Given the unprecedented financial turmoil facing Canadians as a result of the COVID-19 Pandemic, the government of Canada recently announced that Eligible businesses can now apply for the Canada Emergency Rent Subsidy (CERS).
The following article will detail how these activities will affect Canadian lessee taxpayers, and the proactive ways in which Canadians can benefit. The CERS is retroactive to September 27, 2020 and is scheduled to last until June 2021.
CERS will provide qualifying renters and property owners that have experienced a drop in revenue with direct support to cover part of their rent or property expenses. The legislation only provides details of the CERS program until December 19, 2020 and the CERS program generally follows the Canada Emergency Wage Subsidy (CEWS) program, including the sliding scale of subsidy based on revenue decline. Businesses that are currently eligible to claim CEWS should qualify for CERS assuming they are incurring eligible expenses.
The CERS will apply to eligible expenses up to $75,000 per period per business location with an overall expense limit of $300,000 per period that must be shared amongst affiliated entities. Eligible expenses include:
Rent and other expenses required to be paid under a net lease, including base rent, operating expenses, property tax, and other ancillary services.
Interest on commercial mortgages (with some limitations), property insurance, and property taxes.
***Please note that expenses paid to non-arms length entities do not qualify for CERS.
The details for the CERS for the first three periods have been released and eligible businesses that have experienced a revenue decline will be eligible to claim CERS on up to 65% of their eligible expenses as follows:
Revenue decline of 70% or more – 65%
Revenue decline of 50% to 69% – 40% plus (revenue decline – 50%) x 1.25% (e.g. 40% +(65% revenue decline – 50%) x1.25 = 58.75%)
Revenue decline of 1% to 49% – revenue decline x .8 (e.g. 35% revenue decline x .8 = 28%)
Businesses that are forced to close or have their activities significantly restricted by government authorities due to COVID-19 will be eligible for an additional 25% subsidy if they already qualify for the CERS. The revenue decline can be determined by using the general approach or the alternative approach. Once a method is determined it must be used for each of the three periods.
At Cirrus Consulting Group, we have both lawyers and consultants with over 100 years of combined experience negotiating with landlords and supporting dentists, doctors and veterinarians to resolve their lease issues. If you have any questions about how the legislation may affect you as a lessee, or questions about dealing with your landlord during these times, please contact us through the form below.
In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy in these uncertain times.
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.
Author: Ryan Robertson, Associate Lawyer at Cirrus Consulting Group