Webinar: How to navigate government programs with KPMG

There is an impressive array of federal, provincial and territorial government programs that offer subsidies, loans and other measures to meet the urgent needs of businesses during the COVID-19 pandemic. Professionals from KPMG joined us for a live interactive discussion to help you better understand these programs and how they can help your operations.

Additional Q&As from this webinar:

For the CEWS, do you include revenue from sales in the US or just Canadian revenue?

Qualifying revenue is the inflow of cash, receivables, or other consideration arising in the course of the ordinary activities of the eligibly entity from the sale of goods and services of the eligible entity in Canada determined in accordance with its normal accounting practices. There are several exceptions to the computation of revenue. One of these exceptions is where the eligible entity and each member of its affiliated group jointly elect then the qualifying revenue of the group may be determined on a consolidated basis in accordance with the relevant accounting principles is to be used for each member of the group. Another exception is where all or substantially all of the eligible entity’s qualifying revenue is from one or more persons or partnerships for which the entity does not deal at arm’s length and each person or partnership jointly elects with the eligible entity, then a special formula in the legislation applies to look through to the revenue of the non-arm’s length person or partnership. Assuming the question is asking whether sales by a Canadian entity to US customers would form part of the qualifying revenue, then yes it would.

Would those that rely on commissions as their primary source of income qualify for the CERB?

To be eligible for the CERB, an individual must meet the following: (i) not receive EI benefits during the qualifying period; (ii) did not quit their job voluntarily; (iii) resident in Canada; (iv) 15 years of age and older at time of application; (v) earned at least $5,000 of income (from employment, self-employment, or parental/maternity benefits) in 2019 or the last 12 months; (vi) stopped working due to COVID-19 and did not receive more than $1,000 from employment and self-employment income.

If company is returning revenue (i.e. private school closed and returning tuition paid at start of year), would that qualify as reduced revenue?

Presumably this question is in respect of a private school’s eligibility for the CEWS. An eligible entity is specifically defined, and excludes certain public institutions. The matter to address is whether the private school is a “public” institution. Only private universities or colleges may be considered an eligible entity.

If this the CEWS needs to be included on T4s, should the amount subsidized appear on paystubs?

Where an entity qualifies, it would be the recipient of the CEWS. It is the remuneration paid to the employee which is included on the T4 Supplementary. We understand there may be a requirement for an employer to report on the 2020 T4 Supplementary the amount received by the employer under the CEWS in respect of the employee during the year. This will not change the employment income but may be required disclosure reporting for 2020.

In the scenario in which the foreign parent prepares consolidated statements and a Canadian subsidiary prepares standalone statements, if no elections made, do you calculate revenue using consoldated or standalone statements?

If the normal accounting practice is to prepare consolidated financial statements which is done by the foreign parent then that may be the basis of comparing the eligible entity’s qualifying revenue. However, each member of the group of eligible entities may opt to determine its qualifying revenue separately.

A group of associated companies, some qualify on their own in March, but the consolidated group qualifies only in April. Can you switch monthly?

Once an eligible entity selects its method of computation of revenue, we understand CRA’s current view is that it must apply that methodology for the subsequent periods.

Does CECRA cover leases?

There are specific eligibility requirements under the CECRA, which is administered by the CMHC. In general, the CECRA is for small businesses that have experienced financial hardship due to COVID-19 through a forgivable loan to eligible commercial property owners to reduce the rent owned by the tenant by at least 75% for the months of April, May and June 2020

CECRA: If a landlord has non traditional financing on their property, is there an opportunity to access this program to help the tenant with rent decrease?

The CMHC commentary indicates that one of the conditions is the property owner has a mortgage loan secured by the commercial property; however, for those that do not have a mortgage, an alternative mechanism will be implemented with details to be provided at a later date

How do you deal with an employee who didn’t start until early March – how is their baseline remuneration calculated?

For purposes of the CEWS, baseline remuneration is required for non-arm’s length employees. For arm’s length employees, the CEWS may apply to new employees, assuming all of the other criteria for qualification have been met. For new employees they would not have baseline remuneration, therefore the maximum CEWS may only be 75% of the actual wages paid.

Please note: These are general statements about the programs and are not construed to be tax or accounting advice. For more information, contact Dino Infanti at [email protected] or 604-673-4437.