15 January 2021 External T.I. 2020-0847781E5 - CEWS - remuneration / SSUC - rémunération

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: 1- Whether taxable benefits have to be taken into consideration for purposes of determining whether the 14 day remuneration condition is met for an individual to be considered an “eligible employee” and if so, which portion of the remuneration is received or enjoyed in respect of particular days in a qualifying period? / Est-ce que les avantages imposables doivent être pris en considération aux fins du test d'au moins 14 jours consécutifs sans rémunération dans la définition d'un employé admissible et si oui, comment déterminer la période visée par un tel avantage?

2- Does the payment of a commission, earned in a previous period, have an impact on the 14 days without remuneration test to qualify as an “eligible employee”? / Est-ce que le paiement d'une commission gagnée au cours d'une période antérieure affecte le test d'au moins 14 jours consécutifs sans rémunération dans la définition d'un employé admissible?

3- Is there a difference between the remuneration that has to be taken in consideration for the 14 day remuneration condition for an individual to qualify as an “eligible employee” and the “eligible remuneration” paid to an employee to calculate the CEWS? / Est-ce qu'il y a une différence entre le concept de rémunération utilisée pour la définition d'un employé admissible et la rémunération admissible utilisée pour calculer la SSUC?

Position: 1- Yes / Oui 2- No / Non 3- Yes / Oui

Reasons: 1- Taxable benefits are remuneration and therefore, an employer must take these benefits into consideration for purposes of determining whether the 14 day remuneration condition is met . Whether remuneration received by an individual is in respect of a specific day in a qualifying period is a question of fact that can only be determined on a case by case basis. / Un avantage imposable fait partie de la rémunération d'un employé et, par conséquent, doit être pris en compte lorsqu'un employeur détermine si un employé admissible a été sans rémunération pour une période d'au moins 14 jours consécutifs. La période à laquelle se rapporte un avantage imposable est une question de fait qui doit être analysé au cas par cas.

2- The moment when a commission is paid to an employee is not necessarily relevant for the determination of whether an individual is an “eligible employee.” / Le moment où une commission est payée à un employé n'est pas nécessairement pertinent pour déterminer si un particulier est un "employé admissible".

3- Remuneration for the purpose of the "eligible employee" includes non-cash taxable benefits. For purposes of computing the CEWS, the value of such benefit is not eligible remuneration paid to an eligible employee. / La rémunération prévue dans la définition d'un "employé admissible" inclut les avantages imposables non monétaires. Pour calculer la SSUC, de tels avantages ne font pas partie de la rémunération admissible payée à un employé admissible.

XXXXXXXXXX
										2020-084778
S. Thibault,
										CPA, CA, LL.M. fisc.

January 15, 2021

Dear XXXXXXXXXX,

Objet : CEWS – remuneration

We are writing to you in response to your enquiry of April 30, 2020, wherein you asked our views on different aspects related to the remuneration of an employee for the purpose of the Canada Emergency Wage Subsidy (“CEWS”) in section 125.7 of the Income Tax Act (the “Act”).

You have asked whether taxable benefits have to be taken into consideration for purposes of determining whether the 14 day remuneration condition is met for an individual to be considered an “eligible employee” as that term is defined in subsection 125.7(1) of the Act, and if so, how to determine which portion of the remuneration is received or enjoyed in respect of particular days in a qualifying period (question 1).

You have also asked if the payment of a commission, earned in a previous period, will have an impact on the 14 day remuneration condition for an individual to qualify as an “eligible employee” (question 2).

Finally, you have asked if there is a difference between remuneration that has to be taken into consideration for the 14 day remuneration condition for an individual to qualify as an “eligible employee” and the “eligible remuneration” paid to an employee to calculate the CEWS (question 3).

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation. 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.

Question 1

An “eligible employee” of an eligible entity in respect of a week in a qualifying period means pursuant to subsection 125.7(1) of the Act, an individual employed in Canada by the eligible entity in the qualifying period, other than, if the qualifying period is described in any of paragraphs (a) to (c.1) of the definition “qualifying period,” an individual who is without remuneration by the eligible entity in respect of 14 or more consecutive days in the qualifying period. Paragraphs (a) to (c.1) of the definition “qualifying period” are qualifying periods 1 to 4.

The “qualifying period,” under subsection 125.7(1) of the Act, is the period for which an eligible entity may claim the CEWS for eligible remuneration paid to eligible employees. An eligible entity may be able to claim the CEWS for one or more of the qualifying periods.

We are of the view that for the purpose of the definition of “eligible employee,” remuneration includes any cash or non-cash taxable benefits. Whether remuneration received by an individual is in respect of a specific day in a qualifying period is a question of fact that can only be determined on a case by case basis. For example, which days a taxable benefit is received or enjoyed by an employee can vary depending on the type of benefits conferred on the employee. This may not necessarily correspond with the pay period during which the taxable benefit is added to the employee’s income for the calculation of payroll deductions.

Question 2

The moment when a commission (or any other kind of remuneration) is paid to an employee is not necessarily relevant for the determination of whether an individual is an “eligible employee.” The 14 day remuneration condition should be examined based on whether remuneration was paid in respect of a qualifying period and not on the remuneration that was actually paid during a qualifying period. We have provided some additional guidance in question 17-6 of the Frequently Asked Questions - CEWS (“FAQs”) on our website that may help you determine whether a commission payment is in respect of a specific week in a qualifying period.

Question 3

The calculation of the CEWS, under subsection 125.7(2) of the Act, provides that in respect of a week in a qualifying period, described in any of paragraphs (a) to (c.1) of the definition “qualifying period” under subsection 125.7(1) of the Act, the wage subsidy could represent up to 75% of the eligible remuneration paid to the eligible employee by a qualifying entity in respect of that week, subject to the various limits provided in subsection 125.7(2) of the Act.

As mentioned in question 17-01 of the FAQs, non-cash taxable benefits are not remuneration eligible for the wage subsidy. Only eligible remuneration paid to an eligible employee by a qualifying entity in respect of a week in a qualifying period qualifies for purposes of computing the wage subsidy. Although the value of a non-cash taxable benefit is received by the employee because of employment, the value of such benefit is not eligible remuneration paid to an eligible employee for purposes of computing the wage subsidy.

Therefore, we are of the view that remuneration for the purpose of the definition of an “eligible employee”, for a period described in any of paragraphs (a) to (c.1) of the definition “qualifying period” under subsection 125.7(1) of the Act, would not necessarily be the same as “eligible remuneration” paid to an eligible employee for purposes of the calculation of the CEWS under subsection 125.7(2) of the Act.

We trust our comments will be of assistance.

Yours truly,

Michel Lambert, CPA, CA, M. Fisc.

Manager
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch