This past spring, the federal government introduced two wage subsidy programs as part of their COVID-19 Economic Response Plan. The first of these programs was the Temporary Wage Subsidy (TWS) program, introduced on March 18, 2020, which was available to eligible small businesses, charities, and not-for-profit organizations with qualifying payroll. This program was followed on April 1, 2020 with the much larger and more comprehensive Canada Emergency Wage Subsidy (CEWS) Program, which was available to eligible employers with sufficient declines in qualifying revenues.
On July 31, the Canada Revenue Agency (CRA) released a new reporting form and related guidance to employers who qualified for the TWS. New mandatory reporting form, PD27, “10% Temporary Wage Subsidy Self-identification Form for Employers” was released at this time. All taxpayers who were eligible to claim both this subsidy and the CEWS are required to file this form with the CRA, even if they did not make a claim under the TWS program. As benefits under the TWS program were claimed by a reduction in payroll withholding remittances, this form will be used by the CRA to reconcile the employer payroll program (RP) accounts. The CRA indicated that filing this form will ensure that the employer will not receive a discrepancy notice at the end of the year.
The TWS is a program that assists eligible employers by allowing them to reduce payroll withholding tax that must be remitted to the CRA on eligible remuneration paid during the period from March 18, 2020 to June 19, 2020 (the eligible period). The TWS provides a subsidy of up to 10% of eligible remuneration paid during the eligible period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
By definition, eligible employers must:
- have employed one or more eligible employees in the period between March 18, 2020 and June 19, 2020;
- have had a registered payroll account (RP account) with the CRA on March 18, 2020; and
- Be one of the following types of entities
- an individual (other than a trust)
- a not-for profit
- a registered charity
- a partnership, all of the members of which are an individual, eligible Canadian controlled private corporation (CCPC), registered charity or another eligible partnership
- a CCPC with a business limit (relevant for claiming the small business deduction) of more than nil for the last taxation year that ended before March 18, 2020, or if the CCPC does not have a taxation year that ended before March 18, 2020, this condition is applied as if its taxation year ended immediately before March 18, 2020.
Rate of subsidy
The employer has the discretion to select a subsidy rate—from 0% up to the maximum of 10%—for each payroll period that falls within the eligible period.
All eligible employers who claimed the TWS are required to complete the new Form PD27. If the employer had more than one payroll program account, a separate form is required for each RP account and the forms must be submitted together. Note that the combination of such employer accounts must not be more than the maximum subsidy per employee as well as per employer. Although there is no stated due date, it is advisable to file Form PD27 well before the end of the calendar year to allow the CRA to process the form and update the appropriate payroll program accounts before T4s are filed for 2020.
In addition to basic employer information, Form PD27 requires the total number of eligible employees paid during the eligible period to be disclosed, along with gross remuneration, income tax deductions, CPP contributions, and EI premiums. The TWS claimed—in dollars and as a percentage of gross remuneration paid—is also to be reported for each pay period that falls within the eligible period. The form also allows employers to request that the CRA pay any remaining subsidy to the employer, where applicable, such as in situations where the subsidy calculated is more than the income taxes deducted.
The completed Form PD27 needs to be attested to and signed by the employer or authorized officer and submitted online through the CRA’s My Business Account or mailed/faxed to the CRA National Verification and Collection Centre within the employer’s jurisdiction as listed on the form.
Employers who are eligible for both the TWS and CEWS
Many employers who qualified for both the TWS and CEWS chose to apply only for the CEWS for administrative ease, either from the start of the TWS program or later on in the eligible periods. As mentioned above, these employers are still required to file Form PD27 even if they did not claim the TWS by reducing their payroll withholdings. The TWS dollar amount and percentage must be reported for each pay period on Form PD27, even if they are nil. In their information webpage, Reporting the TWS to the CRA, the CRA states that if the employer is an eligible employer and fails to file the form, they will be credited for the entire TWS and their CEWS claim may be reduced and recovered, if necessary. Note that the TWS claim per period should correspond to the TWS amount that was reported for each CEWS claim.
In an example provided by the CRA, an eligible employer claimed the TWS and reduced their payroll withholding taxes in April but decided not to apply for the TWS in May and subsequent periods, opting to only apply for CEWS from that point forward. In this case, the employer would need to provide the information requested on Form PD27 and indicate a TWS claim of $0 and 0% for the periods where they did not claim the TWS.
Similarly, in a second example provided by the CRA, an eligible employer did not claim the TWS from the start and only applied for the CEWS. In this example, the employer would still need to complete Form PD27 and indicate a TWS claim of $0 and 0%.
The only situation where Form PD27 is not required of an eligible employer is when they did not participate in either the TWS or the CEWS program.
If you have any questions on the new Form PD27 requirements or the TEWS and CEWS programs, please contact your BDO advisor.
The information in this publication is current as of August 11, 2020.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.