News and Insights

Federal Wage Subsidy and Time Limits Extended

Tax Development May 27, 2020

The Government of Canada implemented the Canada Emergency Wage Subsidy (CEWS) during March and April of 2020. The CEWS is intended to help employers of all sizes from every industry—and their employees—through the economic challenges created by the COVID-19 pandemic. For eligible employers, up to 75% of employee wages and salaries will be subsidized to a maximum of $847 per week per employee. The program was initially set to run for a period of 12 weeks, retroactive to March 15, 2020, and only available to organizations that experienced a decrease in revenue of 15% for the period between March 15 and April 11, and 30% in two subsequent periods. However, both the eligibility criteria and timeframe for the CEWS program have been extended, as discussed below.

In addition, the Minister of Justice has recently introduced proposed legislation that would permit the extension of many federal time limits and other periods. 

CEWS Extension

On May 15, 2020, the federal government released a backgrounder outlining several adjustments to the existing CEWS program. These modifications, designed to build worker confidence and provide additional incentive to employers to keep their staff working during the COVID-19 pandemic, are outlined below.

Time Periods

The CEWS was originally set to expire on June 6, 2020. Since the impact of the pandemic is likely to extend beyond the original time period, as the Canadian economy very slowly restarts, the federal government has decided to extend the CEWS for another 12 weeks and it will now expire on August 29, 2020. Additionally, the government has noted that it will consult with business and labour in the coming weeks to determine if further adjustments to certain eligibility criteria are required to maintain the effectiveness of the program.  For example, as the economy is restarted, the 30% revenue decline threshold may require
fine-tuning, as some businesses may not meet this condition when they resume operations. Without an adjustment, restarting businesses may miss out on the subsidy, which could hinder their return to normal operations.

Regulatory Adjustments

As various entities determined if they qualified for the original CEWS, it became apparent that certain organizations were not eligible for the subsidy because of their structure. This was not intended when the program was introduced and could have prevented the subsidy from fully achieving its desired goal. To ensure employers of all sizes from every industry benefit from this incentive, the CEWS regulations will prescribe certain organizations meeting all other qualifying conditions to be eligible employers, including:

  • Partnerships with one or more non-eligible members;
  • Indigenous government-owned businesses;
  • Registered Canadian amateur athletic associations;
  • Registered journalism organizations; and
  • Non-public educational and training institutions (e.g., private colleges and schools).

Proposed Legislative Change

To ensure the CEWS meets its desired objectives, legislative revisions will be introduced to prevent unintended consequences from the program criteria. These changes are being made to ensure that the following types of employees and entities are not left out of the program.

Employees Returning from Extended Leave or Hired Seasonally

The formula used to calculate the subsidy amount may eliminate certain employees from eligibility because of the absence of an appropriate baseline remuneration. In particular, employees on parental, disability, or unpaid leaves and employees working seasonally may fall into this category. To prevent this situation, the CEWS will be amended to allow employers to choose one of two periods when calculating an employee’s baseline remuneration. Under this amendment, effective for the first qualifying period (retroactive to March 15, 2020), employers will be allowed to calculate baseline remuneration for an employee as either the average weekly remuneration paid to the employee from January 1 to March 15, 2020, or the average weekly remuneration paid to the employee from March 1 to May 31, 2019. Under both options, periods of seven or more consecutive days without remuneration are excluded from the baseline amount. In addition, the choice on which period to use can be made on an
employee-by-employee basis. 

Amalgamated Entities

Where an amalgamation of two or more entities or a wind-up occurs, the new corporation may not qualify for the CEWS as there may not be a proper benchmark revenue available to calculate the revenue decline. Where this is the case, the government is proposing to allow an entity to calculate its benchmark revenue for the purpose of determining CEWS eligibility using the combined revenues of the predecessor entities, unless it is apparent that the main reason for the amalgamation (or wind-up) was to qualify for the program. This option would be available for the first qualifying period commencing on March 15, 2020, and for any subsequent qualifying period.

Tax-Exempt Trusts

A trust is considered to be an individual for income tax purposes, and it qualifies for the CEWS. This may create a misalignment in the tax treatment of trusts and corporations under the CEWS. Therefore, effective for the third qualifying period (i.e., May 10 to June 6), a trust will only qualify for the CEWS as a tax-exempt entity if it is a registered charity or another form of eligible tax-exempt entity, or as a public institution if it is a prescribed organization.

Additional details on the amendments to the CEWS can be found on the Department of Finance Canada website at:
Extending Eligibility for the Canada Emergency Wage Subsidy

Amendments to Federal Time Limits and Other Periods

Federal legislation typically sets out time limits for certain requirements (e.g., fee payments or report filings) and provides for periods during which certain events can be performed (e.g., licence or permit validity periods and other authorizations to perform specified activities). The COVID-19 pandemic has created the potential for many people and entities to be unable to meet certain requirements within the various time limits set out in Canadian federal legislation through no fault of their own—a situation that could lead to some serious negative consequences.

To address this situation, the Minister of Justice and Attorney General of Canada has introduced legislation to create more flexibility for the various time limits and other prescribed periods under federal legislation, as needed, because of the exceptional circumstances created by COVID-19. The proposed changes will allow for the temporary suspension of some time limits and consent for the suspension or extension of other time periods where circumstances may make compliance difficult or impossible. The proposal will also allow other periods to be extended where an expiration could produce unfair or undesirable results. 

The proposed legislation would allow ministers overseeing specified legislation, including the Income Tax Act and the Excise Tax Act, to postpone or extend time limits and extend other periods for up to six months, retroactive to March 13, 2020. Once the legislation has been passed, it is anticipated that specific extensions will be announced to help taxpayers in need of further administrative relief. Of particular interest will be the hard 18-month deadline for Scientific Research and Experimental Development Tax Credit claims. For fiscal years ending on December 31, 2018, there is an impending deadline of June 30, 2020. At the time of this release, this deadline had not been extended. Accordingly, companies wishing to file a claim for this period should assume that the June 30 deadline will be in effect and ensure that their claims are filed by that date.   

Further details on the proposed legislation can be found in Draft Legislative Proposals on the Department of Justice website.

More Information

If you have any questions about how these changes might benefit your organization, please do not hesitate to contact the Ryan TaxDirect® line at or 1.800.667.1600.

Additional information on the CEWS can be found on the Ryan website at: The Canada Emergency Wage Subsidy

For a summary of all significant COVID-19 relief initiatives announced by North American, European, and Australian governments, please visit the Ryan COVID-19 Information Hub.