In response to this sudden economic crisis, both Federal and Provincial governments have quickly brought into law legislation seeking to provide support to businesses across the country. We will focus on providing an overview of the Federal program called the COVID-19 Economic Response Plan. Each province within Canada has supplementary legislation aiming to support businesses within their territory.
Canada’s COVID-19 Economic Response Plan for businesses has four platforms: There are policies aimed at avoiding layoffs and rehiring employees; policies for deferred payments, policies for access to credit; and policies for supporting financial stability.
Avoiding Layoffs and Rehiring Employees
There are four different programs that businesses can have access to under this platform. The Canada Emergency Wage Subsidy covers 75% 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% in March, and 30% in April and May. The program will be in place for a 12-week period, from March 15 to June 6, 2020. The Temporary 10% Wage Subsidy is a three-month measure that will allow eligible employers to reduce the amount of payroll deduction required to be remitted to the Canada Revenue Agency (CRA). We are extending the maximum duration of the Work-Sharing program from 38 weeks to 76 weeks for employers affected by COVID-19. This measure will provide income support to employees eligible for Employment Insurance who agree to reduce their normal working hours because of developments beyond the control of their employers. The Federal government is also making temporary changes to the Canada Summer Jobs program to allow employers to receive an increased wage subsidy, so that private and public sector employers can also receive up to 100 per cent of the provincial or territorial minimum hourly wage for each employee. It has also extended the end date for employment to February 28, 2021. This extension allows businesses to adapt their projects and job activities and hire staff on a part-time basis.
The Canadian government is giving more time to pay income taxes by allowing all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after March 18 and before September 2020. No interest or penalties will accumulate on these amounts during this period. It is also allowing businesses, including self-employed individuals, to defer payments of the GST/HST until June 30, 2020, as well as customs duty owing on their imports. These amounts were normally due to be submitted to the Canada Revenue Agency and the Canada Border Services Agency as early as the end of March 2020.
Easing Access to Credit
The newly established business credibility program enables $40 billion in additional lending and includes the following program points: a loan guarantee for small and medium size enterprises backed by Export Development Canada (EDC), Canada’s export credit agency, and a co-lending program for small and medium size enterprises backed by Business Development Canada (BDC), Canada’s bank for entrepreneurs.
Cooperating with financial institutions, the EDC provides funding for the loan guarantee program which allows SMEs to apply for new operating credit and cash flow term loans of up to $6.25 million. Under the co-lending program, BDC cooperates with financial institutions to provide term loans to SMEs for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25 million.
In total, eligible companies could obtain up to $12.5 million through these two lending programs, which will start in mid-April. Interested companies are to contact their current financial institutions for further information.
Through the Canada Emergency Business Account, businesses can access interest free loans of up to $40,000 to cover their operating costs. To be eligible, organizations need to demonstrate that they had $20,000 to $1.5 million in total payroll expenditures in 2019. Interested companies are to contact their financial institutions for further information.
Supporting Financial Stability
In order to support financial stability, the Canadian government has put in place a series of measures. Among others the government issued a moratorium on solvency payments requirements for sponsors of federally regulated defined benefit plans. The insured mortgage purchase program in which the government purchases up to $150 billion of insured mortgage pools via the Canadian Mortgage and Housing Corporation has the objective to provide long-term stable funding to banks and mortgage lenders, and ultimately to facilitate lending to Canadian businesses and individuals. In addition the Bank of Canada has lowered key interest rates, is intervening to support key financial markets and is providing liquidity support for financial institutions. Furthermore, the Office of the Superintendent of Financial Institutions is lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, which will allow an additional $300 billion of lending by Canada’s largest banks.
Are you interested in accessing the latest information regarding the Canadian Economic Response Plan?
The Canadian Government has published a comprehensive overview of the different support measures for businesses, industries and individuals. Please consult the following website for the latest information.