COVID-19 & Canadian Government Incentives
Wage Subsidy Offered to Employers Initially this wage subsidy was 10%. It offered the following relief. Example of how the initial wage subsidy worked: If your monthly payroll was say $10,000 (to use a round number), 10% or $1,000.00 would be the wage subsidy that a company would be eligible for in the particular month.
With this $1,000.00 the company will be allowed to deduct up to a maximum of $1,000.00 from the payroll taxes owed on the 15th day of the following month.
This deduction cannot be applied against either the CPP or the EI portion of the payroll taxes owed, only the portion of the income tax withheld. This wage subsidy is maxed out at $25,000 for the 2020 year. So NO Money on the way just a discount on payroll taxes.
In addition, the total amount discounted on payroll taxes in the year is to be included in the income of the company and taxed in the company's 2020 year...YES TAXED!
On March 30, 2020, Mr. Trudeau will now replace the above wage subsidy with a new 75% wage subsidy, with details to follow.
Subsidy offered to self-employed and independent contractors The government of Canada has proposed a $2,000/month subsidy for the self-employed and independent contractors. More details will be provided on April 6, 2020, with a website on the process of applying for these funds.
Guaranteed Government Loans Government guaranteed loans are going to be offered that max out at $40,000 with approximately $10,000 being forgivable on the meeting of certain conditions. These loans will be offered through financial institutions (including the Business Development Bank of Canada). For details, we need to have a discussion with the financial institution.
Other Relief Incentives
- I have seen many landlords offering their commercial clients a 50% deferral on rent;
- Financial institutions are offering either interest-only payments on mortgages and in some cases deferral of both mortgage and property tax payments. Note that in the case of the deferrals or interest-only payments you will end up paying more money in total on mortgages in more interest payments and in the case of deferrals, the deferred payment will be added to the mortgage.
It is advisable to seek professional advice to understand the tax laws that impact your particular situation, and to guide you through the complexities of Canadian Income taxes. AWFS Consulting Inc. offers professional tax, business advisory, and accounting services to clients. The company’s mission is to offer financial leadership and support to clients in this ever-changing economic environment by empowering clients with financial knowledge.