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Canada Emergency Wage Subsidy Updates



July 4 2021 – July 31 2021 January 27 2022 Period 19 (proposed) August 1 2021 – August 28 2021 February 24 2022 Period 20 (proposed) August 29 2021 – September 25 2021 March 24 2022

Certain Additional Legislative Changes

  • Payroll services. An employer that does not have its own payroll program account and uses a payroll service provider to administer its payroll may qualify for the CEWS.

  • Accounting method. Under the original CEWS legislation” employers that use accrual-based accounting were able to elect to use the cash method of accounting to compute their revenue for purposes of determining the revenue decline. Any eligible employer may now make an election which will apply for all qualifying periods to determine its revenue based on the cash method or the accrual method.
  • Amalgamations. A corporation formed by amalgamation is deemed” for purposes of the CEWS to be the same corporation as and a continuation of each predecessor corporation unless it is reasonable to consider that one of the main purposes of the amalgamation is to cause the new corporation to qualify for or increase the amount of the CEWS. This allows corporations that have been amalgamated to calculate their revenue decline using the combined revenues of the predecessor corporations unless it is reasonable to consider that one of the main purposes of the amalgamation was to qualify for or increase the amount of the subsidy.
  • Continuity on purchase of a business. Where an eligible employer has acquired all or substantially all of the assets of a business carried on in Canada by a seller during a qualifying period” the purchaser and the seller may file a joint election such that the purchaser may include the seller’s revenue in its revenue in calculating the purchaser’s revenue decline for purposes of accessing the CEWS in respect of the purchased business.
  • The legislation provides for an appeal process for the CEWS to the Tax Court of Canada based on existing procedures for notices of determination.

Requirement to Repay Amounts

Budget 2021 proposes that publicly listed corporations will be required to repay CEWS amounts received for qualifying periods beginning after June 5 2021 (i.e. Periods 17 to 20) in the event that its aggregate compensation for specified executives during the 2021 calendar year exceeds its aggregate compensation for specified executives during the 2019 calendar year. “Specified executives” are Named Executive Officers whose compensation is required to be disclosed under Canadian securities laws or similar executives in the case of a corporation listed in another jurisdiction. Generally this will include a corporation’s chief executive officer chief financial officer and three other most highly compensated executives.

If the requirement to repay applies the amount of the wage subsidy to be repaid would be equal to the lesser of: (1) the total of all CEWS amounts received in respect of active employees for qualifying periods beginning after June 5 2021 and (2) the amount by which the aggregate specified executives’ compensation for 2021 exceeds the aggregate specified executives’ compensation for 2019. The requirement to repay will be applied at the group level and will apply to wage subsidy amounts paid to any entity in the group.

CEWS Audits

The Canada Revenue Agency has begun auditing CEWS claims and the information requests in respect of these audits are very onerous and the information must be provided within 10 business days. The following is a summary of the types of information that will be included in a CEWS information request:

  • Documents from minute books. This will include governance documents that relate to the CEWS claim” any agreements or resolutions that demonstrate the decision-making process and approvals for making a CEWS claim and information on any entities and businesses within the corporate group. 

  • Revenues for the 2019 taxation year. This will include general ledger data” year-end and monthly trial balances and monthly sales reports that break down sales by revenue type and source. 

  • Revenues for the 2020 taxation year. This will include monthly ledger data” monthly trial balances and monthly sales reports that break down sales by revenue type and source. 

  • Information used to compute the CEWS revenue decline percentages. This will include working papers substantiating the computation of qualifying revenue for the current reference period and prior reference period” revenue recognition policy and a summary distinguishing between revenue earned in Canada and outside Canada. 

  • General payroll/employee information. This will include a detailed payroll journal separated by employee and their Social Insurance Number with working papers to reconcile payroll data to lines A to C on the CEWS application submitted” employment contracts proof of payment to employees and bank statements. 

  • Information relating to other subsidies and government programs. This will include supporting documents for the 10% temporary wage subsidy and Employment and Social Development Canada’s Work-Sharing Benefit and working papers to reconcile the amount claimed on the CEWS application. 

  • A signed copy of the Attestation filed with the CEWS application. 

  • Remuneration exclusions. This will include lists of special categories of employees such as those who were not receiving eligible remuneration and those who were not dealing at arm’s length with the employer and a summary of severance payments” retiring allowances and stock option benefits. 

  • Qualifying revenue exclusions. This will include a breakdown of revenues from non-resident related parties” revenues from non-arm’s length persons extraordinary items and government subsidies. 

  • Elections. Where the non-arm’s length election is made” the employer must provide the following information: the names and business account numbers for the non-arm’s length entities the financial statements for those entities the information referred to above for non-arm’s length entities and working papers detailing how qualifying revenues were computed for the non-arm’s length entities.

This information should be prepared and maintained contemporaneously given the amount of information that may be requested and the short period of time provided to produce it.


1 Bill C-20 An Act respecting further COVID-19 measures received Royal Assent on July 27 2020
2 Bill C-9 An Act to amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy) received Royal Assent on November 19 2020 and is now law. Additionally new regulations amending the Income Tax Regulations were published in the Canada Gazette Part II Volume 155 Number 1 on January 6 2021 and came into force on December 20 2020

This publication is a general summary of the law. It does not replace legal advice tailored to your specific circumstances.