March 21, 2020
By Nizam Shajani, CPA, CA, MBA
On March 18th the federal government announced temporary wage subsidies for employers.
The temporary wage subsidy for employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).
Employers that are eligible include the following:
• Canadian-controlled private corporations, registered charity, or a non-profit organization;
• Have an existing business number and payroll program account with the CRA on March 18th; and
• Pay salary, wages, bonuses or other remuneration to an employee.
How much is the subsidy?
The subsidy will be equal to 10% of remuneration paid during a three-month period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
The subsidy will be effective from March 28, 2020 to June 20, 2020. So the subsidy would be based on the remuneration you pay between that period of time. To benefit from this support, eligible employers may reduce the remittance of federal, provincial or territorial income tax by the amount of the subsidiary.
Associated CCPCs will not have to share the maximum subsidy.
Calculating the subsidy
The subsidy will have to be calculated manually.
Here is an example:
Employee Monthly Salary Salary paid March 28 – June 20 10% to max $1,375
Ann $5,000 $15,000 $1,375
Bob $3,333 $10,000 $1,000
Carl $2,000 $6,000 $600
Dianne $4,583 $13,750 $1,375
Eric $500 $1,500 $150
TOTAL $15,416 $46,250 $3,125
Based on our example, the employer would remit $1,042 less in payroll remittances each month.
Remittances can be reduced in the first remittance period that includes remuneration paid between March 18 and June 20. For many monthly remitters, this will be on their April 15, 2020 remittance.
If the income tax deducted is not sufficient to offset the subsidy, future deductions may be reduced to offset the subsidy amount. This includes reducing the income tax remittance made on payrolls after June 20th.
The subsidy is only calculated on the amount remitted to the CRA. Continue to deduct income tax, CPP and EI premiums from salary, wages, bonuses or other remuneration paid to your employees as you currently do.
The subsidy will be considered taxable income. The subsidy amount should be recorded as income on your tax filings.
If you feel you qualify for the wage subsidy, and our firm processes your payroll, please let us know if you would like to make application of the wage subsidy by contacting your account manager at Equitus (or Shajani).
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP