Canada proposes additional CEWS tweaks

Canada proposes additional CEWS tweaks

Canadian government continues to adjust the CEWS including to simplify the revenue-decline test and to change the treatment of furloughed employees


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Finance has released details of more proposed changes to the Canada Emergency Wage Subsidy (CEWS). In particular, Finance says it will harmonize the revenue-decline test for the base subsidy and the top-up subsidy starting September 27, 2020, and will align the wage subsidy for furloughed employees with Employment Insurance (EI) benefits, beginning October 25, 2020. These changes were announced on October 14, 2020 and provide additional details of the proposed changes to the parameters of the wage subsidy until December 19, 2020. Finance recently announced that the CEWS would be extended to June 2021, however further details of the CEWS for these additional periods, including details on eligibility, are not yet available.

In its announcement, Finance also advises that the 40% base and 25% maximum top-up that applies for the period September 27 to October 24, 2020 will continue to apply from October 25 to December 19, 2020. This statement confirms Finance's previous announcement that the current maximum 65% subsidy would be retained for this period.


In response to COVID-19, Canada enacted fiscal and tax relief intended to support individuals and businesses. Among other measures, Canada introduced temporary wage subsidies for businesses. The CEWS is a temporary subsidy that is available from March 15, 2020 until June 2021. Currently, the CEWS provides a two-part subsidy consisting of a "base" and a "top-up" amount. The amount of the wage subsidy an eligible employer could qualify for varies, based on their decline of qualifying revenue during COVID-19, with a current maximum combined subsidy of 65% of eligible wages until December 19, 2020.

The CEWS was first passed into law on April 11, 2020, and has been subject to several revisions since then. Initially, the CEWS generally provided an amount to eligible employers equal to 75% of employees' eligible remuneration paid, where their revenue declined by at least 30% (or 15% in March 2020). The government later expanded eligibility for the CEWS to additional employers in July 2020 by removing the minimum revenue decline threshold and adjusted the subsidy amount to vary depending on the level of revenue decline. For further details on the evolution of the CEWS, see TaxNewsFlash-Canada 2020-62, "Canada Further Extends and Expands Wage Subsidy", TaxNewsFlash-Canada 2020-47, "Canada Extends 75% Wage Subsidy and Refines Eligibility", TaxNewsFlash-Canada 2020-39, "Employers — Canada's 75% Wage Subsidy Now Enacted".

In its most recent announcement, the government advised that it will maintain the current CEWS rate of up to a maximum of 65% of eligible wages until December 19, 2020 (previously, this rate was scheduled to go down to a maximum of 45% effective October 25, 2020), and confirmed that the subsidy would remain in place until June 2021. For details, see TaxNewsFlash-Canada 2020-76, "Canada Bolsters Wage Subsidy and Announces New Support".

Revenue-decline test

Finance states that it will allow employers to determine the base subsidy and the top-up subsidy by the change in the eligible employer's monthly revenues, year-over-year, for either the current or previous calendar month, rather than the current three-month revenue decline test for the top-up subsidy. For employers using the alternative revenue-decline test, both the base subsidy and top-up subsidy would be determined by the change in the eligible employer's monthly revenues compared to the average of its January and February 2020 revenues. This harmonization of the revenue-decline test for the base subsidy and the top-up subsidy would apply starting September 27, 2020 onward. As a result of this change, an employer with a 70% or greater revenue decline would be eligible for a 65% CEWS.

Finance says that this change will be subject to a "safe harbour" rule that will apply from September 27, 2020 to December 19, 2020, and will entitle an eligible employer to an amount that is not less than the top-up subsidy it would have received under the three-month revenue decline test.

Furloughed employees

Finance also states that it will align the wage subsidy for furloughed employees with EI benefits, as of October 25, 2020. As a result, the subsidy per week for an arm's length employee (or a non-arm's length employee who received pre-crisis remuneration for the relevant period) would be:

  • The amount of eligible remuneration paid for the week; or,
  • If the employee receives remuneration of $500 or more for the week, the greater of $500 and 55 per cent of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $573.

For more information, contact your KPMG advisor.

Information is current to October 15, 2020. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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