Welcome to CONnected Navigating COVID19:Financing programs and financial recovery cash flow considerations for construction Presented by BDO Canada In partnership with Bockstael Construction
TODAY’S SPEAKERS AMANDA FAVOT HALI VAN VLIET JENNIFER LUCIER JUSTIN MASTRANGELO Partner Partner Vice President Senior Manager Financial Advisory People Advisory Domestic & Domestic & Services Transaction Tax Transaction Tax
AGENDA Workforce Wage Tax Financing Government Subsidies Options Deadlines Support
GOVERNMENT SUPPORT – CEWS 4
CEWS – HIGH LEVEL PROGRAM OVERVIEW ELIGIBLE ELIGIBLE EMPLOYEES EMPLOYER KEY CONCEPTS QUALIFIED ELIGIBLE REVENUES REMUNERATION 5 Information current as of May 7, 2020.
CEWS – HIGH LEVEL PROGRAM OVERVIEW ELIGIBLE PERIODS REQUIRED REDUCTION PERIOD CLAIMING PERIOD REFERENCE PERIOD FOR ELIGIBILITY IN REVENUE March 2020 over: March 15 to April PERIOD 1 15% • March 2019 or 11 • Average of January and February 2020 Eligible for Period 1 OR PERIOD 2 April 12 to May 9 30% April 2020 over: April 2019 or • Average of January and February 2020 • Eligible for Period 2 OR PERIOD 3 May 10 to June 6 30% May 2020 over: • May 2019 or • Average of January and February 2020 Election under paragraph 125.7(4)(e)(Cash Method) Election under 125.7(1) (Prior reference period) – January / February 2020 Average Finance has the ability to extend eligible periods to September 30 6 Information current as of May 7, 2020.
APPLICATION PROCESS HOW CAN YOU APPLY FOR THE SUBSIDY 1. APPLY THROUGH THE CRA’S My Business Account Portal Requires a pre-existing account with the program; or Request to open account by an authorized person 2. APPLY THROUGH REPRESENT A CLIENT Only representatives authorized at Level 2 or 3 will be able to apply 3. APPLY THROUGH THE CRA’S ONLINE WEB FORM USING A WEB ACCESS CO DE Web based application Requires a Web Access Code (WAC) You can apply online with CRA for a Web Access Code and will be asked for your account number, date of registration and total income tax reported in box 22 of the most recent 2018 T4 Summary 7 Information current as of May 7, 2020.
APPLICATION PROCESS INFORMATION NEEDED FOR EACH APPLICATION EACH COMPANY WITH A SEPARATE RP NUMBER MUST APPLY SEPARATELY Line A = Number of eligible employees Line B = Total eligible remuneration paid during the period Line C = Calculation of your Canada Emergency Wage Subsidy (CRA Excel File) Line D = Employers EI, QPIP Premiums payable on salary paid to furloughed employees Line E = Employer’s CPP and QPP contributions payable on salary paid to furloughed employees Line F = 10% Temporary Wage Subsidy reduction for employers (If applicable) Line G = Amounts received by eligible employees under the Work Sharing Benefit program Line H = CEWS (Automatically calculated) ATTESTATION FORM TO BE COMPLETED FOR EACH ENTITY – AVAILABLE TO DOWNLOAD ON CRA’S WEBSITE CONSISTENT ELECTIONS AND FORMS SHOULD BE FILED FOR THE ENTIRE GROUP 8 Information current as of May 7, 2020.
FREQUENTLY ASKED QUESTIONS 1 2 3 4 Can an eligible employer When calculating the Can an eligible employer What is baseline claim the wage subsidy for wage subsidy, should I claim CEWS in respect of remuneration? an employee that the consider wages paid or an eligible employee who employer hires back and wages paid in respect of has received payments pays retroactively? that week? under the CERB? 5 6 7 8 Will I be eligible for Can owners and non- Can I claim the wage Is the wage subsidy both the CEWS and the arms length subsidy twice if an eligible considered taxable 10% Temporary Wage employees claim the employee is employed by income? Subsidy? wage subsidy? two or more eligible employers? 9 Information current as of May 7, 2020.
EXAMPLES Calculating qualified revenue of a group of employers 125.7(4)(a) Joint Election Corporation A owns all the shares of Corporation B. Both corporations are eligible employers. Corporation A prepares consolidated financial statement for accounting purposes. Assume that that there is no intercompany revenue. Below are the qualifying revenue for each corporation as well as their qualifying revenue on a consolidated basis for March 2019 and March 2020. QUALIFYING REVENUE FOR QUALIFYING REVENUE REDUCTION IN QUALIFYING REVENUE IN MARCH 2019 FOR MARCH 2020 MARCH 2020 AS COMPARED TO MARCH 2019 CORPORATION A $1,000,000 $1,000,000 0% $1,000,000 $800,000 20% CORPORATION B TOTAL ON A $2,000,000 $1,800,000 10% CONSOLIDATED BASIS In accordance with normal accounting practice Corporations A and B will not be eligible for the wage subsidy as their qualifying revenue, determined on a consolidated basis, has not experienced the required reduction in revenue of at least 15%. Therefore, Corporation A and Corporation B have decided to determine their qualifying revenue separately. In that case, while Corporation A will not qualify for the wage subsidy, as it has not experienced the required reduction in revenue of at least 15%, Corporation B will qualify for the wage subsidy because its qualifying revenue has dropped by more than 15%. 10 Information current as of May 7, 2020.
EXAMPLES Calculating qualified revenue of members of an affiliated group 125.7(4)(b) Joint Election Individual Mr. A, owns all the shares of Corporation A and his spouse Mrs. A, owns all of the shares of Corporation B. Both corporations are eligible employers. Corporation A and Corporation B form an affiliated group and each corporation is a member of that group. Below are the qualifying revenues for each corporation as well as on a consolidated basis, assuming such a consolidation was done, for March 2019 and March 2020. QUALIFYING REVENUE FOR QUALIFYING REVENUE REDUCTION IN QUALIFYING REVENUE IN MARCH 2019 FOR MARCH 2020 MARCH 2020 AS COMPARED TO MARCH 2019 CORPORATION A $200,000 $200,000 0% CORPORATION B $200,000 $100,000 50% TOTAL ON A $400,000 $300,000 25% CONSOLIDATED BASIS Because Corporation A and Corporation B are members of an affiliated group, they could jointly elect that the qualifying revenue of the affiliated group be determined on a consolidated basis in accordance with relevant accounting principles, and the consolidated amount will be used as the qualifying revenue by each member of the group. Thus, both Corporations A and B will be eligible for the wage subsidy, as their qualifying revenue, determined on a consolidated basis, has dropped by more than 15%. Without this election only Corporation B would qualify for the wage subsidy. 11 Information current as of May 7, 2020.
EXAMPLES Calculating qualifying revenue in a non- arm’s length relationship 125.7(4)(d) Joint Election All or substantially all of the revenues of Corporation X, (an eligible employer), are from two corporations (Corporation Y and Corporation Z) with which it does not deal at arm's length. Corporation X's total revenue for March 2020 was $1,450 of which $400 was attributable to Corporation Y and $1,000 was attributable to Corporation Z. $50 was from an arm's-length taxpayer. Corporation Y's qualifying revenue for March 2020 was $1,000 and for March 2019 was $1,500. Corporation Z's qualifying revenue for March 2020 was $1,300 and for March 2019 was $2,000. Calculation of Corporation X's qualifying revenue for the current reference period: Qualifying revenue (QR) calculation in relation to Corporation Y: $100 x $400 (QR attributable to Corporation Y)/$1,400 (Corporation X's total QR from non-arm's-length persons or partnerships) x $1,000(Corporation Y QR for current reference period)/$1,500 (Corporation Y QR for prior reference period) = 19 QR calculation in relation to Corporation Z: $100 x $1,000 (QR attributable to Corporation Z)/$1,400 (Corporation X's total QR from non-arm's-length persons or partnerships) x $1,300(Corporation Z's QR for current reference period)/$2,000 (Corporation Z's QR for prior reference period) = 46 The weighted average qualifying revenue for Corporation X for the current reference period is $65 ($19+$46). Since the prior reference period's qualifying revenue is deemed to be $100, Corporation X has experienced the required reduction in revenue of at least 15% for the claim period. Corporation Y and Corporation Z must jointly elect with Corporation X in order to use this special rule. 12 Information current as of May 7, 2020.
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