CRA comments on when utilities can be added to rent for CERS purposes and notes CERS/CEWS similarity for computing revenue reduction

The definition of “qualifying rent expense” for purposes of the CERS (rent subsidy) refers to “rent … including … regular instalments of operating expenses, such as insurance, utilities and common area maintenance expenses, customarily charged to the lessee under a net lease.” In clarifying (so to speak) what this means, CRA stated:

[I]f a net lease requires an amount to be paid to a third party as a regular instalment of operating expenses customarily charged to the tenant under a net lease, this payment may be a qualifying rent expense. Examples of third parties might include property managers or utility service providers.

CRA also confirmed that an eligible entity must compute its qualifying revenue using the same approaches and elections for both the CEWS (wage subsidy) and the CERS for a particular qualifying period.

For example, if Corporations A and B have jointly elected that the qualifying revenue of the affiliated group is to be determined on a consolidated basis under s. 125.7(4)(b) for qualifying period 9 for CEWS purposes (i.e., period 2 for CERS purposes) then, even if Corporation B did not apply for the CEWS for that period, it must determine qualifying revenue on a consolidated basis for that qualifying period in determining its revenue reduction for CERS purposes.

In addition, CRA provided a useful table showing all the upcoming application deadlines for periods 8 to 13 for the CEWS, along with the corresponding periods for the CERS (periods 2 to 6).

Neal Armstrong. Summaries of 23 March 2021 TEI Roundtable, 2021-0879631C6 under s. 125.7(1) – qualifying rent expense – (a)(i)(C)(II), rent subsidy percentage and s. 125.7(2.1).