must still complete form PD27. You must indicate on the form, for each pay period, that the wage subsidy rate requested is 0% and that the wage subsidy requested is $0.
Other considerations
It’s also important to note that this grant constitutes taxable income for the company, and that this applies only to tax payments made to the CRA.
