As you are likely aware, the COVID-19 pandemic is wreaking havoc on society and the economy. The Government of Canada has recognized the need for assistance and has made efforts to help both Canadian individuals and businesses. A big part of Canada’s response to the COVID-19 pandemic is providing government assistance to avoid further economic struggle.
Interest Rate Cuts
Due to COVID-19’s impact on the economy, the Bank of Canada has cut interest rates to 0.75%. This is meant to be a proactive measure to prevent further negative impact to the Canadian economy resulting from the pandemic. By decreasing the prime interest rate, individuals and businesses can still afford and rely on credit despite economic turmoil.
The Bank of Canada’s primary goal in this time of economic stress is to increase the Canadian financial system resilience and ensure that financial institutions can continue to extend credit to individuals and businesses. A secondary factor that has impacted Canada’s economy is the sharp drop in oil prices. The Bank of Canada’s proactive actions are meant to address economic stress from both COVID-19 and the oil price drop.
Increasing Access To Credit
As a response to the COVID-19 economic stress, the Government of Canada has introduced the Business Credit Availability Program (BCAP). The BCAP program will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide $10 billion of additional financial support. This support is mainly for small to medium-sized businesses who will be hit hard by the economic downturn. The idea is to provide businesses who are vulnerable in this time financial help to ensure they remain resilient.
BDC and EDC are working with private lenders to coordinate on credit solutions for businesses in various industries, such as oil, tourism, gas, and air transportation. Farmers and other agri-food businesses will receive credit solutions through Farm Credit Canada. The additional financing that has become available to Canadian businesses is meant to provide financial support through this time of economic distress.
Wage Subsidy
Payroll is typically the largest expense a business incurs. To avoid mass layoffs which would cause worse economic struggle, the Government of Canada is introducing a 10% wage subsidy for the next 90 days starting on March 18th. The maximum amount is $1,375 per employee and $25,000 per employer. Eligible employers include non-profit organizations, charities, and specific Canadian Controlled Private Corporations.
Furthermore, eligible employers are permitted to reduce remittances of provincial, territorial, and federal income tax by the amount of the subsidy. This is only applicable to remittances made to the Canada Revenue Agency (CRA).
Work-Sharing Program
Work-Sharing (WS) is a program designed to help employers and employees mitigate mass layoffs when there is a temporary reduction in normal business activity that is outside of the employer’s control. The program provides income support to employees who have temporarily had their hours reduced and therefore do not technically qualify for EI benefits.
Work-Sharing programs involve employers, employees, and Service Canada. All employees who are part of a WS agreement must agree to reduced hours and share available work over a certain period of time.
The Work-Sharing Program has been put in place by the Government of Canada as an interim, special solution for employers impacted by the economic downturn of COVID-19. This program applies to forestry, steel and aluminum sectors.
This program extends the duration of Work-Sharing agreements by an additional 38 weeks bringing the total to 76 weeks. The required waiting period has been waived to allow employers with recently expired agreements to immediately apply for a new agreement. Those applying for new agreements will not have to wait between applications and ease Recovery Plan requirements for the duration of the WS agreement.
For the duration of the program, eligibility, how to apply and important dates, see below.
COVID-19 – Everyone
Work-Sharing Program special measures are effective from March 15, 2020, to March 14, 2021
If you are experiencing a downturn in business activity related to COVID-19 and all of the following apply, you are eligible:
- WS agreements signed between March 15, 2020, and March 13, 2021;
- WS agreements that finished between June 23, 2019 and March 14, 2020, and are in a mandatory cooling-off period; and
- WS agreements that started, or finished, between March 15, 2020, and March 14, 2021.
Forestry Sector
Work-Sharing Program special measures are effective from July 30, 2017, to March 28, 2020.
If your business has been impacted directly or indirectly by the downturn in the forestry sector and one of the following apply, you are eligible:
- Had a WS agreement that finished between October 30, 2016, and July 29, 2017;
- Have a WS agreement that will start or finish between July 30, 2017, and March 28, 2020; or
- Have a WS agreement that will be signed between July 30, 2017, and March 28, 2020 (start date can be no later than March 29, 2020).
Steel And Aluminum Sectors
Work-Sharing Program special measures are effective from August 19, 2018, to March 27, 2021.
If your business has been impacted directly or indirectly by the downturn in the steel or aluminum sector and you have one of the following, you are eligible:
- Had a WS agreement that finished between November 25, 2017, and August 18, 2018;
- Have a WS agreement that will be signed between August 19, 2018, and March 27, 2021 (agreement start date can be no later than March 28, 2021); or
- Have a WS agreement that will start or finish between August 19, 2018, and March 27, 2021.
How To Apply
For new agreement applications or if you had a WS agreement that ended between:
- June 23, 2019, and March 14, 2020 (due to COVID-19)
- October 30, 2016, and July 29, 2017 (for the forestry sector)
- November 25, 2018, and August 18, 2018 (for the steel and aluminum sector)
Then you must submit the following documents:
- EMP 5100 – Application for a Work-Sharing agreement
- EMP 5101 – Attachment A: Work-Sharing unit attachment (must be signed by each employee for non-union agreements or by a union representative)
- EMP 5105 – Attachment B: Recovery Plan for special measures
- Sales and/production figures for the previous 2 years
If you have a 38-week agreement in place and are applying for the 38-week extension, you must submit the following documents:
- EMP 5103 – Amendment to a Work-Sharing Agreement
- EMP 5101 – Attachment A: Work-Sharing unit attachment (must be signed by each employee for non-union agreements or by a union representative)
- EMP 5105 – Attachment B: Recovery Plan for special measures
- Sales and/production figures for the previous 2 years
It is recommended that you apply at least 30 days prior to when you want the temporary special measures to begin. Applications can be submitted to:
- Atlantic Canada: ESDC.TP-ATL-WS-TP.EDSC@servicecanada.gc.ca
- Quebec: QC-DPMTDS-LMSDPB-TP-WS-GD@servicecanada.gc.ca
- Ontario: ESDC.ON.WS-TP.ON.EDSC@servicecanada.gc.ca
- Western Canada and Territories: EDSC.WT.WS-TP.ESDC@servicecanada.gc.ca
For more information, visit this Government of Canada website.
Reduced The Domestic Stability Buffer
The Office of the Superintendent of Financial Institutions (OSFI) has announced that they are lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets. This allows Canada’s large banks to inject $300 billion dollars into the economy. This action will provide long term, stable financing to banks and mortgage lenders. In addition, it will help facilitate continued lending to Canadian consumers and businesses in this time of economic downturn.
Business Taxes
The Canada Revenue Agency (CRA) is allowing businesses to defer the payment of income tax that becomes owing on or after today and before September 1, 2020, until after August 31, 2020. In simpler words, any taxes owing between now and August 31, 2020, will not become due until September 1, 2020. This applies to tax amounts and instalments due under Part I of the Income Tax Act (ITA). During this period, no interest or penalties will accumulate on the owed amounts.
The CRA will also be ceasing contact with any small or medium-sized businesses to initiate any post-assessment GST/HST or income tax audits for the next month. For most businesses, the CRA will temporarily suspend audits with taxpayers and representatives. The Liaison Officer service will now be available over the phone to provide taxation information to businesses during this time.
What We Know Now
The above discussions are what we know now and are based on the current COVID-19 circumstances. Keep in mind that this information is susceptible to change depending on how the COVID-19 situation evolves. For more information, visit the below Government of Canada websites:
