Tax Measures Under Canada’s COVID-19 Economic Response Plan

The CRA confirmed that the part of the loan that is forgivable is included in the income of the year in which the loan is received by virtue of paragraph 12(1)(x) of the ITA. However, as CEBA funds are to be used to pay for non-deferrable operating expenses of the business including payroll, rent, utilities, insurance, property tax, and regularly scheduled debt service, the recipient can elect to reduce the amount of outlay or expense under subsection 12(2.2) as opposed to reporting the amount as an income inclusion.

Canada Emergency Rent Subsidy(“CERS”)

On November 2, 2020[22], the Government introduced Bill C-9 which received royal assent on November 19, 2020. It implements new, targeted support to help certain businesses. Despite its name, it is not just a rent subsidy as it also supports businesses that own the real property used in their business’ ordinary activities (provided that the use of this property is not primarily to earn rental income). The business supports provide direct and rent, mortgage interest, insurance costs, and property tax support to tenants and property owners until June 2021 for qualifying organizations affected by COVID-19. The new rent subsidy supports businesses, charities, and non-profits that have suffered a revenue drop by providing support up to a maximum of 65% of eligible expenses until December 19, 2020. In its November 30, 2020, economic update[23], the government is proposing to extend the current subsidy rates until March 13, 2021. Qualifying rent expenses are capped at $75,000 for a single eligible entity, and are capped at $300,000 for a corporate entity occupying more than one space. The new legislation allows for retroactive claims for the period that began September 27 and ended October 24, 2020. Furthermore, the government introduced in Bill C-14[24] a provision which considers rent payable as an eligible expense for the purpose of this subsidy.

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