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The Canada Emergency Account loan to businesses is a rarity in government programs.
It quickly adapted to the continuing and sometimes increasing pressures on Canada’s small business sector by the ongoing COVID pandemic.
The CEBA was initially launched on April 9, 2020 and as of December 1, 2020, nearly 800,000 loans had been approved for a total of $ 31 billion. It provided up to $ 40,000 in funds to successful applicants without interest, with a portion of $ 10,000 forfeited if the loan was repaid before December 31, 2022. Amounts that remained unpaid after that date would carry an interest rate. five percent.
In December 2020, the government announced it was offering an extension to the program of an additional $ 20,000, half of which could be forgiven. This means that up to a third of the $ 60,000 in loans could be canceled.
Applications for the $ 60,000 loan must be received by March 31, 2021. If you have already applied for the $ 40,000 loan, you can reapply for the $ 20,000 expansion, also before the above deadline.
CEBA is available on request from over 220 financial institutions across the country, including all major banks and many credit unions. You cannot apply to more than one financial institution.
A condition of the original plan was that the business must have an active checking or operating account. This has been changed allowing you to open such an account while making your request.
Other conditions include having an active Canada Revenue Agency business number and you must intend to continue to operate the business or resume operations.
You have the choice to apply under one of the two measures. One is employment income paid in the 2019 calendar year between $ 20,000 and $ 1.5 million. Previously, the payment of wages through dividends was not allowed but is now allowed.
However, if you cannot meet this threshold, you can demonstrate non-deferral expenses between $ 40,000 and $ 1.5 million incurred before December 31, 2020. These could include demonstrable expenses for rent, taxes land and utilities, among other costs. Dividends paid are not considered an eligible expense that cannot be carried forward, but they constitute an acceptable means of remuneration depending on the mode of application of the payroll. You must also have filed an income tax return for the tax year ending in 2019 or if it has not yet been filed, your 2018 return is acceptable.
The program is open to active operating businesses classified as a sole proprietorship, partnership or Canadian-controlled private corporation that was active on March 1, 2020.
As for the repayable part of the loan, it is considered as income by the CRA when the loan has been received. This requires an amendment to any filing for your business’s fiscal year ending May 31, 2020. There is another method of recognizing this income without filing an amended return. You can reduce loan expenses, offsetting some or all of the income associated with the remitted amount. This can be recognized by a letter signed to the CRA before the due date of the corporate income tax return associated with the period in which the expenses were incurred.
Grant Diamond is a tax analyst in Saskatoon, Saskatchewan with FBC, a farm tax firm. Contact: [email protected] or 800-265-1002.
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