Federal government support programs
As a part of Canada’s COVID-19 Economic Response Plan, the Government of Canada has announced a series of support programs of relevance to Canadian production companies.
These include general support programs for businesses and individuals, including wage subsidies, a loan program, temporary income support for those who are not working to due the pandemic and assistance with commercial rent. In addition to these relief measures, the Department of Canadian Heritage recently launched a sector-specific program to support the creative industries, including the screen-based production sector. Details about all of these programs and key considerations for producers can be found below. We also recommend that you to consult the Government of Canada’s COVID-19 Economic Response Plan webpage and their list of additional support measures for Canadian businesses.
In addition to the many announcements from the federal government regarding benefits available to assist businesses and workers, various provinces have made a number of their own benefit announcements and changes to employment standards legislation in response to COVID-19. We encourage members to keep up to date on provincial benefit announcements and strongly encourage you to speak with your local employment counsel for advice regarding whether there are any legislative changes that may impact your employment-related rights or obligations.
Not sure which government support programs work best for your company?
The Department of Innovation, Science and Economic Development (ISED) has developed an interactive tool to help you find out which programs are right for you. Just answer a few questions, and you’ll get a tailored list for your specific needs. Try it out here:
Need to speak with an expert for more guidance?
The Government of Canada has set up a hotline for Canadian entrepreneurs and small businesses seeking guidance to help them make the best decisions for their businesses as they navigate the current crisis. Business advisors—125 members of Chartered Professional Accountants Canada (CPA Canada)—can answer questions about tax regulations and the implications of COVID-19, inform business owners about government support programs that best fit their unique circumstances, and provide strategic financial planning for their road to recovery.
Seven days a week, from 8 am to 8 pm ET
Heritage COVID-19 Emergency Relief Funds
The Canada Media Fund and Telefilm Canada COVID-19 Emergency Relief Funds are part of the federal government’s $500 million Emergency Support Fund for Cultural, Heritage and Sport Organizations (ESFCHSO), which aims to complement existing COVID-19 support measures for wages and fixed costs. The funds will be disbursed in two phases.
Phase 1 funding (closed)
In the first two phases of support for the cultural sector, through the ESFCHSO, $115.8 million was earmarked for the screen-based production industry, with $88.8 million being administered by the Canada Media Fund and $27 million administered by Telefilm Canada. The purpose of the CMF and Telefilm COVID-19 Emergency Relief Funds is to:
– support the business continuity of Canadian businesses and organizations in Canada’s audiovisual industry and help them be in a better position to recover once the pandemic subsides;
– address financial needs of these businesses and organizations so they can continue to support writers, directors, crew, cast and other employees in the audiovisual industry; and
– complement – and not duplicate – other measures announced by the Government of Canada, recognizing that many companies in Canada’s audiovisual industry may not be eligible for previously released support due to their structure and cyclical nature of their business.
Emergency assistance was allocated to the operating parent company of each group of companies in proportion to their participation in each project funded over the last three fiscal years (from April 1, 2017, to March 31, 2020). If an eligible applicant received funding in the previous three years from more than one of either CMF, Telefilm or the Canada Council for the Arts, then they would only apply to the organization that provided the highest amount of funding over the three-year period.
The CMF and Telefilm allocations are in the form of a non-repayable contribution. This contribution is considered as taxable, and applicants may be subject to audits at future dates.
The application window for both Telefilm and CMF funding requests is now closed.
Phase 2 funding
On July 7, the Minister of Canadian Heritage Steven Guilbeault announced the final funding details related to phase 2 of the government’s $500 million Emergency Support Fund for Cultural, Heritage and Sport Organizations. With the application process for phase 1 now closed, this final announcement addresses gaps from the first phase of the program. Following feedback from our members, the CMPA engaged the government and stakeholder groups to communicate funding shortfalls for organizations who were not recent clients of Telefilm Canada or the Canada Media Fund, and thus ineligible for the phase 1 support. The newly announced funds are being distributed through six different grant and contribution programs, which are listed below.
– Audiovisual Allocation ($19 million): for audiovisual producers making Canadian content that did not receive funding in phase 1
– Emergency Relief Funds for IDM companies ($10 million)
– CMF Third-Language Allocation ($2.5 million): to support producers of content in a language other than English or French
– CMF Regional Allocation ($1 million): for audiovisual training and development partners
– Telefilm Audiovisual Training and Development Program ($1 million): for independent groups producing access programming for community television
– Telefilm Movie Theatre Program ($1.755 million): for movie theatres that show Canadian films
Canada Emergency Wage Subsidy (CEWS)
The Canada Emergency Wage Subsidy (CEWS) covers 75 per cent of an employee’s wages – up to $847 per week – for employers of all sizes and across all sectors who have suffered a drop in gross revenues of at least 15 per cent in March, and 30 per cent in subsequent months. The program will be in place for a 24-week period, from March 15 to August 29, 2020, but legislation has been passed by the House of Commons to extend it until December 2020.
If necessary, an employer may demonstrate the applicable reductions by reference to non-arm’s length revenues or on the basis of consolidated revenues.
When an employer is found eligible for a specific period, they automatically qualify for the next and do not need to re-apply. For example, if you experienced a drop in revenue of more than 15 per cent in March, you qualify for the first two periods of the subsidy. Likewise, if you experience a drop in revenue of 30 per cent in April, you qualify for the second and third periods of the program.
Employers can measure revenues on accrual accounting (money earned) or cash accounting (money received). The same accounting method must be used consistently throughout the program once selected by the employer. Additionally, employers will be compensated for their contributions to the CPP, EI, QPP and QPIP paid to employees currently on leave with pay because of COVID-19.
The CEWS was originally set to expire on June 6; however, on May 15, the federal government announced that the program would be extended until August 29. In the same announcement, the government also stated that consult with key business and labour representatives over the next month on potential adjustments to the program to incent jobs and growth, including the 30 per cent revenue decline threshold.
Issues with CRA number
The CMPA has successfully completed a months-long advocacy campaign to address the challenges faced by producers attempting to access the Canada Emergency Wage Subsidy (CEWS). Bill C-20, which has now become law, modifies CEWS eligibility requirements, allowing eligible employers utilizing the CRA business payroll number of a payroll service provider to access the program. This change is retroactive to the launch of the program in March 2020. While the application process is now open, we have discovered an additional administrative burden involved with CRA that complicates the processing of claims but does not preclude companies from applying. The CMPA is working with the government to resolve this issue.
Other important changes to CEWS were also addressed in the legislation, including an extension of the program until November 21, 2020. In the Bill, the government also proposes a further extension of CEWS, until December 19, 2020. Further details about the extension of CEWS beyond November 21 have yet to be announced. A summary of the key changes impacting CMPA members is below.
CEWS base subsidy and top-up subsidy
A key change, retroactive to July 5, 2020, splits the CEWS into two parts for active employees: a base subsidy for all eligible employers experiencing revenue declines, and a top-up subsidy for the hardest-hit employers.
The base subsidy will vary depending on the scale of an eligible employer’s revenue decline, and would apply on remuneration of up to $1,129 per week. The maximum base rate is 60 per cent for periods 5 and 6 (July 5 to August 29) for employers facing a revenue decline of 50 per cent or more. This will decline to a maximum base rate of 20 per cent in period 9 (October 25 to November 21, 2020). Employers with a revenue drop of less than 50 per cent would be eligible for a lower base rate, allowing for a smooth phase-out as employers recover.
The top-up subsidy will add up to 25 per cent to the subsidy entitlement for employers experiencing revenue declines of 50 per cent or more. The maximum 25 per cent is attained on a 70 per cent revenue drop.
Safe harbour for periods 5 and 6
To phase in these changes, employers in periods 5 and 6 (July 5 to August 29, 2020) are entitled to a CEWS rate of not less than the rate they would have received in periods 1 through 4 (March 15 to July 4, 2020). This means an employer with a revenue decline of 30 per cent or more would receive a CEWS rate of at least 75 per cent, but this may now be as high as 85 per cent if that employer has revenue drops entitling them to the top-up subsidy.
CEWS for furloughed employees
The subsidy calculation for a furloughed employee remains the same for periods 5 and 6 (July 5 to August 29, 2020), but will now be available for any employer eligible for the base or top-up CEWS rates. Starting in period 7 (August 30 to September 26, 2020), CEWS support for furloughed employees will be adjusted to align with the Canada Emergency Response Benefit (CERB) and Employment Insurance (EI) to ensure equitable treatment under those programs.
Reference periods for drop-in-revenues test
The revenue test likewise remains unchanged. For period 5 (July 5 to August 1, 2020) forward, an employer can reference either its percentage revenue decline in the current period for which it is applying, or in the previous period, whichever is more.
The mechanisms for calculating entitlement are complex and have changed for program applications in July through November (July 5 to November 21, 2020). We suggest securing advice from accounting professionals on a company’s individual entitlement.
An employer cannot draw a subsidy against an employee when that employee has been without remuneration for at least 14 consecutive days in a claim period. That employee may instead be eligible for the Canada Emergency Relief Benefit.
The usual tax treatment associated with benefits of this sort will apply and as such, any wage subsidy amounts will be included in the employer’s taxable income. Further, any assistance received under either the Canada Emergency Wage Subsidy or the previously-announced wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
The federal government has directed a maximum $30 billion in cashflow or liquidity assistance for businesses and self-employed individuals over the next three months by deferring Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittances and customs duty payments to June 30, 2020.
Canada Emergency Business Account (CEBA) and new business loan programs
The Canada Emergency Business Account (CEBA) is a $25 billion program that will be implemented by eligible financial institutions in cooperation with Export Development Canada.
Eligible small businesses can receive interest-free loans of up to $40,000 to help cover their operating costs during a period where their revenues have been temporarily reduced due to the economic impacts of the COVID-19 virus. If a business repays the balance of the loan on or before December 31, 2022, this will result in loan forgiveness of 25 per cent (up to $10,000).
In addition, the initial program eligibility requirements mandated that small businesses (which must apply through their financial institutions) would need to demonstrate that they paid between $20,000 to $1.5 million in total payroll in 2019.
However, in response to concerted advocacy by the CMPA and other business groups, on May 19 the federal government announced a significant expansion to this program to grant access to eligible sole proprietorships receiving income directly from their businesses, businesses that rely on contractors, and certain corporations that pay employees through dividends rather than payroll. The government has indicated that applicants who do not already satisfy the employment income threshold would need:
– a business operating account at a participating financial institution;
– a 9-digit Canada Revenue Agency business number;
– a 2018 or 2019 tax return; and
– eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.
Importantly, the reference to the CRA business number in the context of these expanded eligibility criterion is the standard 9-digit business number members should each have received when registering with the CRA. This does not refer to the payroll business number (which members using an industry payroll service provider may not have) since the expanded program focuses exclusively on other non-deferrable operating expenses beyond employment income.
Applications for the expanded version of CEBA program opened on June 26.
Other business loan programs
In addition to CEBA, the federal government announced two other loan programs for the small- and medium-sized enterprises (SMEs). For more information about these programs, click here.
The Loan Guarantee for Small and Medium Enterprises offers SMEs an Export Development Canada (EDC) guarantee to backstop new operating credit and cashflow term loans of up to $6.25 million from financial institutions.
The Co-Lending Program for Small and Medium Enterprises is intended to provide additional liquidity for SMEs with the Business Development Bank of Canada (BDC) partnering with financial institutions, which will co-lend term loans to for operational cashflow requirements. Eligible SMEs may obtain incremental credit amounts up to $6.25 million, with BDC contributing up to $5 million of this amount per loan. Under this program, financial institutions will conduct the underwriting and work with loan recipients throughout the process.
Canada Emergency Response Benefit (CERB)
The Canada Emergency Response Benefit (CERB) is taxable benefit of $2,000 a month, and is available to individuals who have lost their income due to COVID-19.
Following advocacy efforts by the Canadian creative industries, including the CMPA, the federal government announced on June 16 that the CERB would be extended by an additional eight weeks. Going forward, eligible applicants can now claim the benefit for up to 24 weeks, in 4-week increments, until October 3, 2020.
The CERB is available for the following individuals:
– workers who must stop working due to COVID-19 and do not have access to paid leave or other income support;
– workers who are sick, quarantined, or taking care of someone who is sick with COVID-19;
– working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures;
– workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work; and
– wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance.
No supporting documentation is required to make an application. Applicants should begin to receive CERB payments within 10 days of their application.
The CERB only applies to wage earners, contractors and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI). Canadians who are already in receipt of EI regular and sickness benefits would continue to receive those benefits, and are advised not to apply for the CERB. If, however, their EI benefits end before the CERB termination date of October 3, 2020 and they are unable to work due to COVID-19, then they can apply for CERB once their EI benefits cease. Conversely, employees who qualify for EI but who receive the CERB first, may apply for EI after the sixteen-week CERB benefit period has ended.
Canada Emergency Commercial Rent Assistance (CECRA)
The federal government has reached an agreement in principle with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. This program will lower rent by 75 per cent for small businesses that have been affected by COVID-19.
The program provides forgivable loans to qualifying commercial property owners to cover 50 per cent of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.
The loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75 per cent under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to percent of the rent.
Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70 per cent drop in pre-COVID revenues. This support will also be available to non-profit and charitable organizations.
Applications now open and processed through the Canada Mortgage and Housing Corporation (CMHC) website.
Regional Relief and Recovery Fund (RRRF)
On May 13, the federal government announced a $962 million Regional Relief and Recovery Fund (RRRF). The new program aims to mitigate the financial pressure experienced by businesses and organization who are unable to access other existing measures to allow them to continue their operations, including paying their employees.
$675 million of the fund will support regional economies, businesses, organizations and communities in regions all across Canada, and the remaining $287 million will support the national network of Community Futures Development Corporations, which will specifically target small businesses and rural communities across the country.
The initiative will be administered by the six regional development agencies (RDAs):
Atlantic Canada Opportunities Agency (ACOA)
Canada Economic Development for Quebec Regions (CED)
Canadian Northern Economic Development Agency (CanNor)
Federal Economic Development Agency for Southern Ontario (FedDev Ontario)
Federal Economic Development Initiative for Northern Ontario (FedNor)
Western Economic Diversification Canada (WD)