Canadian Medical Association

This document is being updated on a regular basis, in accordance with additions/changes to federal programs. Last updated June 1, 2020 to reflect CEWS extension by an additional 12 weeks to August 29, 2020.


COVID-19 has disrupted most industries, including health care. While the pandemic is placing immense demands on health care providers, many physicians and medical learners are also facing financial uncertainty related to loss of income.

The Canadian Medical Association commissioned MNP, a national accounting and tax firm, to provide a detailed analysis of the top four current federal assistance programs.

The Canadian government has created several programs: to help Canadian businesses facing hardship as a result of the COVID-19 outbreak; which may be applicable to your medical practice:

  • Two wage subsidies: Canadian Emergency Wage Subsidy (CEWS) and Temporary Wage Subsidy for Employers (TWS); and
  • A loan program: Canadian Emergency Business Account (CEBA).

Should the above subsidy programs be deemed not applicable for business reasons, a worker could apply for relief under the Canada Emergency Response Benefit (CERB) if the criteria are met.

Federal assistance programs at a glance

federal systems program at a glance

Two additional federal assistance programs not covered in this  analysis could also be helpful to you under specific circumstances:

•    If you rent a commercial space for your practice, your landlord could be eligible for the Canada Emergency Commercial Rent Assistance (CECRA) to help reduce the cost of your rent – please visit CMHC - CECRA for more information.
•    Medical students could be eligible for the Canada Emergency Student Benefit (CESB) – please visit CRA - CESB for more information. 

This dashboard is designed to assist all medical practitioners with questions regarding the specific government subsidies and how each relates to their employment structure.

CEWS

Canadian Emergency Wage Subsidy (CEWS)

CEWS is a subsidy that covers 75 percent of salaries for eligible entities, for up to 12 weeks, retroactive from March 15 to June 6, 2020. The Government has recently announced it intends to extend this program by an additional 12 weeks to August 29, 2020. Generally, it is intended that employers of all sizes and across all sectors of the economy would be eligible except for public sector entities.

Employment Structures

Eligibility

A.Self-Employed Physician or Professional Corporation

  • Did you have a corporate payroll number by March 15, 2020
  • Did your qualifying revenue decline 15 percent in March 2020, 30 percent in April/May 2020, or 30 percent in other prescribed periods compared to prior reference periods?
  • Do your employees include yourself as a physician and/or family members?
  • Do you have a Canada Revenue Agency (CRA) My Business Account setup?

B. Cost Sharing Arrangement (Unincorporated Association)

1. Self-employed physician or employees paid by the professional corporation

    Refer to self-employed physician or professional corporation (A)

 

2. Employees jointly paid and employed under Cost Sharing Agreement

  • The CRA appears to not accept an “agent” relationship for purposes of filing a CEWS application at this time.

C. Partnership

1. Employees paid by the self-employed physician or professional corporation

 

2.  Employees of a Partnership

  • Does the partnership have a payroll number?

  • Did the partnership's qualifying revenue decline 15 percent in March,30 percent in April/May 2020 or 30% in other prescribed periods compared to prior reference periods?

  • Do you have a CRA My Business Account setup?

  • The partnership can apply for subsidy if eligible.

4. How to apply: Eligible entities can apply through the CRA's My Business Account portal and web-based application. Consult their application guide to get started.

TWS

Temporary Wage Subsidy for Employers (TWS)

Should your business not qualify for the CEWS, it may qualify for the previously announced wage subsidy of 10 percent of remuneration paid from March 18 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per eligible employer.

Employment Structures

Eligibility

A. Self-Employed Physician or Professional Corporation

  • Is your professional corporation a CCPC?

  • Do you access the small business deduction?

  • No application required

  • Available for physician and family members paid a salary

B. Cost Sharing Arrangement (Unincorporated Association)

1. Self-employed physician or employees paid by the professional corporation

      Refer to self-employed or professional corporation (A)

2. Employees jointly paid and employed under Cost Sharing Agreement

  • Relying on the position that the Agent's payroll # is in fact the payroll # of the principals

  • As a principal, your eligibility needs to be assessed independent of the other principals in the arrangement

  • Employees belong to the principal on a proportionate basis

C. Partnership

1. Employees paid by the self-employed physician or professional corporation  

2. Employees of a Partnership

  • Does the partnership have a payroll number?

  • Are your partners individuals or CCPCs that access the small business deduction?

  • No application required

How to apply: No application required. Eligible entities can visit the Government of Canada’s TWS FAQ.

CEBA

Canadian Emergency Business Account (CEBA)

CEBA is available for eligible businesses and provides for a loan up to $40,000 to fund certain expenses incurred by the business. The loan is interest free up to December 31, 2022 and no principal payments are required.  If you pay at least 75 percent of the loan ($30,000) by December 31, 2022 then the remaining $10,000 is forgiven. If the loan balance is not repaid by December 31, 2022, then the loan is converted into a term loan with a 5 percent interest rate and due December 31, 2025. No principal payments are due during the term of the loan; however, the full balance is due by December 31, 2025. Expansion of this program was announced on May 19, 2020 by the Government.

Employment Structures

Eligibility

A. Self-Employed Physician or Professional Corporation

  • Do you have a CRA business number and a business operating bank account (future changes may allow a personal bank account)?
     
  • Do you need assistance in covering your current operating costs?
     
  • Was your 2019 T4 payroll between $20,000 to $1,500,000 or 
     
  • If your payroll is less than $20,000 do you have eligible non-deferrable operating expenses between $40,000 and $1,500,000?

 

B. Cost Sharing Arrangement (Unincorporated Association)

1. Self-employed physician or employees paid by the professional corporation

      Refer to self-employed or professional corporation (A)

2. Employees jointly paid and employed under Cost Sharing Agreement

  • The CRA appears to not accept the “agent” relationship for purposes of filing a CEBA application at this time;

  • As a principal, your eligibility needs to be assessed independent of the other principals in the arrangement.

C. Partnership

1. Employees paid by the self-employed physician or professional corporation  

2. Employees of a Partnership

  • Do you have a CRA number and a business operating bank account?

  • Does the partnership need assistance in covering its current operating costs?

  • Was the partnership's 2019 T4 payroll between $20,000 to $1,500,000?

How to apply: Contact your financial institution for more information on this type of assistance.

CERB

Canada Emergency Response Benefit (CERB)

A taxable benefit of $2,000 for a 4-week period, up to 16 weeks is available to eligible workers who have lost their income due to COVID-19. Generally, this will be available to workers who have stopped work for at least 14 consecutive days within the initial four-week application period, due to reasons related to COVID-19 and receive $1,000 or less of income (pre-tax) in respect of the consecutive days they ceased work.

If this applies to your situation, you may be eligible to apply for a previous period, starting March 15, 2020.

 

Employment Structures

Eligibility

A. Self-Employed Physician or Professional Corporation

  • Have you or an employee including family members stopped work or will stop work?

  • Are you or an employee including family members receiving $1,000 or less for at least 14 consecutive days within the initial four-week period?

B. Cost Sharing Arrangement (Unincorporated Association)

1. Self-employed physician or employees paid by the professional corporation

      Refer to professional corporation or self-employed (A)

2 Employees jointly paid and employed under Cost Sharing Agreement

  • Has a joint worker stopped work or will stop work?

  • Has a joint worker stopped receiving employment income or receiving $1,000 or less for at least 14 consecutive days within the initial four-week period?

C. Partnership

1. Employees paid by the self-employed physician or professional corporation  

2. Employees of a Partnership

  • Has a worker stopped work or will cease work?

  • Has a worker stopped receiving employment income or receiving $1,000 or less in for at least 14 consecutive days within the initial a four-week period?

How to apply: Employees can apply on either the Service Canada or Canada Revenue Agency (CRA) websites

 

Federal assistance program overview

Canada Emergency Wage Subsidy (CEWS)

The CEWS provides a 75 percent wage subsidy to eligible employers for up to 12 weeks, retroactive from March 15 to June 6, 2020. The Government has recently announced it intends to extend this program by an additional 12 weeks to August 29, 2020.

Eligible Entity

To qualify, you must be an eligible entity. Eligible entity includes individuals, trusts, taxable corporations and partnerships (provided 50% or more of the members are eligible entities).

An eligible entity must attest to a revenue drop of at least 15 percent of their revenues in March 2020, 30 percent for the months of April/May or 30 percent for other prescribed periods. The 30 percent decline required currently, is under review with the Government. See qualifying period below.

The Government is encouraging all eligible entities to rehire employees as quickly as possible and to apply for the CEWS if they are eligible.  To ensure that the CERB applies as intended, the Government has introduced a process to allow individuals rehired by their employer during the same eligibility period to repay any CERB they no longer qualify for. 

Calculating Revenues

Revenue would be calculated using the employer's normal accounting practices (typically the accrual method) or the cash method (if elect to do so).  Revenue would include inflows of cash, receivables or other consideration arising from the rendering of services (or the sale of goods) in Canada. Revenues would not include extra-ordinary items or amounts received under this program or the TWS.CRA has noted that extra-ordinary items would include federal, provincial or municipal Government assistance/relief received due to Covid-19.
 
In addition, there are further rules that impact the calculation of revenue.

  • Affiliated groups may elect to compute revenue on a consolidated basis.
  • Certain eligible entities receiving substantially all (90% or more) of their revenue from non-arm's length persons are eligible to elect to calculate their decline in revenue based on the non-arm's length persons' decline in revenue.  These rules are complex and should be reviewed with your tax advisor. 

Amount of Subsidy

The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 (and for the anticipated extension of the program to August 29) would be the greater of:

  • 75 percent of the amount of eligible remuneration paid, up to a maximum benefit of $847 per week or if the employee is not dealing at arm's length with the employer, nil; and
  • The amount of eligible remuneration paid, up to a maximum benefit of $847 per week or 75 percent of the employee's baseline remuneration (previously referred to as the pre-crisis weekly remuneration), whichever is less.

Eligible remuneration includes salary, wages, and other remuneration such as taxable benefits, not including severance pay or items such as stock option benefits.

Baseline remuneration for a given employee will be determined on the average weekly eligible remuneration paid between January 1 and March 15 inclusively, excluding any seven-day periods in which the employee was not remunerated. Proposed legislation changes include expanding the definition of baseline remuneration to allow employers to choose one of two periods when calculating the baseline remuneration of their employees. Employers would be allowed to calculate baseline remuneration for an employee as the average weekly remuneration paid to the employee from January 1 to March 15 or, alternatively, as the average weekly remuneration paid to the employee from March 1 to May 31 of 2019, in both cases excluding any period of 7 or more consecutive days without remuneration.  Employers would be able to choose which period to use on an employee-by-employee basis.  This change is proposed to be retroactive to April 11, 2020, which means that it would apply to the first qualifying period starting March 15, 2020 and subsequent qualifying periods.

The subsidy for employees not dealing at arm's length with their employers will only be available to those employed at some point from January 1 to March 15, 2020 and/or between March 1 to May 31, 2019 (later period of dates based on proposed legislation).

Employers will also be eligible for a subsidy of up to 75 percent of salaries and wages paid to new employees.

Refund for Certain Payroll Contributions

A 100 percent refund for certain employer-paid contributions to EI, the CPP, the QPP and the QPIP was introduced as part of this program.  This refund is available on employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay, and for those employees that the employer is eligible to claim the CEWS. 

An employee is considered on leave if that employee is paid by the employer but does not perform any work for the employer. The refund has no weekly maximum benefit per employee and no overall limit to the refund amount that an eligible entity may claim. 

Employers will be required to collect and remit employer and employee contributions to each program as usual; eligible employers will apply for a refund at the same time as they apply for the CEWS.

Qualifying Periods

Employers will be allowed to calculate their change in revenue in March/April/May/additional prescribed periods, 2020 using a year-over-year or an alternative approach to determine their eligibility and must maintain consistency in the approach they use over the period of the program.

The following table from the Department of Finance provides for the reference periods (period to test revenue) and the qualifying period (period in which remuneration has been paid). Please note: a qualifying entity must have a payroll number with CRA by March 15, 2020.

 

Qualifying Period

Required Reduction of Revenue (equal to at least these percentages)*

Reference Period for Eligibility

Period 1

March 15 – April 11

15%

March 2020 over:

  • March 2019 or
  • Average of January and February 2020

Period 2

April 12 – May 9

30%

Eligible for Period 1 or April 2020 over:

  • April 2019 or
  • Average of January and February 2020

Period 3

May 10 – June 6

30%

Eligible for Period 2 (based on the revenue decline in period 2) or May 2020 over:

  • May 2019 or
  • Average of January and February 2020
Period 4 June 7 - July 4 30%**

Eligible for Period 3 (based on revenue decline in period 3) or
June 2020 over:

•    June 2019 or
•    Average of January and February 2020

Period 5 July 5 - August 1 30%**

Eligible for Period 4 (based on revenue decline in period 4) or
July 2020 over:

•    July 2019 or
•    Average of January and February 2020

Period 6 August 2 - August 29 30%** Eligible for Period 5 (based on revenue decline in period 5) or:

•    August 2019 or
•    Average of January and February 2020

 

* Proposed legislation
** The Government will consult with key business and labour representatives over the next month on potential adjustments to the program to incent jobs and growth, including the 30 percent revenue decline threshold.


In order to provide certainty for employers once an employer is found eligible for a specific period, the employer will automatically qualify for the immediately following period.

Eligible employees

Eligibility for the CEWS of an employee's remuneration, is limited to individuals employed in Canada and who have not been without remuneration for 14 or more consecutive days in the qualifying period.

Employers are cautioned to exercise particular care in regards to the hiring and dismissing of an employee in any period because of this rule.

How to Apply

Eligible entities can apply for the CEWS through the CRA's My Business Account portal as well as a web-based application.

Please note that the government intends to communicate, or otherwise make available to the public, the name of the employer that makes an application for the CEWS. It is unclear in what manner this communication will be made.

Employers need to keep all records that support the CEWS application including those that demonstrate their decline in revenue and remuneration paid to employees.   

For more information, visit the Government of Canada’s:

Temporary Wage Subsidy for Employers (TWS)

The TWS for employers is a three-month measure to help prevent layoffs and support businesses.

The subsidy is equal to 10 percent of the remuneration paid from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer.

Note that associated Canadian-controlled private corporations ("CCPC") will not be required to share the maximum subsidy of $25,000 per employer.

The subsidy is calculated and deducted from payroll remittances owing to the CRA. The current payroll remittance of federal, provincial or territorial income tax owing to the CRA would be reduced by the amount of the subsidy.

If the income taxes deducted are not enough to offset the value of the subsidy in a specific period, future payroll remittances can be reduced. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 19, 2020).

Eligibility

TWS is limited to the following employers:

  1. A CCPC that is eligible for the small business deduction subject to rules. A medical professional corporation would generally be a CCPC. Consult your tax advisor regarding eligibility and status of your professional corporation as a CCPC;
  2. An individual (other than a trust);
  3. A partnership, all members of which are: eligible CCPCs, individuals, partnerships and registered charities;
  4. A non-profit organization exempt from tax; and
  5. A registered charity.

An eligible employer qualifies provided they:

  • Employ one or more individuals in Canada;
  • Have an existing business number and payroll program account with the CRA on March 18, 2020; and
  • Pay salary, wages, bonuses or other remuneration to an eligible employee.

Other

Note that the subsidy is required to be reported as income in the year in which it is received. To the extent that any amount is received under TWS, this will generally reduce the amount that can be claimed under the CEWS.

For more information, visit the Government of Canada’s FAQ on TWS.

Canada Emergency Business Account (CEBA)

The CEBA is available for eligible businesses and provides a loan for up to $40,000 to fund certain expenses incurred by the business.  The loan is interest free up to December 31, 2022 and no principal payment are required.  If you pay at least 75% of the loan ($30,000) by December 31, 2022 then the remaining $10,000 is forgiven.

If the loan balance is not repaid by December 31, 2022, then the loan is converted into a term loan with a 5% interest rate and due December 31, 2025.  No principal payments are due during the term of the loan; however, the full balance is due at December 31, 2025.

As the banks are administering this program, please consult your financial institution for specific criteria; however, based on our current understanding, the loan is available to businesses who meet the criteria below:

  • an existing business account with a bank on March 1, 2020 (government committed to work on potential solutions to help business owners and entrepreneurs who operate through their personal account);
  • a business number with the CRA as of March 1, 2020;
  • payroll between $20,000 and $1,500,000 for the 2019 calendar year (and supported by your T4 Summary); and
  • good credit standing (which may be required by some banks).

The loan is available through your primary banking institution and is to be used to cover non-deferrable costs such as payroll, rent, insurance and utilities.

On May 19, 2020, the Government discussed an expansion to the CEBA program.  Launch date for these expansion rules have yet to be determined. This program expansion is intended to now be available to a greater number of businesses that are sole proprietors receiving income directly from their businesses or family-owned corporations that pay employees through dividends rather than payroll.  To qualify for the expanded eligibility criteria, applicants with payroll lower than $20,000 would need:

  • a business operating account at a participating financial institution (program may be adapted to include personal operating accounts in the future);
  • a business number with the CRA, and to have filed a 2018 or 2019 tax return. (provisions for new businesses who could not file a 2018 or 2019 tax return may be announced);
  • eligible non-deferrable expenses between $40,000 and $1,500,000.  Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities and insurance.

Contact your primary business bank to apply.

For more information about the program, visit the Government of Canada’s FAQ on CEBA.

For more information about the expansion of the program, visit CEBA Expansion.

Canada Emergency Response Benefit (CERB)

The legislation provides that a worker will be eligible for the program if he/she has ceased work for at least 14 consecutive days within the initial four-week application period,  due to reasons related to COVID-19 and does not receive income in the consecutive days they ceased work A worker can re-apply for CERB for multiple 4-week periods, to a maximum of 16 weeks (4 periods). 

Recently, the Government announced changes to the CERB program to expand eligibility to situations where an individual earns $1,000 (before taxes) or less during an eligibility period.  If this applies to your situation, you may be eligible to apply for a previous period, starting March 15, 2020.

The CERB provides a payment of $2,000 for a 4-week period (equivalent to $500 a week) for up to 16 weeks. The amount of the support payment is subject to change by government regulation. The benefit is available until October 3, 2020. Applications can be filed until December 2, 2020.

Per the CRA, payments received under the CERB will be included in the recipient's taxable income, meaning there will be no tax withheld on the payment. As a result, the recipient will owe income tax when they file their personal tax return for 2020.

Eligibility

A person will be eligible if they are considered a worker and if they meet certain eligibility requirements for the program.

worker is a person who is at least 15 years of age, who was a resident of Canada in 2019 and had total income of at least $5,000 from employment, self-employment or non-eligible dividends in either 2019 or in the 12 months immediately preceding their application. We also understand that a worker can count non-eligible dividends towards the $5,000 income requirement.

A worker will be eligible for the program if work he/she has non-voluntarily stopped working because of reasons related to COVID-19 and has not earned more than $1,000 in employment/self-employment income or non-eligible dividends for 14 or more consecutive days within the initial four-week benefit period of their claim.  When submitting subsequent claims, one cannot have earned more than $1,000 in employment/self-employment income for the entire four-week benefit period of the new claim. The reasons for ceasing work could include sickness, quarantine, closure of business, taking care of an ill family member or taking care of children due to closure of schools and daycares.

Other

This program applies to wage earners, contract workers and self-employed individuals who would not otherwise be eligible for EI. Additionally, a worker could also receive payments under this program if they are still employed but are not receiving more than $1,000 of income due to a COVID-19 related disruption.

You will be able to apply for the new CERB through CRA's My Account or using the dedicated phone line starting April 2020.

For more information, visit the Government of Canada’s main webpage for CERB.


Federal assistance program eligibility by employment scenario

A. Employees of a Self-Employed Physician or Professional Corporation

The following commentary is directed at self-employed physicians and professional corporations. The professional corporation may employ/compensate you as a physician and other staff which may include family members. While, the self-employed physician cannot employ him/herself as a physician, he/she may employ or compensate other staff which could include family members.

CEWS – A

The Department of Finance has released the CEWS program and has recently announced a proposed expansion to the program. The following are a few of the factors that should be considered:

  • Are you an eligible entity? Eligible entity includes an individual and taxable corporation.  As such, both, a self-employed physician and a professional corporation would meet the definition of an eligible entity;
  • An eligible entity will have to calculate their qualifying revenue in order to determine their eligibility. A decline in revenue of at least 15 percent in March 2020 or 30 percent for April/May/other prescribed periods as compared to each month's prior reference period will need to be demonstrated;
  • The amount of the CEWS that can be claimed for each employee (new or existing) is calculated as the greater of:
    • 75 percent of eligible remuneration (includes salary, wages and other remuneration) up to a maximum of $847 per week or if the employee is not dealing at arm's length with the employer, nil, whichever is less; and
    • the amount of eligible remuneration paid, up to a maximum benefit of $847 per week or 75 percent of the employee's baseline remuneration (previously referred to as the pre-crisis weekly remuneration), whichever is less.
  • Generally, the baseline remuneration is the average weekly eligible remuneration paid to the eligible employee during the period of January 1, 2020 through March 15, 2020 and excludes any period of seven or more consecutive days for which the employee was not remunerated.
  • The Government has proposed an expansion of the definition of baseline remuneration. Employers would be allowed to calculate baseline remuneration for an employee as the average weekly remuneration paid to the employee from January 1 to March 15 of 2020, or, alternatively, as the average weekly remuneration pad to the employee from March 1 to May 31, 2019, in both cases excluding any period of 7 or more consecutive days without remuneration.  Employers would be able to choose which period to use on an employee-by-employee basis.  
  • There are additional rules pertaining to eligible remuneration that prevent any amount received by an employee to be paid or returned to the employer, a non-arm's length party or to another person/partnership at the direction of the entity.  These rules also preclude remuneration arrangements being entered into between the employee and employer whereby one of the main purposes for the arrangement is to increase the amount of the CEWS.

Eligible employees are to be employed in Canada and not without remuneration for 14 or more consecutive days in the qualifying period. 

Physicians who suspect that their qualifying revenue has decreased or will decrease by at least 15 percent in March or 30 percent in April/May/other prescribed periods should consult with their accountant regarding evidence to support this position.

More information on the CEWS program

For further insights on how CEWS can apply to both self-employed physicians and professional corporations, read the frequently asked questions on this topic.

CEWS FAQ

TWS – A

The TWS is a three-month measure to help prevent layoffs and support businesses. The subsidy is equal to 10 percent of the remuneration paid from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per eligible employer.

As an employer, it would be necessary to assess the eligibility with respect to obtaining the TWS. 

More information on the TWS program

For further insights on how TWS can apply to both self-employed physicians and professional corporations, read the frequently asked questions on this topic.

TWS FAQ

CEBA – A

CEBA is available for eligible businesses and provides a loan for up to $40,000 to fund certain expenses incurred by the business.  The loan is interest free up to December 31, 2022 with no principal payments required.  If you pay at least 75 percent of the loan ($30,000) by December 31, 2022 then the remaining $10,000 is forgiven.

If the loan balance is not repaid by December 31, 2022, then the loan is converted into a term loan with a 5 percent interest rate and due December 31, 2025.  No principal payments are due during the term of the loan; however, the full balance is due at December 31, 2025.

More information about the CEBA program

For further insights on how CEBA can apply to both self-employed physicians and professional corporations, read the frequently asked questions on this topic.

CEBA FAQ

CERB – A

For business reasons, should the CEWS, TWS and CEBA programs be deemed not applicable, a worker could apply for relief under the CERB if the criteria are met. 

A worker will be eligible for the program if he/she has involuntarily stopped work due to reasons related to COVID-19 and does not earn more than $1,000 (pre-tax) in employment and/or self-employment income for 14 or more consecutive days within the 4-week benefit period of the initial claim.  A worker can re-apply for CERB for multiple 4-week periods, to a maximum of 16 weeks (4 periods) and must not earn more than $1,000 (pre-tax) in employment and/or self-employment income and/or non-eligible dividends with respect to each additional 4-week period claim.

The Benefit is available from March 15, 2020, to October 3, 2020. You can apply no later than December 2, 2020 for payments retroactive to within that period.

More information about the CERB program

For further insights on how CERB can apply to both self-employed physicians and professional corporations, read the frequently asked questions on this topic.

CEBA FAQ

B. Cost Sharing Arrangement

Under a cost-sharing arrangement, employees would be jointly employed by the principals in the arrangement. Typically, the principals (self-employed physicians or their professional corporation) under an agency relationship would delegate responsibility or authority to an agent. The agent would be given discretion to pay the employees, withhold the appropriate amount of taxes, file T4 slips, hire and terminate on behalf of the principals.     

Generally, there are two situations to assess with respect to the new government programs for a physician in a cost sharing agreement:

  1. Employees of the principals (self-employed physicians or professional corporations) - may include the physician's staff (if applicable) and the physician's family members that work in the practice. The professional corporation may also include the physician him/herself as an employee. Please refer to discussion under A (Employees of a Self-Employed Physician or Professional Corporation); and
  2. Jointly employed staff – includes employees who are jointly employed under a cost sharing arrangement. For purposes of this discussion, we assumed that staff jointly employed in a cost sharing agreement are considered employees of each principal (self-employed physicians or professional corporations). Please confirm this assumption with your tax advisor.

CEWS – B

In a cost sharing arrangement employees are jointly employed by any combination of self-employed physicians and professional corporations and an "agent" is administrating payroll. 

The concept of "agency" is not defined in the Income Tax Act (ITA). An "agency" relationship has been accepted by CRA on an administrative basis with respect to payroll, on particular facts. 

If the "agency" relationship is respected by the CRA for purposes of claiming the CEWS, the "agent" would be ignored, and each self-employed physician and professional corporation may need to determine their eligibility for CEWS. For instance, it would be necessary for each self-employed physician and professional corporation to calculate their qualifying revenue in order to determine their eligibility. In terms of qualifying revenue, it would be necessary for each self-employed physician and professional corporation to demonstrate a revenue decline of at least 15 percent on a year-over-year basis for which the period began for March 2019 vs. March 2020.  Alternatively, a revenue decline of at least 15 percent for March 2020 compared to the average revenue of January and February 2020 could be utilized.  

CRA has remained silent on whether or not it would respect the “agency” relationship and only recently, posted this question and answer within its own published Frequently Asked Questions – CEWS:

Question 3-8. Can an eligible employer that hires a third party to facilitate the administration of its payroll, qualify for the wage subsidy?

  • In order to qualify for the wage subsidy, an eligible employer must meet certain criteria.  One of these conditions is that the eligible employer had an open payroll program account with the CRA on March 15, 2020.
  • An employer, as the entity who has discretion over the amounts they pay to their employees, is responsible for the payroll withholding, remitting, and reporting obligations under the Income Tax Act.  This entity is one who must register a business number and payroll program account with the CRA. In many circumstances, an employer will hire a third party to facilitate the administration of their payroll.  This third party simply performs actions on the employer’s behalf and should, in all cases, be using the employer’s business number and payroll program account to perform these actions.
  • Employers who did not have their own business number and payroll account with the CRA on or before March 15, 2020 would not meet the eligibility criteria, and subsequently, would not be eligible for the wage subsidy.  The third party cannot apply for the wage subsidy on behalf of an employer by using their own business number and payroll program account.  

As a successful CEWS application may be based on the relevant facts and application of the law, please contact your tax advisor or legal counsel to discuss further.

Please refer to the question and answers in the self-employed physician or professional corporation section for more information.

TWS – B

The TWS is a three-month measure to help prevent layoffs and support businesses. The subsidy is equal to 10 percent of the remuneration paid from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per eligible employer.

Like CEWS, because the employees are jointly employed by any combination of self-employed physicians and professional corporations, each "employer" would be required to assess their eligibility with respect to obtaining the TWS. The concept of "agency" is not defined in the ITA.  An "agency" relationship has been accepted by CRA on an administrative basis with respect to payroll, on particular facts. A successful TWS application is dependent upon the on the relevant facts and an application of law. This is best explained by example:

  • Let's assume that PC A ("A"), PC B ("B"), and self-employed physician C ("C") are each "eligible employers" of all employees and that each of A, B, and C have engaged Agent Company to discharge the responsibilities related to all employees under an agency relationship.
  • On the basis that the PCs and the self-employed physician are "eligible employers", the Agent Company may claim the TWS on behalf of each of A, B and C.  Each of A, B, and C would be required to recognize their "share" of the subsidy as income in the year in which the subsidy is received.  
  • If for example, A is not an eligible employer, the Agent Company may claim the TWS on behalf of B and C.  Assuming, that they all share costs equally regarding employees (33% each), the Agent Company would claim 66% of the TWS or the proportion that relates to B and C. Each of B and C would recognize their "share" of the subsidy (33%) as income in the year in which the subsidy is received. A may have no income inclusion because A was not eligible.

Please contact your tax advisor or legal counsel with regard to claiming TWS via an agent and how this may interact with claiming the CEWS.

Please refer to the question and answers in the self-employed physician or professional corporation section for more information.

CEBA – B

Each principal of a cost sharing arrangement would need to apply for the CEBA and assess based on facts specific to each of them. As an expansion to the CEBA program has been recently announced, a principal who is a self-employed physician or a professional corporation may qualify for the CEBA if its 2019 payroll was less than $20,000.

Please refer to the question and answers in the self-employed physician or professional corporation section for more information.

CERB – B

For business reasons should the CEWS, TWS and CEBA programs be deemed not applicable, a worker could apply for relief under the CERB if the criteria are met.

A worker will be eligible for the program if he/she has involuntarily stopped work due to reasons related to COVID-19 and does not earn more than $1,000 (pre-tax) in employment and/or self-employment income for 14 or more consecutive days within the 4-week benefit period of the initial claim.  A worker can re-apply for CERB for multiple 4-week periods, to a maximum of 16 weeks (4 periods) and must not earn more than $1,000 (pre-tax) in employment and/or self-employment income with respect to each additional 4-week period claim.

Please refer to the question and answers in the self-employed physician or professional corporation section for more information.


C. Partnerships

Generally, there are two situations to assess with respect to the new government wage subsidy and loan programs for a physician or a physician's professional corporation who is a partner in a partnership:

  1. Employees of the partners (self-employed physicians or professional corporations) – may include the physician's staff (if applicable) and the physician's family members that work in the practice.  The professional corporation may also include the physician him/herself as an employee; and
  2. Employees who are employed by the partnership.

1. Workers Directly Employed by Partner (Self-Employed Physician or Professional Corporation)

The following commentary is directed at employees of either a self-employed physician or professional corporation which could include the physician, arm's length employees and non-arm's length employees such as the physician's family members who work in the practice. For clarity, it is assumed that both the self-employed physician and/or the professional corporation are partners (members) of the partnership.  

CEWS – C - 1

The self-employed physician and/or professional corporation rather than the partnership would be required to assess the eligibility with respect to obtaining the CEWS for its own employees (the employees of the self-employed physician and/or professional corporation could be different than the employees of the partnership).

If subsidies or payments are available and received directly by the partner, they would be taxed at the partner's relevant income tax rate (marginal tax rates for the self-employed physician and either the small business rate or the general rate for a professional corporation).

The key question to be answered here with regard to the eligibility is the decline in qualifying revenue. If the partner and the partnership are not dealing at arm's length, then special rules could apply to the partner to take into account the revenue of the partnership in computing the decline. Please consult your tax advisor for further information in this regard as these rules are complex.

If the partner is dealing at arm's length with the partnership, it is unclear as to whether the revenue of the partnership could be used to compute the revenue of the partner and you should consult your tax advisor in this regard. 

Although, the CEWS program has been legislated, the following are some of the unresolved issues that should be considered:

  • How does a partner measure qualifying revenue?
    • Does a partnership draw from a partnership constitute an "inflow of cash" using your normal accounting practices?
    • If no, can you elect to use the cash method to include draws in qualifying revenue?
    • Because a partnership is deemed to be a taxpayer, do we assume that normal partnership concepts may not apply?
  • For non-arm's length employees, the eligible remuneration paid is the lesser of the maximum benefit of $847 per week or 75 percent of the employee's baseline remuneration (previously referred to as the pre-crisis weekly remuneration). 

For more information on the baseline remuneration please refer to the self-employed physician or professional corporation section. Even with the unanswered questions above, it would be advisable to review the compensation paid to all non-arm's length employees with your accountant.

 Please refer to the question and answers in the self-employed physician or professional corporation section for more information.

TWS - C - 1

As an employer, the self-employed physician and/or professional corporation rather than the partnership would be required to assess the eligibility with respect to obtaining the TWS for its own employees (the employees of the self-employed physicians and/or professional corporation could be different than the employees of the partnership).

Subsidies or payments received directly by the partner would be taxed at the partner's relevant income tax rate (marginal tax rates for the self-employed physician and either the small business rate or the general rate for a professional corporation).

Please refer to the question and answers in the self-employed physician or professional corporation or section for more information.

CEBA – C - 1

The CEBA is available for eligible businesses and provides a loan for up to $40,000 to fund certain expenses incurred by the business. The loan is interest free up to December 31, 2022 and no principal payments are required. If you pay at least 75 percent of the loan ($30,000) by December 31, 2022 then the remaining $10,000 is forgiven.

If the loan balance is not repaid by December 31, 2022, then the loan is converted into a term loan with a 5 percent interest rate and due December 31, 2025. No principal payments are due during the term of the loan; however, the full balance is due at December 31, 2025.

Please refer to the question and answers in the self-employed physician or professional corporation section for more information.

CERB – C - 1

For business reasons should the CEWS, the TWS and the CEBA programs be deemed not applicable, a worker could apply for relief under the Canada Emergency Response Benefit if the criteria are met.

A worker will be eligible for the program if he/she has involuntarily stopped work due to reasons related to COVID-19 and does not earn more than $1,000 (pre-tax) in employment and/or self-employment income for 14 or more consecutive days within the 4-week benefit period of the initial claim.  A worker can re-apply for CERB for multiple 4-week periods, to a maximum of 16 weeks (4 periods) and must not earn more than $1,000 (pre-tax) in employment and/or self-employment income with respect to each additional 4-week period claim.

Both arm's length and non-arm's length individuals are eligible for the program provided they meet the conditions.

Please refer to the question and answers in the self-employed physician or professional corporation section for more information.

2. Employees of Partnership

The following commentary is directed at a partnership that employs workers. Of note, a partnership cannot pay a partner a salary. For clarity, partners receive draws or cash payments and the partnership allocates its taxable income to its partners at year-end pursuant to its partnership agreement. 

CEWS – C - 2

The partnership would be required to assess its eligibility to access the CEWS. 

We currently know that the partnership will need:

  • to assess that all partners meet the definition of eligible entity (includes: individuals, trusts, non-profit organizations and taxable corporations) and
  • to calculate its qualifying revenue in order to determine its eligibility.  A revenue decline of at least 15 percent in the month of March 2020 when compared to March 2019 or alternatively, the average of January and February 2020 will need to be demonstrated. For periods after March, it will be necessary to demonstrate at least a 30 percent reduction using the same benchmark and methodology used for March. Once an employer is found eligible for a specific qualifying period, the employer will automatically qualify for the next qualifying period.

Receipt of the CEWS is taxable.  The partnership would include the CEWS received in its taxable income which is allocated to the partners (in accordance with the partnership agreement) at the end of the year.  The allocation of partnership taxable income is taxed at the partner level

For partnerships filing SR&ED claims, a wage subsidy received under this program would also reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration. Please contact your tax advisor for further details.

TWS - C - 2

The TWS is a three-month measure to help prevent layoffs and support businesses. The subsidy is equal to 10 percent of the remuneration paid from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per eligible employer.

The partnership itself would be required to assess its eligibility with respect to claiming TWS.  Generally, the partnership must meet the following criteria:

  • employs one or more eligible employees;
  • has a registered payroll number with CRA on March 18, 2020; and
  • all partners/members of the partnership are exclusively individuals, Canadian-controlled private corporations eligible for the small business deduction and/or registered charities. Of note, if any partners are a trust, the partnership will not be eligible.

Receipt of the TWS is taxable.  The partnership would include the TWS received in its taxable income which would be allocated to the partners (in accordance with the partnership agreement) at the end of the year.  The allocation of income from the partnership is taxed at the partner level.

For partnerships claiming SR&ED, a wage subsidy received under this program would also reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

Please consult your tax advisor for further information if you would like to apply.

CEBA – C - 2

The CEBA is available for eligible businesses and provides a loan for up to $40,000 to fund certain expenses incurred by the business. The loan is interest free up to December 31, 2022 and no principal payments are required. If you pay at least 75 percent of the loan ($30,000) by December 31, 2022 then the remaining $10,000 is forgiven.

If the loan balance is not repaid by December 31, 2022, then the loan is converted into a term loan with a 5 percent interest rate and due December 31, 2025. No principal payments are due during the term of the loan; however, the full balance is due at December 31, 2025.

A partnership could be eligible for the CEBA. Please confirm the partnership's eligibility with your financial institution.

CERB – C - 2

For business reasons and after subsidy programs (CEWS, TWS and CEBA) are evaluated, if it is decided by the partnership that there is no longer work to be completed, a worker, employed by the partnership, could apply for the CERB program provided they are eligible.

A worker will be eligible for the program if he/she has involuntarily stopped work due to reasons related to COVID-19 and does not earn more than $1,000 (pre-tax) in employment and/or self-employment income for 14 or more consecutive days within the 4-week benefit period of the initial claim.  A worker can re-apply for CERB for multiple 4-week periods, to a maximum of 16 weeks (4 periods) and must not earn more than $1,000 (pre-tax) in employment and/or self-employment income with respect to each additional 4-week period claim.
 

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