The Canada Revenue Agency (CRA) has released additional information on the three-month Temporary Wage Subsidy for eligible employers. The subsidy allows eligible employers to reduce the amount of payroll deductions required to be remitted to the CRA.
You are an eligible employer if you meet the following requirements:
- You are a non-profit organizations, registered charity, or Canadian-Controlled Private Corporation (CCPC);
- Have an existing business number and payroll account with the CRA on March 18, 2020; and
- Pay salary, wages, bonuses or other remuneration to an employee.
Please note: CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.
The subsidy is equal to 10% of the remuneration you pay between March 18, 2020 and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.
Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.
- Example #1: If you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 X 5 employees), even though the per employer maximum is $25,000.
- Example #2: If you have 5 employees earning monthly salaries of $4,100 for a total monthly payroll of $20,500, the subsidy would be 10% of $20,500, of $2,050.
The subsidy is calculated manually by you or your payroll provider. This means it is your responsibility to calculate the subsidy and reduce your remittance for federal, provincial and territorial income tax, up to the maximum allowed.
IMPORTANT: Canada Pension Plan and Employment Insurance premiums are still required to be remitted. This subsidy is only applicable to the income taxes withheld from your employees.
How is the subsidy received?
To receive the subsidy, employers reduce the first payroll remittance period that includes wages paid between March 18, 2020 and June 20, 2020 to CRA by the amount of the subsidy calculated. If the employer’s payroll remittance is insufficient to utilize the full subsidy, future remittances may be reduced until the maximum subsidy the employer is entitled to is reached. The subsidy is only applicable to remittances made to the CRA and cannot be used the reduce any remittances to Revenu Québec.
Eligible employers who do not want to reduce their payroll remittances during the year can calculate their temporary wage subsidy on remuneration paid between March 18, 2020 and June 20, 2020 and request the subsidy be paid to them at the end of the year or transferred to the next year’s remittance.
Employee Net Pay
Employees will not see an impact to their net pay. The Temporary Wage Subsidy reduces what an eligible employer is required to remit to CRA, however, it does not impact what employees are paid each pay period.
Maintain Records to Support Claim
You are required to keep detailed records of the total remuneration paid between March 18, 2020 and June 20, 2020; the federal, provincial, or territorial income tax that was deducted from that remuneration; and the number of employees paid in that period.
The CRA is currently updating reporting requirements. More information on how to report this subsidy will be released in due course.
Note: Significant changes and clarifications were introduced on March 25, 2020.
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