Accessing the 10% Wage Subsidy
Last week the Canadian Government announced a 10% Wage subsidy for small businesses. Yesterday CRA posted guidance around accessing the subsidy. See below for a summary. Please see the CRA Website for further details: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html
The first question is to determine if you are eligible. If you are an incorporated business and are a Canadian Controlled Private Corporation with less then $15 million in taxable capital OR a Not-for-profit OR Charity.
At this point the wage subsidy does not apply to partnerships or sole proprietorships. We hope that in due course the government will extend this subsidy to these businesses as well.
Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.
How to Calculate the 10% Wage Subsidy
It is important to note that part of your payroll remittance is EI and CPP. You cannot reduce your CPP contributions or EI premiums, only personal tax deducted from people’s pay but if you do not have enough remittance to reduce in one pay period you can continue reducing future income tax remittances, up to the maximum of $25,000, for all remuneration paid before June 20, 2020.
Payroll companies are in the process of editing their software to allow businesses to calculate this subsidy properly. If you are using a payroll service you will need to Opt-in to this program within the software program. Please watch the notifications from your payroll providers.
For Companies that do their payroll Manually using PDOC:
If you use the PDOC service through CRA it will not do the calculation for you. You will need to calculate your 10% adjustments manually and make sure you track the adjustments and your calculations for future reference.
The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.
For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.
Once you have calculated your subsidy, you can reduce your current remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy.