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

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.

The new CERS operates similarly to the CEWS, whereby the subsidy amount is considered an overpayment of tax by the business. This results in a reduction of tax payable for the company or triggers a tax refund.

Furthermore, the new Lockdown Support, which provides an additional 25% through the CERS for qualifying organizations that are subject to a lockdown and must shut their doors or significantly limit their activities under a public health order issued under the laws of Canada, a province or territory (including orders made by a municipality or regional health authority under one of those laws). Combined, this would mean that certain businesses subject to a lockdown could receive rent support of up to 90 per cent.

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