Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether an eligible entity can submit a CEWS application for a lesser amount than the amount determined under subsection 125.7(2) of the Act.
Position: A qualifying entity may choose not to calculate an amount under subsection 125.7(2) of the Act in respect of an eligible employee for a week in a qualifying period.
Reasons: See below.
Amanda Couvrette, CPA, CA
May 3, 2021
SUBJECT: Canada Emergency Wage Subsidy (CEWS)
This is in reply to your query of May 21, 2020 regarding the Canada Emergency Wage Subsidy (“wage subsidy”) under section 125.7 of the Income Tax Act (the “Act”). You would like to know if a qualifying entity can apply for a lesser amount than the amount for which they are eligible for under subsection 125.7(2) of the Act. We apologize for the delay in our response.
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R11, Advance Income Tax Rulings and Technical Interpretations.
In order to qualify for the wage subsidy in respect of a qualifying period, an eligible entity must meet certain conditions. One of the conditions requires that the eligible entity files an application with the Minister in respect of a qualifying period in prescribed form and manner on or before the later of January 31, 2021 (footnote 1) and 180 days after the end of the qualifying period.
The amount of the wage subsidy, for a qualifying entity for a qualifying period, is determined by formula pursuant to subsection 125.7(2) of the Act. Variable A of the formula calculates the total of all amounts, each of which is for an eligible employee in respect of a week in a qualifying period. It essentially provides a calculation for any eligible employee, in respect of a week in a qualifying period, subject to the application of a specific paragraph which depends on the qualifying period in question.
Therefore, as the amount is calculated for an eligible employee in respect of a week in the qualifying period, it is our view that the qualifying entity has discretion to claim a lesser amount in its application by excluding any employees from the wage subsidy calculation under subsection 125.7(2) of the Act.
We trust our comments will be of assistance.
Amanda Couvrette, CPA, CA
Business Income and Capital Transactions
Income Tax Rulings Directorate
Legislation Policy and Regulatory Affairs Branch
Note to reader: Because of our system requirements, the footnotes contained
in the original document are shown below instead:
1 Since January 31, 2021 was a Sunday, the last day to apply for qualifying periods 1 to 5 was February 1, 2021.
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