With all the necessary safety restrictions enacted by provincial and federal governments, operating a commercial business has been anything but simple. Meeting necessary expenses, like rent payments, has been incredibly difficult (or outright impossible!) for many.
In April 2020, the federal government rolled out the Canada Emergency Commercial Rent Assistance (CECRA) program. CECRA covered only small businesses, and under this program, landlords forgave 25% of the monthly rent. While it was a help, this program was not enough, and it ended in September 2020.
Fortunately, in October, Federal Finance Minister Chrystia Freeland announced the new Canada Emergency Rent Subsidy (CERS) to take its place.
With the CECRA, commercial property owners applied instead of the small business owner tenants. With CERS, the businesses themselves apply for the subsidy and receive the benefit directly.
To help you better understand the CERS and how it may benefit you, we’ve put together this helpful guide.
How Does CERS Work?
The subsidy rate is based on a sliding scale and calculated using the eligible revenue during the reference period with the eligible revenue from a previous period. Eligibility is not based on a minimum revenue drop. That amount is only used to calculate the amount you will receive.
The maximum available subsidy is 65%. Eligible businesses that have experienced a revenue loss of 70% or more qualify for a 65% rent subsidy during a claim period.
The first claim period is backdated to September 27, 2020, and will run until June 2021. To qualify, businesses must apply for the subsidy within 180 days after the claim period has ended.
What Is Lockdown Support?
Lockdown Support is available to businesses that have been forced to temporarily shut their doors or restrict services due to a mandatory Public Health order.
Lockdown Support offers an additional 25% to the CERS subsidy. Only businesses that qualify for the base subsidy are eligible for this additional support.
This 25% top-up is a fixed rate multiplied by the number of qualifying rent expenses and added to the base amount.
The Lockdown Support is as follows: 25% x days of lockdown / 28 days (28 days being the claim period).
What Businesses are Eligible for CERS?
To qualify for CERS, a business must meet the following conditions:
- Had a CRA business number before September 27, 2020
- Had a payroll account on March 15, 2020, or had someone conduct payroll remittances on your behalf
- Purchased another person’s business assets or partnership who meets the payroll criteria listed above and have made an election based on the same acquisition rules for CERS
Eligible businesses must:
- Be an individual, a non-profit organization, taxable corporation or trust, a registered charity, or a partnership consisting of eligible employers
- Own or rent qualified properties and have seen a decline in revenues due to the pandemic
Tenants of commercial landlords that applied and received CECRA are eligible to apply for CERS.
What Properties Qualify for CERS?
Any and all buildings or land that an organization owns or rents and uses for everyday business in Canada is eligible.
Residential properties or properties owned to generate rental income from renting entities that are independent of one another or considered arm’s length parties do not qualify for CERS.
What Expenses Can Be Claimed Under CERS?
To receive CERS, you must have qualifying rent expenses. These expenses can be broken down into two categories, one for tenants and one for property owners.
In both instances, for the expense to be considered eligible during a claim period, it must meet the following criteria:
- Amount paid or payable to an arm’s-length party
- An expense for the particular claim period
- An expense must be paid or payable under a written agreement in place before October 9, 2020
For each claim period, expenses can be claimed to a maximum of:
- $75,000 per business location (base and top-up)
- $300,000 in total for all areas, including amounts claimed by affiliated entities. This amount applies to the base subsidy only, and there is no maximum for the top-up
Tenants are eligible to claim:
- Rent, gross rent, and rent based on a percentage of sales, profit, or similar factors
- Amounts are required under a net lease, including base rent, operating expenses such as insurance, utilities, common area maintenance expenses, property taxes, including school and municipal taxes, and amounts paid for ancillary services typically rendered in connection with rent
Sales taxes, amounts paid for damages, and amounts for special services are excluded from eligibility.
For Property Owners
Property owners can claim property taxes (including school and municipal taxes), property insurance, interest on commercial mortgages. The mortgage amount should not exceed the lowest principal amount secured by one or more mortgages on the property when acquired or the property’s cost.
How to Apply for CERS
To apply for CERS, you must first have a CRA My Business account. From this account, you will need to set up your CERS number.
Once you have your CERS number, you will be able to access the application form. From there, you can choose the period you are applying for, fill in the claim information applicable to you, and the subsidy amount will be calculated for you. Not all fields will apply to you, so leave blank those which are not appropriate.
The following lines will automatically be calculated and displayed for you on the review page:
- Line 155 – Total eligible expenses for the claim period (Line 120 + Line 130 + Line 140 + Line 150)
- Line 170 – Maximum rent expenses that can be claimed for the claim period (lesser of: Line 160; $300,000; and, if applicable, $300,000 multiplied by the percentage assigned per the agreement among affiliated entities claiming the rent subsidy)
- Line 220 – Subsidy rate
- Line 300 – Base Canada Emergency Rent Subsidy (Line 170 x Line 220)
- Line 320 – Total Canada Emergency Rent Subsidy (Line 300 + Line 310)
A separate application must be filled out for each claim period. For complete details on the application process, visit the Government website here.
Let WTC Help!
It is entirely understandable that you want to put as much energy and focus into your business as you possibly can.
If you have questions or concerns about CERS and how it impacts you and your business, WTC is happy to answer your questions. As one of Canada’s most popular professional accounting firms, we have in-depth knowledge and understanding of CRA guidelines and Canadian tax requirements to support you in all of your accounting needs, from bookkeeping to corporate tax filings and accounting systems setup.
Contact us today to learn what we can do to support your business!