As the circumstances around COVID-19 continue to evolve, so does the Canadian government’s response to the pandemic and the relief measures offered to businesses. The Canada Emergency Rent Subsidy (CERS)1 has been designed to provide rent and mortgage relief directly to businesses that experience a year-over-year revenue decline.
“One of the biggest benefits of this subsidy is that businesses can apply directly to the Canadian government. Unlike previous programs, they don’t have to go through their landlord,” says Jeffrey Heard, Business Account Manager at RBC. “This process enables businesses to have more control over their situation and ability to access relief.” Plus, because the program operates through a platform and process similar to the Canada Emergency Wage Subsidy (CEWS), it is expected that the program will be simple for businesses to understand, evaluate criteria and apply for support.
How CERS works
The program is administered by the Canada Revenue Agency on a period-by-period basis. Businesses can use the CERS calculator to determine their eligibility and apply for it through either the My Business Account or Represent a Client portal.
The subsidy will be available on a sliding scale with a maximum claim of 65% of eligible expenses, plus an additional 25% available for organizations temporarily shut down by a mandatory public health order. All information about the program, including dates, maximum subsidy amounts and eligibility criteria can be found on the Government of Canada website.
In a recent presentation by the Retail Council of Canada (RCC), businesses had the opportunity to ask questions about the program. Here are the top ten questions answered:
Q: Does a business calculate revenue on a location basis or a company basis?
A: Revenue decline is measured on an entity-by-entity basis – not by location. You, therefore, apply for the rent subsidy at the entity level. A given location would be eligible for the subsidy only if the entity itself experiences a revenue decline.
Q: One of my locations was forced to close due to lockdown. Do I have to be eligible for the base subsidy before I can apply for the 25% lockdown subsidy?
A: Yes. For a location to be eligible for the lockdown support, the entity must be eligible for baseline subsidy support. If the entity itself is not eligible and the location is closed due to public health order, you would be in a situation where no lockdown support is received.
Q: I opened a business in 2020 so I don’t have 2019 revenue to compare against. Can I still apply?
A: New businesses will have a harder time qualifying for this subsidy if they don’t have a baseline revenue to compare against. The same rules apply as with the Canada Emergency Wage Subsidy (CEWS).
Q: Some of my expenses aren’t paid monthly. For example, property tax is paid quarterly and property insurance is paid annually. Can I claim these expenses if I’m not paying them within this claim period?
A: You can only claim expenses that are paid or payable within the claim period (and for payable expenses, you must pay them within 60 days). For future expenses to be considered under a claim, you can amend claims as long as they are made within 180 days of the claim period. Alternatively, you can pre-pay an expense so it falls within this period.
Q: Are warehouses, storage spaces, and head offices eligible for the rent subsidy?
A: Yes, providing you meet the other criteria. A warehouse, for instance, would be considered a location, which may be eligible for up to $75,000 in subsidy funding.
Q: When calculating my revenue, do I calculate all revenue, including online sales, or just retail sales?
A: All revenue is relevant. If your retail sales decrease but your online sales grow – consequently balancing out your total revenue – you may not be eligible for the rent subsidy.
Q: If my landlord decides to reduce my rent after I receive the subsidy, what should I do?
A: If your rent decreases after you submit your subsidy claim, you should amend your claim to represent the actual amount of rent you are paying. For instance, if your $10,000 rent was reduced by your landlord by 10%, your claim should reflect a $9,000 rent.
Q: If a tenant is required to pay insurance, maintenance fees, etc. can they claim them through CERS?
A: Yes. A tenant can claim what’s in the rental agreement.
Q: Can a sub-tenant apply for a rental subsidy?
A: Being a sub-tenant doesn’t mean you can’t apply, as long as you’re dealing at arm’s length with the landlord and that you, as the sub-tenant, meets the eligibility criteria.
Q: Is the subsidy taxable?
A: Yes. The subsidy amount you received needs to be included on your Annual Return of Income (e.g., corporate income tax return, partnership return, etc.) when calculating your taxable income.
Remember, all information about the Canada Emergency Rent Subsidy can be found at the Government of Canada website. Here, you can also calculate your subsidy amount, check your eligibility and link out to the CRA portals in order to apply.
1 While information presented here is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. If you have further questions about this program please consult the applicable government website or, if you are an RBC business client, speak to an RBC advisor by booking an online appointment.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.