COVID-19 Wage and Rent Subsidy Extension

Summary#

These are the final Regulations Amending the Income Tax Regulations (COVID-19 — Prior Reference Periods for Wage Subsidy, Rent Subsidy and Hiring Program and Subsidies Extension). They let some recently started businesses use January and February, 2020 as a prior comparison month for subsidy tests, and they extend and raise subsidy rates for pandemic support programs for one extra qualifying period that ends on October 23, 2021. The rules were registered on August 12, 2021 and published in the Canada Gazette on September 1, 2021.

What it does#

• Allows eligible entities that were not operating on March 1, 2019 and that switched to the general revenue test after early 2020 to instead elect the “alternative” prior reference period (the months of January and February, 2020) for qualifying periods 14 to 17.
• Extends the Canada emergency supports by one qualifying period so the programs run through September 26 to October 23, 2021 (the new “period 21”).
• Raises the maximum subsidy for qualifying period 20 (that is, August 29 to September 25, 2021) so the top subsidy that month is 40% instead of 20% under the earlier plan.
• Keeps the subsidy programs and their matching rules in place for employers who meet the revenue-decline test and aligns the rent and wage subsidy rates for the phase-out periods.
• Sets specific percentage formulas for how the wage and rent subsidies (base and top-up parts) are calculated for periods 20 and 21.
• Confirms the Canada Revenue Agency administers the programs and that the regulations took effect on registration (August 12, 2021).

(Programs involved: Canada Emergency Wage Subsidy (CEWS), Canada Emergency Rent Subsidy (CERS), Lockdown Support, and the Canada Recovery Hiring Program (CRHP).)

Who's affected#

• Small and medium businesses, registered charities, and non‑profit organizations that applied for or use the CEWS, CERS, Lockdown Support, or CRHP.
• Newly established businesses that were not operating on March 1, 2019 and that would otherwise lose eligibility under the original rules.
• Landlords and tenants who get help through the CERS.
• Employers deciding whether to claim the CRHP (the program referenced a per‑employee cap of $1,129 in the background material).
• The Canada Revenue Agency (CRA), which administers and enforces the rules.

If it’s unclear whether a particular business qualifies under the changed formulas or election rules, the source says the CRA will apply the amendments when determining eligibility.

Why it matters#

• It fixes an eligibility problem for businesses that started after March 1, 2019, letting some newer businesses keep getting wage and rent support for certain months. That can mean continued help paying employees and rent for firms that otherwise lost access under the earlier rules.
• It delays the phase-out of federal pandemic support by one period and boosts aid for August 29 to September 25, 2021, which provides extra cash flow to firms during reopening.
• The government estimated the extension and higher rates cost about $1 billion, so this was a material short-term spending decision to support recovery.
• Practically, employers who expect to claim these subsidies should check which revenue-test approach applies to them and whether they can make the election allowed by these amendments.