Frequently asked questions - Canada emergency wage subsidy (CEWS) CRA Webpage 24 September 2021

s. 125.7(9) rule can be applied successively

5. How is the reduction in revenue determined?

… Once an eligible employer has determined that it has experienced the required reduction in revenue for a particular claim period, it is automatically considered to have experienced the required reduction in revenue for the immediately following claim period (deeming rule). As a result, the employer does not have to make this determination again for that next claim period … .

… In a situation where the eligible employer, subsequently determines that it actually experienced the required reduction in revenue, without applying the deeming rule, for the second claim period - April 12 to May 9, 2020, the eligible employer will be considered to have experienced the required reduction in revenue for that third claim period because of the deeming rule that can now be applied to the third period … .

No required link of revenue decline to COVID/Example of application of alternative approach

5. How is the reduction in revenue determined for claim periods 1 to 4?

[T]he employer is under no obligation to prove that the decline in revenue is related to the COVID-19 crisis. …

Example 5D

An eligible employer is determining if it has experienced the required reduction in revenue to qualify in order to claim the wage subsidy for the first claim period, from March 15 to April 11, 2020. Since the eligible employer began operations only on January 14, 2020, it must use the alternative approach to determine its reduction in revenue. Its total qualifying revenues earned in January and February 2020 was $90,000. Its average qualifying revenue for the two months will be $57,447 [0.5x90,000x(60/47]. Its qualifying revenue for March 2020 is $39,600.

Because its qualifying revenue for March 2020 has declined by 31% when compared to the average of its qualifying revenues earned in both January and February 2020, the eligible employer has experienced the required reduction in revenue of at least 15% for the first claim period and will qualify to claim the wage subsidy for that period.

Because it has qualified for the first claim period, the eligible employer is automatically considered to have experienced the required reduction in revenue for the second claim period (April 12 to May 9, 2020).

Examples of application of the special elective rule to use the qualifying revenues of NAL persons to determine reduction in qualifying revenues

8. Are there special rules for calculating the qualifying revenue of an eligible employer that derives its revenue from one or more non-arm's length persons or partnerships?

Example re provision to non-arm's length domestic corporation

Example 8A

Corporation A, an eligible employer, provides management services, including payroll services, to Corporation B. All of Corporation A's revenues are from Corporation B with which it does not deal at arm's length. Corporation B's revenues are from arm's-length customers.

Under the special rule, in order to determine whether Corporation A can qualify for the wage subsidy, Corporation A's qualifying revenue for the current reference period is determined by reference to the required reduction in qualifying revenue for Corporation B for that reference period.

Example re provision to 2 non-arm's length domestic corporations

Example 8B

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.

Example of s. 125.7(4)(d) election with non-resident corporation

Example 8C

All or substantially all of the revenues of Canco, (an eligible employer), are from sales to a non-resident corporation (Forco), who then sells to arm’s length customers. Canco and Forco do not deal at arm’s length. All of Canco’s ordinary activities take place in Canada. All of Forco’s sales and other activities take place outside of Canada.

Canco’s total revenue for March 2020 was $900. All of this revenue was attributable to Forco.

Forco’s total revenue for March 2020 was $1,500 and for March 2019 was $2,000.

Calculation of Canco’s qualifying revenue for the current reference period:

Qualifying revenue (QR) calculation in relation to Forco:

$100 x $900 (QR attributable to Forco)/$900 (Canco total QR from non-arm’s-length persons or partnerships) x $1,500 (Forco QR for current reference period)/$2,000 (Forco QR for prior reference period) = 75

Since the prior reference period’s qualifying revenue is deemed to be $100, Canco has experienced the required reduction in revenue of at least 15% for the claim period. Forco must jointly elect with Canco in order to use this special rule

[Q.8-01] ...

• Non-resident's qualifying revenue could be measured in the applicable foreign currency consistent with the non-resident’s normal accounting practice

[Q.8-1]. Meaning of “substantially all”

Generally, the phrase “all or substantially all” means at least 90%. … However, the “all or substantially all” test could, depending on the circumstances and context, be satisfied even if the 90% level is not strictly achieved.

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[Q. 9] Normally, qualifying revenues of each eligible employer determined by the consolidated statements

The qualifying revenue of an eligible employer is generally determined in accordance with its normal accounting practices. Consequently, when a group of eligible employers generally prepares consolidated financial statements, each member of the group will determine its qualifying revenue in accordance with those statements.

Example of election to determine revenues on an unconsolidated basis

However, each member of such a group may determine its qualifying revenue separately and not based on the consolidated statements, so long as every member of the group determines its qualifying revenue on that separate basis.

Example 9A

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. [There is a consolidated reduction in qualifying revenue of 10% for the first period, but an unconsolidated reduction of 20% for Corporation B.] 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%.

Non-consolidation election under s. 127.5(4)(a) is not binding on subsequent periods

12-1. Can an eligible employer change their approach used for calculating the qualifying revenue from claim period to claim period?

[F]or the special rules described in Q8-Q11 [e.g., respecting Q.9 where “each member of … a group may determine its qualifying revenue separately and not based on the consolidated statements, so long as every member of the group determines its qualifying revenue on that separate basis”] an eligible employer may choose to apply a different approach in a subsequent claim period, provided that all the requirements for the application of that different rule are met for that subsequent claim period.

[Q.10] Example 10A of two affiliated but not commonly controlled corporations making the election

• CRA provides Example 10A of two silos making the s. 127.5(4)(b) election, e.g., two corporations each owned 100% by a spouse, with one having no percentage reduction in qualifying revenue in its first period, and the other experiencing a 50% reduction.
• Accordingly, on a consolidated basis there is a 25% drop in qualifying revenue.

Consolidation election must be made by the broadest affiliated group of eligible entities possible and not a subset

10-2. Can affiliated corporations that are not in the same ownership chain, determine their qualifying revenue on a consolidated basis, even if they cannot prepare consolidated financial statements?

On the assumption that affiliated corporations that are not in the same ownership chain, are otherwise eligible employers, they can jointly elect to determine their revenue on a consolidated basis, as though the relevant accounting principles for consolidation applied to them. This means, for example, that intercompany transactions should be eliminated.

Where there are multiple entities in an affiliated group, if an election is going to be made, all eligible employers in the affiliated group must consolidate for the purpose of calculating qualifying revenue. It is not possible to have only some of those eligible employers in the affiliated group elect to consolidate.

[Q.10-3.] One signed election of the parent will be accepted on behalf of all group members not making the claim

[The] joint election must be signed by each eligible employer in the affiliated group that is applying for the wage subsidy (see note below). On an administrative basis, the CRA will accept a signature by the authorized representative of the overall parent entity of the affiliated group, on behalf of all eligible employers in the affiliated group that are not making a wage subsidy claim. … [A] complete list of these group members must be attached to the joint election. …

… This election … and the list, must be made and retained with the eligible employer's other books and records … .

[Q.3-9] Pro rata recognition of payroll under a cost-sharing agency arrangement

A cost sharing arrangement (CSA) is generally an agreement under which the participants share certain costs, including the salary or wages that are paid to employees. …

[W]here the CSA represents a type of an agency relationship or a mandate for the employers, each of the separate eligible employers may qualify for the wage subsidy in respect of their portion of eligible remuneration paid to each eligible employee by the agent or the mandatary in respect of a week in a claim period, as long as all of the other eligibility criteria have been met … . Only the actual employer(s) can apply for the wage subsidy in respect of a particular employee … .

Example of arrangement for doctors’ sharing of medical support staff

Example 3-9A

A group of five medical professional corporations dealing at arm’s length, enter into a CSA to share certain costs, including the salary or wages that are paid to eight support employees. The agreement, which is an agency relationship, requires that the participants (the five medical professional corporations) use an entity established for this purpose (the agent) to perform certain tasks, such as paying employees, on each of their behalf. The medical professional corporations are each considered the employer on a proportionately agreed upon basis in respect of the employees. The entity established for this purpose has its own payroll program account to make payroll remittances for all eight support employees.

Given that an agency relationship exists, each medical professional corporation could qualify for the wage subsidy in respect of their portion of eligible remuneration paid to each eligible employee by the agent in respect of a week in a claim period, as long as all of the other eligibility criteria have been met (see Q4). Each corporation would need to obtain their own payroll program account to apply for and receive the wage subsidy.

[Q.3-10]. Can a joint venture qualify for the wage subsidy? New: October 6, 2020

[The] case law, which generally describes a joint venture as a limited business undertaking by two or more parties, in which the parties have a joint property interest in the subject matter of the venture and share control and management of the enterprise. …

A joint venture is not an eligible employer for the purposes of the wage subsidy. However, in certain circumstances, an eligible employer may use the qualifying revenue of a joint venture instead of its own qualifying revenue, in order to determine if it experienced the required reduction in revenue in order to qualify for the wage subsidy (see Q11).

Q13-1. In determining who is an eligible employee, what is the meaning of the phrase, “employed in Canada”?

An employee is “employed in Canada” if they are performing the duties of an office or employment in Canada. Generally, a person exercises the functions of their employment at the place where they are physically present. Thus, when that place is situated outside Canada, that person will not generally be considered as being “employed in Canada”. It is not necessary for an individual to be “employed in Canada” throughout the claim period to be an eligible employee.

[Q. 16] Eligibility of non-resident employee

[E]ligible employee status is determined based on where the individual is employed and not where the individual resides. Generally, a non-resident individual employed in Canada during a claim period will qualify as an eligible employee as long as all other conditions to be an eligible employee are met ... .

[Q.17-2] Dividends not eligible remuneration

For the purpose of the wage subsidy, dividends are not considered eligible remuneration. Accordingly, an eligible employer that pays a dividend instead of salary to an owner-manager that is also an eligible employee in a claim period, will not be eligible for the wage subsidy in respect of that dividend.

[Q.17-4] Inclusion of maternity or parental top-up payments

Amounts paid by an eligible employer to an eligible employee as a maternity or parental top-up amount are generally considered salary, wages, and remuneration and would qualify as eligible remuneration.

To qualify for the wage subsidy, the maternity or parental top-up payments must be paid to the eligible employee by an eligible employer that qualifies for the wage subsidy, in respect of a particular week in the claim period. An employee on maternity leave will not be considered to be on leave with pay for purposes of the wage subsidy (see Q20-03).

[Q.17-7] Payments of wages in lieu of termination notice and salary continuance payments

A payment in lieu of earnings for a period of reasonable notice of termination (wages in lieu of termination notice) that is made under the explicit or implied terms of an individual’s employment is considered salary or wages from employment. However, wages in lieu of termination notice are not considered to have been paid in respect of a week, and therefore are not eligible for the wage subsidy.

Salary continuance payments are generally periodic amounts paid to an employee who is being terminated but who remains on payroll and remains entitled to benefits available only to employees, even if they are no longer required to report to work. Where pension benefits continue to accrue to the individual, an employment relationship continues to exist (as pension benefits only accrue to employees) even though the individual is not required to report to work.

Where the employment relationship continues to exist, salary continuance payments to an eligible employee are salary or wages from employment, that would generally be considered eligible remuneration paid in respect of a week, and would be eligible for the wage subsidy.

[Q.19] Remuneration can be exempt

Eligible remuneration of an eligible employee means amounts for which the eligible employer would generally be required to make payroll deductions to be remitted to the CRA, irrespective of whether the amounts are taxable to the eligible employee. For example, salaries and wages paid to a status Indian whose income is exempt from tax under a specific provision of the Act are considered eligible remuneration and would qualify for the purpose of calculating the wage subsidy.

[Q. 21] Wage subsidy reduced by 10% temporary wage subsidy as calculated, even where the latter has not yet been fully claimed through available reductions in source deduction remittances

Example 21A

Assume an eligible employer is eligible for both the subsidies. It calculates its 10% temporary wage subsidy as $2,050 on remuneration paid from April 12 to May 9, 2020 (which coincides with the second claim period), using the 10% rate. However, it only deducted $1,050 of federal, provincial, or territorial income tax from its employees for that period.

While the eligible employer can still reduce a future payroll remittance by $1,000 in respect of the balance (even if that remittance is in respect of remuneration paid after May 9, 2020), its CEWS claim for the same period (April 12 to May 9, 2020), is reduced by the entire amount of $2,050.

Reduction to wage subsidy can be avoided by electing to claim temporary wage subsidy at less than 10%

Example 21B

In Example 21A assume the eligible employer elects to apply a percentage less than 10% to determine the 10% temporary wage subsidy such that the subsidy is now only $1,050. It is now able to offset the entire $1,050 of the subsidy against the $1,050 from the federal, provincial, or territorial income tax withheld from its employees for that period. In this situation, its CEWS claim for the same period (April 12, to May 9, 2020), is reduced by only $1,050.

6-1 Qualifying revenue includes interest and dividend income arising in course of ordinary activities

The qualifying revenue of an eligible employer is generally determined in accordance with its normal accounting practices. To the extent that investment revenue, such as interest or dividends from investments in securities, arises in the course of an eligible employer’s ordinary activities in Canada in the particular period, is not an extraordinary item or on account of capital, and is included in revenue under its normal accounting practices, it would generally be included in qualifying revenue.

6-2. Whether government assistance directly related to the COVID-19 is excluded as an extraordinary item

Qualifying revenue of an eligible employer is generally determined in accordance with its normal accounting practices. Qualifying revenue means the inflow of cash, receivables, or other consideration arising in the course of the ordinary activities of the eligible employer in Canada in a particular period. For greater certainty, qualifying revenue does not include extraordinary items.

“Extraordinary items” is not a term defined in the Act. Generally, the CRA would expect extraordinary items to meet all three of the following characteristics:

(a) Not be expected to occur regularly or frequently within several years

• Grants or other government assistance that an entity is eligible to receive on a regular or reoccurring basis would not meet this criteria.

(b) Not typical of the normal activities or risks inherent in the normal operations of the entity

• Consideration should be given to the nature of the services or products offered by an entity and the normal environment in which it operates.

(c) Primarily out of the control of owners or management

• Consideration should be given to the extent that inflows are influenced by the decision of owners or management.

... [D]ue to the highly unusual economic impact and response resulting from the COVID-19 crisis, the CRA would generally consider emergency government assistance, including assistance from provinces and municipalities, directly related to COVID-19 to be an extraordinary item. However, the CRA would not consider COVID-19 related government assistance to be extraordinary to the extent that it replaces or is meant to replace normal or recurring government assistance.

Change in revenue sources does not change the application of the qualifying revenue definition

6-2.1. If an eligible employer changes its operations to manufacture essential products during the pandemic, which generates revenues but no profit, is the revenue included in qualifying revenue?

Yes. The qualifying revenue of an eligible employer … would include the revenue arising from the sales of new products. …

[Q.6-2.3] Forgivable portion of a Canada Emergency Business Account (“CEBA”) loan not included in qualifying revenue

The forgivable portion of a CEBA loan meets all the characteristics of an extraordinary item … [and] is not included in qualifying revenue.

Bad debts generally not deducted

6-3. Can an eligible employer deduct its bad debts when determining its qualifying revenue under the accrual method?

When using the accrual method in accordance with its normal accounting practices, an eligible employer should usually not be able to deduct its bad debts (or an allowance for bad debts), when determining its qualifying revenue.

No adjustment to changes in the normalized level of operations

6-6. Can an eligible employer's qualifying revenue for a reference period be adjusted to account for changes in business operations of an eligible employer's business?

No. … For example, an eligible employer would not be able to make adjustments to its qualifying revenue calculations for a prior reference period with unusually low revenue caused by an interruption to its operations due to damage to equipment or premises, an employee lock-out or strike, or a supply chain disruption. Likewise, qualifying revenue calculations cannot be adjusted for a recent expansion of an eligible employer's normal operations … .

Qualifying revenue measured in Canadian dollars where accounting statements in Canadian dollars

6-7. How do foreign exchange rate fluctuations affect the computation of qualifying revenue?

… Where an eligible employer’s normal accounting practice is to convert the inflow of cash, receivables and other consideration to Canadian currency from a foreign currency, then the eligible employer would be expected to use the Canadian currency equivalent of the amounts in the computation of qualifying revenue.

Exception for functional currency reporter

6-8. How will an eligible employer that files its income tax returns using a functional currency compute its qualifying revenue?

.. Where an eligible employer that is a corporation files its income tax return using a functional currency, that currency is the primary currency in which the eligible employer maintains its books and records for financial reporting purposes, and using that currency would likely be part of its normal accounting practice. …Since the qualifying revenue of an eligible employer is determined in accordance with its normal accounting practices, and on that basis, it should be determined in such currency.

9-1. Consolidated revenue can arise in Canada even if ultimate sale does not occur in Canada

In accordance with accounting principles for consolidation, consolidated revenue excludes transactions between members of the group but includes global revenue of the group. The qualifying revenue of an eligible employer does not include the portion of consolidated revenue that does not arise in the course of ordinary activities in Canada. The eligible employer can however include the portion of the consolidated revenue that arises in the course of ordinary activities in Canada whether or not the ultimate sale to third parties occurs in Canada.

Examples of qualifying private schools

3-7. Are all schools and colleges eligible for the wage subsidy?

… [A] person or partnership that operates a private school or private college is a prescribed organization and is an eligible employer for the purposes of the wage subsidy.

Private schools and private colleges include for-profit and not-for-profit institutions such as arts schools, language schools, driving schools, flight schools and culinary schools.

A non-resident corporation earning Canadian Treaty-exempt income because of no PE may qualify

3-02. Can a non-resident corporation be an eligible employer if its income is excluded in computing its income under the Act because of a tax treaty? New: August 11, 2020

Yes. A non-resident corporation may be an eligible employer even if all of its Canadian-sourced business income is not taxable in Canada on the basis that it is excluded from the computation of its income under the Act because of a tax treaty.

For the purpose of the wage subsidy, an eligible employer includes a corporation (other than a public institution) that is not exempt from tax under Part I of the Act (see Q3). However, there are some exceptions and certain corporations that are exempt from tax can still be eligible … .

Where a corporation resides in a country with which Canada has a tax treaty and carries on a business in Canada but does not have a permanent establishment in Canada, the treaty might provide that such income is not taxable in Canada. That non-resident corporation is not listed in subsection 149(1) of the Act as being exempt from tax under Part I of the Act. The fact that the treaty provides that its income is not taxable in Canada does not prevent it from being an eligible employer.

Verification that payroll remittances were made through payroll service

3-8. Can an eligible employer that hires a third party to facilitate the administration of its payroll, qualify for the wage subsidy?

Eligible employers who … on March 15, 2020 employed one or more individuals and allowed a third party with a business number to make payroll remittances on their behalf, through the third party’s account, will need to register for their own payroll program account. Eligible employers may also need to register for their own business number if they did not previously have one.

Once the payroll program account (and business number if applicable) is opened, the CRA will require information from the third party to verify that remittances were previously made on behalf of the eligible employer. This would include a listing of each employer the third party made remittances on behalf of, and the remittances that can be attributed to each of those employers from January 1, 2020.

Example of application of “greater of rule” for claim periods 5 to 9

5-02. Can an eligible employer qualify for the wage subsidy if it does not have a revenue reduction in a claim period?

For claim periods 5 to 9, if an eligible employer has not experienced a reduction in revenue for a particular claim period, it may still qualify to claim the wage subsidy in the particular claim period if the deeming rule (see Q5-03) applies, or if it is eligible for top-up portion of subsidy (see Q20-03).

Example 5-02A

An eligible employer follows the general year-over-year approach and has a reduction of qualifying revenue of 25% for claim period 4. The changes in qualifying revenue that the employer has seen in subsequent claim periods, when comparing the qualifying revenue in the current reference period with that in the prior reference period, are as follows:

• Claim period 5: a reduction in qualifying revenue of 15% (July 2020 over July 2019). Since the prior claim period actual reduction (25%) is greater than the current claim period reduction (15%), the deeming rule applies and the reduction in revenue is considered to be 25% for claim period 5.

• Claim period 6: an increase in qualifying revenue of 10% (August 2020 over August 2019). Since the prior claim period actual reduction (15%) is greater than the current claim period reduction (0%), the deeming rule applies and the reduction in revenue is considered to be 15% for the claim period 6.

• Claim period 7: an increase in qualifying revenue of 5% (September 2020 over September 2019). Regular rule applies and the employer is not eligible for the wage subsidy for claim period 7 (since the prior claim period and the current claim period have seen an increase of revenue, the deeming rule does not apply).

• Claim period 8: a reduction in qualifying revenue of 12% (October 2020 over October 2019). Regular rules applies and since the employer has a reduction in revenue for claim period 8, it will qualify for the wage subsidy for this period (since the prior claim period had an increase in qualifying revenue, the deeming rule does not apply)

6-4. Can a corporation formed on the amalgamation of two or more predecessor corporations, or where one corporation is wound up into another, qualify for the wage subsidy?

…[T]he new corporation will use the combined qualifying revenue of the predecessor corporations to calculate its qualifying revenue for each relevant reference period in a particular claim period to determine if it has experienced the required reduction in revenue to qualify for the wage subsidy for that claim period. In the case of a subsidiary corporation that is wound up into its parent on a tax-deferred basis in accordance with subsection 88(1) of the Act, the parent’s qualifying revenue will be combined with its subsidiary’s qualifying revenue for each relevant reference period in a particular claim period to determine if it has the required reduction in revenue for a particular claim period.

However, in either of these situations, the wage subsidy will be denied if it is reasonable to consider that one of the main purposes for the amalgamation (or the wind-up) was to qualify for the wage subsidy or to increase the amount of the wage subsidy.

[Q. 8-3] Example of s. 125.7(4.2) not being available where only a business division is acquired

Example 8-3B

A corporation, Toys Inc., operates its business through two divisions. The first division manufactures and sells toys (Toy division) and the second division manufactures and sells office furniture (Furniture division). On May 1, 2020, ABC Inc. acquired all of the assets of the Toy division from Toys Inc. ABC Inc. saw a major decrease in revenue since May 2020.

For claim period 3 (the period that begins on May 10, 2020 and ends on June 6, 2020), ABC Inc. would like to elect to include the assigned revenue of the Toy division in respect of the month of May 2019 in calculating its qualifying revenue for the prior reference period (May 2019).

However, if the fair market value (FMV) of the assets of the Toy division do not constitute all or substantially all of the FMV of the property of Toys Inc. used in the course of carrying on its business, ABC Inc. cannot elect to include the assigned revenue in calculating its qualifying revenue for its prior reference period.

[Q.20-3] Table of top-up percentages

Top-up percentage examples for claim periods 5 to 9

Top-up revenue reduction percentage	Top-up percentage	Top-up percentage= 1.25 x (top-up revenue reduction percentage – 50%)
70% and over	25%	1.25 x (70% - 50%) = 25%
65%	18.75%	1.25 x (65% - 50%) = 18.75%
60%	12.5%	1.25 x (60% - 50%) = 12.5%
55%	6.25%	1.25 x (55% - 50%) = 6.25%
50% and under	0.0%	1.25 x (50% - 50%) = 0%

The overall wage subsidy percentage would be equal to the top-up percentage plus the base percentage.

Example of application

Example 20-3A

For claim period 7 (August 30 to September 26, 2020), the last three calendar months that ended before the relevant reference period for the claim period (September) would be June, July and August. Assuming that the employer follows the year-over-year approach to determine its revenue reduction for the claim period, the eligible employer had $900,000 as its average monthly qualifying revenue between June 1 and August 31, 2019. The employer’s average monthly qualifying revenue between June 1 and August 31, 2020 was $180,000. Therefore, the employer has a drop in revenue of $720,000. Consequently its top-up revenue reduction percentage is 80% (1- $180,000/$900,000, expressed as a percentage).

The top-up percentage is 25%, being the lesser of 25% and 37.5% [1.25 x (80%-50%)].

In respect of a week in the claim period, the employer has paid eligible remuneration of $600 to its sole eligible employee. As its top-up revenue reduction percentage is over 50%, it would receive a top-up rate equal to 1.25 times the average monthly revenue drop that exceeds 50%, up to a maximum top-up rate of 25%. It would be eligible for a maximum top-up wage subsidy of $150 ($600 x 25%) in respect of that employee. This amount will be included in the calculation of the wage subsidy (see Q20-02).

[Q.20-1] Example of computation of base wage subsidy

Example 20-2A

An eligible employer had $50,000 in qualifying revenue in September 2020 (current reference period). For claim period 7, assuming that the employer follows the year-over-year approach to determine its revenue reduction for the claim period, for the prior reference period (September 2019) qualifying revenue was $400,000, the employer has a drop in revenue of $350,000. Consequently, its revenue reduction percentage will be 87.5% (1- $50,000/$400,000, expressed as a percentage).

In respect of a week in the claim period 7, the employer paid eligible remuneration of $500 to its only eligible employee, who at arm’s length and who is not on leave with pay (see Q20-03).

As the revenue drop percentage was more then 50%, the base percentage is 50% and the employer will be eligible for a maximum weekly benefit of $250 ($500 x 50%) in respect of that employee. This amount will be included in the calculation of the wage subsidy (see Q20-01 and 20-02) of the employer.

[Q.3-9] Pro rata recognition of payroll under a cost-sharing agency arrangement

• CRA will recognize employee cost sharing arrangements where, for example, medical professionals share support staff and only one entity has a payroll account with CRA to handle the source deductions – so that, provided the other employers open up payroll accounts with CRA, they can apply for the CEWS under s. 125.7 based on their agreed share of the payroll

[Q.17-5] General pro-ration of bonuses.

[O]nly eligible remuneration paid by an eligible employer to an eligible employee in respect of a week in a claim period is included for purposes of computing the wage subsidy. …

For example, in the case of an annual bonus paid by an eligible employer to an eligible employee, it would generally be reasonable to consider that the annual bonus was earned throughout the fiscal period to which it relates.

Further, for the purposes of computing baseline remuneration in respect of an eligible employee for a claim period, the bonus amount must be paid during the relevant baseline remuneration period as described in Q18. It would also be reasonable, for purposes of computing baseline remuneration, to calculate the average weekly eligible remuneration by dividing the bonus amount by the number of weeks included in the period to which it relates … .

[Q.17-6] Apportionment of commissions

To determine whether a commission payment is in respect of a specific week, it is necessary to review the complete set of facts pertaining to a particular situation, including the employment contract … [and] practices specific to a particular industry … .

For example, if a car salesperson, who is remunerated by commission when a car is sold as provided in the employment contract, sells two cars in a given week in a claim period, it could be reasonable to consider that those commissions are paid “in respect of the week” in which those two sales occurred.

[Q.35] CEWS Registry

A registry of wage subsidy recipients is now available. The registry provides lists that display the legal name and operating/trade name of corporations who have received or will soon receive the wage subsidy. The registry is updated daily as applications are received, cancelled, or withdrawn.

[Q3-9] One group entity can maintain the agency payroll accounts for non-CEWS purposes.

Salary or wages may be paid under a cost-sharing arrangement (“CSA”) that is an agency relationship. In such a situation, only the actual employer can apply for the wage subsidy. CRA indicated:

In situations where only one of the employers in such a CSA, or an entity established by the participants for this purpose, had a payroll program account with the CRA on or before March 15, 2020, the other employers will need to register for their own payroll program account to apply for and receive the wage subsidy. Where this applies, the group of employers can continue making all of their future payroll remittances for the employees using their existing payroll program account … .

[Q3-9] One group entity can continue maintaining single payroll accounts for all group members for non-CEWS purposes.

• Companies in a group can continue to have one group entity handle the payroll matters (e.g., source deductions, and presumably also T4 reporting) – in one payroll account with CRA in its name - for employees that it pays as agent for other group companies even where the other group companies were required to open up their own payroll accounts with CRA to make CEWS claims.

[Q.28-7 Example 28-7A] Example showing order rule for repayment of executive compensation repayment amount

• This example concerning a TSX-listed corporation whose executive compensation disclosed on Form 51-102F6 (pursuant to National Instrument 51-102) increased from $4,500,000 in 2019 to $8,000,000 in 2021 and which claimed wage subsidies totaling $4,000,000 in periods 17 to 20, which is required to repay the executive compensation repayment amount of $3,500,000 ($8,000,000 - $4,500,000) in accordance with an ordering rule, whereby later wage subsidy amounts are required to be repaid first, until the total of all excess refunds equal the eligible employer’s executive compensation repayment amount.