In order to prevent layoffs and as part of its COVID-19 Economic Response Plan, the Canadian federal government introduced on March 18, a wage subsidy program for eligible small employers. This program provided a 10% wage subsidy in the form of a reduction in income tax remittances paid to the Canada Revenue Agency (CRA) (subject to a cap). Further details of this 10% wage subsidy were released as part of Bill C-13, COVID-19 Emergency Response Act. On April 1, Finance Minister Bill Morneau provided significant updates to the wage subsidy program, introducing a new program called the Canada Emergency Wage Subsidy (the Wage Subsidy), which will co-exist with the original 10% wage subsidy. Coming with an estimated cost of $71 billion, this Wage Subsidy program would apply to employers who have suffered a drop in gross revenues of at least 30% in March, April or May, when compared to the same months in 2019. This program not only significantly increases the size of available subsidies, but also expands the categories of eligible employers.

A Tax Alert prepared by Ernst & Young Canada, and attached below, provides additional details.

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Full text of Tax Alert