The government introduced Bill C-9 to introduce updates to CEWS 2.0. The updates are not too substantial. We highlight the 5 key updates you should be aware of.
1. November and December 2020 Base Subsidy Increased to 40% or 0.8 x Revenue Drop
Under CEWS 2.0, November 2020 (October 25, 2020 to November 21, 2020) base subsidy % was calculated as 0.4 x revenue drop, maxing out at 20% when revenue drop hit 50%. The December 2020 rates had not been announced.
Under CEWS 3.0, the base subsidy rate for September 27 to October 24, 2020, continues to apply from October 25 to December 19, 2020.
This means the base subsidy for November and December 2020 has been increased to 0.8 x revenue drop, maxing out at 40% when revenue drop hit 50%.
2. Top-up Subsidy Easier to Calculate
Under CEWS 2.0, the CEWS was split up into two subsidies. The top-up subsidy is an additional subsidy of up to 25% if revenue declined over 50%.
The revenue reduction calculation for the top-up subsidy relied on a complicated formula to look at the preceding 3 months of revenues.
To simplify the rule, from October to December 2020, the top-up revenue decline % is the higher of:
- The amount under the old rules (i.e., three-month revenue-decline test), and
- The revenue reduction percentage
Starting in 2021, the top-up revenue decline % will simply equal the normal revenue reduction % (i.e., the one used for the base subsidy).
This means an employer with a 70% revenue loss in October 2020 would be eligible for a 65% wage subsidy (40% Base Subsidy + 25% Top-up Subsidy).
To read about the top-up subsidy in more depth, check out our previous post.
3. Deadline to File for CEWS
The deadline to file is the later of:
- January 31, 2021, and
- 180 days after the end of the qualifying period.
4. Wages to Employees Working Outside of Canada May Qualify
Under CEWS 2.0, an employee had to be employed in Canada by the eligible entity in the qualifying period.
Under CEWS 3.0, the employee only has to be employed by the eligible entity primarily (generally, greater than 50% of the time) in Canada throughout the qualifying period. This opens up the subsidy to more employers, whereby their employees may not be physically be employed “in Canada” throughout the entire qualifying period.
5. Rates after December 2020 Not Announced
The CEWS has been extended to June 2021. There is nothing yet in the legislation (Bill C-14) on how the wage subsidy rates will look like in 2021. The government proposes implementing the rates through income tax regulations (a more straightforward process) instead of passing a notice of ways and means motion.
