Federal government announces 75% wage subsidy, $ 40,000 interest-free loans for businesses and import duty deferral

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Ottawa is offering a 75 percent wage subsidy to ‘qualified’ small and medium-sized businesses under new COVID-19 supports, including $ 40,000 government-guaranteed, interest-free and partially forgivable loan for businesses with a payroll of less than $ 1 million and deferral until June 30, 2020 of GST / HST and import duties.

Prime Minister Justin Trudeau announced the three new emergency financial support measures on March 27, saying the government’s goal is to ensure that small and medium-sized enterprises (SMEs) can stay in business, keep their employees or reinstate laid-off employees back to payroll and resume all activities soon after the current COVID-19 crisis is over.

Prime Minister Justin Trudeau

The higher government wage subsidy is retroactive to March 15. At the time of going to press, it was not clear whether it completely replaced the three-month wage subsidy announced by the government on March 18, which was equal to 10 percent of the compensation paid to employees during that period. period, up to a maximum grant of $ 1,375 per employee and $ 25,000 per employer.

Trudeau and Finance Minister Bill Morneau did not provide reporters with specific details on the eligibility criteria or caps, if any, that will apply to the 75 percent wage subsidy. Trudeau said more information would likely be available on March 30.

(A backgrounder provided by the government earlier this month on the initially announced benefit indicated that eligible employers would include businesses eligible for the small business deduction, as well as nonprofits and agencies. charity.)

Morneau said a “significant” drop in income related to COVID-19 would be an eligibility criterion. A press release from the Prime Minister’s Office on March 27 said that “more details on the eligibility criteria will start with the impact of COVID-19 on sales, and will be shared before the end of [March]. “

To further support small businesses, the Prime Minister’s press release also said the federal government will allow businesses, including self-employed workers, to defer GST / HST payments until June 30, along with duties. customs duties owed on imports. This is equivalent to providing up to $ 30 billion in interest-free loans to Canadian businesses, Morneau said. The move aims to help businesses continue to pay their employees and their bills, and alleviate cash flow problems across the country.

The government also announced the launch of a “Canada Business Emergency Account”. The program will provide up to $ 25 billion to eligible financial institutions so they can offer interest-free loans to small businesses with payrolls of less than $ 1 million. These line of credit loans – up to $ 40,000 guaranteed and funded by the Government of Canada – will provide small businesses with access to the capital they need at zero percent interest. so they can pay their rent and other major costs over the next few months, the government said. Morneau said 25% of the loan – or $ 10,000 – could be forgiven if the full loan amount is repaid by Dec.31, 2022.

The government also announced that it is launching a new loan and guarantee program for small and medium-sized businesses that will allow loans of up to $ 40 billion, supported by Export Development Canada and the Business Development Bank of Canada, for loans. guaranteed when small businesses turn to their financial institutions. to help them overcome the impacts of COVID-19. “This is aimed at small and medium-sized businesses that need more help to meet their operational cash flow needs,” the government said.

Finance Minister Bill Morneau

“These new investments will help Canada’s financial institutions provide the credit and liquidity options that a range of Canadian businesses need immediately,” the government said. “The Government of Canada understands that some sectors have been disproportionately affected by the COVID-19 pandemic. We will continue to closely monitor all developments and take other short-term action … and the Government of Canada will continue to work tirelessly to ensure that all Canadians and small businesses get the support they need to overcome this crisis. “

Morneau said in a statement, “With the new measures we are announcing today to support businesses, we are once again showing that we will do what we need to to ensure workers and businesses are supported during the outbreak. , and that our economy remains strong in the face of adversity.

The government has said that the deferral of GST / HST payments, as well as customs duties due on imports, to June “will generally apply to payments” that become due in March, April and May 2020. “These amounts would normally have been owed to the Canada Revenue Agency and the Canada Border Services Agency by the end of this month, ”the government said. “This measure will take effect immediately, through the existing authorities. “

The government said the Canada Revenue Agency was putting in place a series of administrative measures to ease some of the burden on financially troubled businesses.

The government has stated that the new loan and guarantee program for SMEs will work as follows:

  • Export Development Canada will provide guarantees to financial institutions to issue new operating credits and cash flow term loans of up to $ 6.25 million to small and medium-sized businesses. These loans will be 80 percent guaranteed by Export Development Canada and will be repaid within one year.
  • SMEs can also get support through a new co-lending program that will bring together the Business Development Bank of Canada and financial institutions to co-lend term loans to these businesses for their operational cash flow needs. Eligible businesses can obtain additional credit amounts of up to $ 6.25 million under the program, the risks of which will be 80 percent shared between the Business Development Bank of Canada and financial institutions. Eligible financial institutions will carry out underwriting and financing directly for clients.

The government said it has already introduced several measures to support businesses affected by COVID-19:

  • Offer eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of the compensation paid during this period, up to a maximum of $ 1,375 per employee and $ 25,000 per employer. Companies will be able to immediately benefit from this support by reducing their income tax rebates withheld from the remuneration of their employees.
  • Extension of the maximum duration of the work-sharing program, from 38 weeks to 76 weeks, for workers who agree to reduce their normal hours of work due to events beyond the control of their employer.
  • Establish a business credit access program, primarily for small and medium-sized businesses, through the Business Development Bank of Canada and Export Development Canada. These organizations work closely with private sector lenders to coordinate credit solutions for individual businesses, including in sectors such as oil and gas, air transportation, and tourism.
  • Increase the credit available to farmers and the agri-food sector through Farm Credit Canada.
  • Deferral of payment of income taxes. The government allows all taxpayers to defer, after August 31, 2020, the payment of income tax amounts due from March 18, and before September 2020. This relief would apply to tax balances due, as well as installments, under Part I of the Income Tax Act. No interest or penalty will accrue on these amounts during this period.

If you have any information, ideas for articles or tips for The Lawyer Daily please contact Cristin Schmitz at [email protected] or at 613-820-2794.

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