CRA provides additional administrative guidance on the CEWS subsidy

CRA has expanded its Q&A on the “CEWS” wage subsidy. Some of the additional or expanded points include:

• CRA states in Q.6-1 that qualifying revenue can include interest or dividend income “arise[ing] in the course of an eligible employer’s ordinary activities in Canada in the particular period [and that] is not an extraordinary item or on account of capital.” (This may suggest that a reduction in interest revenue because of the deployment of excess cash could generate the wage subsidy.)
• In Q.6-2, CRA indicates that COVID-19 – related government assistance would normally be excluded from qualifying revenue on the basis that it is an extraordinary item.
• In Q.9-1, CRA indicates that even though 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.”
• In Q.10-2, CRA confirmed that where entities in an affiliated group elect under s. 125.7(4)(b) to determine their (Canadian) qualifying revenues on a consolidated basis “all eligible employers in the affiliated group must consolidate for the purpose of calculating qualifying revenue” so that it “is not possible to have only some of those eligible employers in the affiliated group elect to consolidate.”
• In Q.12-1, CRA indicates that an election under s. 127.5(4)(a) of members of a group of eligible entities to determine their qualifying revenue separately rather than on a consolidated basis is not binding on subsequent qualifying periods.
• The “CEWS” wage subsidy is reduced by the full amount of the 10% temporary wage subsidy claimed rather than the amount of the latter that is actually collected through available reductions in source deduction remittances. CRA has added Q.13-1 showing that the CEWS wage subsidy will be restored if the amount of the temporary wage claim is reduced to the amount that can be so collected, i.e., this issue is only a trap for the unwary.

Neal Armstrong. Additional or revised summaries of Frequently asked questions - Canada emergency wage subsidy (CEWS) CRA Webpage 28 May 2020 under s. 125.7(1) – qualifying revenue, s. 127.5(4)(a), s. 125.7(4)(b), s. 125.7(2) – B.