Canada Emergency Rent Subsidy (CERS)

Canadian businesses, non-profit organizations, or charities who have seen a drop in revenue due to the COVID-19 pandemic may be eligible for a subsidy to cover part of their commercial rent or property expenses, starting on September 27, 2020, until June 2021.

This subsidy will provide payments directly to qualifying renters and property owners, without requiring the participation of landlords, and if you are eligible for the base subsidy, you may also be eligible for lockdown support if your business location is significantly affected by a public health order for a week or more.

WHO CAN APPLY

ELIGIBLE EXPENSES

PERIODS YOU CAN APPLY FOR

HOW TO CALCULATE YOUR SUBSIDY AMOUNT

LOCKDOWN SUPPORT ELIGIBILITY CRITERIA

HOW TO APPLY

AFTER YOU APPLY

CONTACT US FOR HELP

WHO CAN APPLY

To be eligible, you must meet all four of the following criteria:

1. Meet at least one of these conditions:
   a) you had a CRA business number on September 27, 2020
   b) you had a payroll account on March 15, 2020, or another person or partnership made payroll remittances on your behalf OR
   c) you purchased the business assets of another person or partnership who meets condition 2 above, and have made an election under the special asset acquisition rules

- if you don’t have a business number but you qualify under condition b or c, you will need to set one up before you are able to apply for CERS
- you do not need a payroll account to apply for CERS

2. Are an eligible business, charity, or non-profit (eligible entity)
- individuals (other than a trust)
- corporations (or trusts) that are not exempt from income tax (Part I of the Income Tax Act)
- the following persons that are exempt from income tax (Part I of the Income Tax Act):

• non-profit organizations
• agricultural organizations
• boards of trade
• chambers of commerce
• non-profit corporations for scientific research and experimental development
• labour organizations or societies
• benevolent or fraternal benefit societies or orders

- registered charities

- partnerships consisting of eligible employers (including partnerships where at least 50% of the interests in the partnership are held by eligible employers)

- the following prescribed organizations:

• certain Indigenous government-owned corporations that carry on a business
• partnerships consisting of eligible employers and certain Indigenous governments
• registered Canadian amateur athletic associations
• registered journalism organizations
• private schools or private colleges, and
• partnerships consisting of eligible employers (including partnerships where at least 50% of the interests in the partnership are held by eligible employers)

Public institutions are not eligible for the subsidy. This includes municipalities and local governments, Crown corporations, public universities, colleges and schools, and hospitals.

If your business, charity, or non-profit is related to another eligible entity, you may be considered an "affiliated entity". This may affect your calculations for the subsidy.
- if you are affiliated with other businesses, charities, or non-profits who are also applying for CERS, you must agree how you will split the $300,000 limit for eligible expenses
- you will enter the percentages you agreed to claim in the application form
- the application form will have space for up to 10 affiliated entities. If you have more than 10, enter the ones with the highest allocations (percentages) and keep a full list for your records

3. Experienced a drop in revenue

There is no minimum revenue drop required to qualify for the subsidy. The rate your revenue has dropped is only used to calculate how much subsidy you receive for these periods.

Your drop in revenue is calculated by comparing your eligible revenue during the reference period with your eligible revenue from a previous period (baseline revenue).

Eligible revenue generally includes revenue earned in Canada from:
- selling goods
- rendering services, and
- other's use of your resources

If your normal accounting method is the accrual method, you can choose (elect) to use the cash method (and vice versa), but once you choose you must use the same accounting method for all your claims.

Special revenue circumstances include:
- registered charities, non-profits, and some prescribed organizations may choose whether or not to include government funding, such as grants, when calculating eligible revenue. You must use the same approach for each period you are applying for
- revenue related to certain non-arm's-length transactions and affiliated groups must be subtracted from your qualifying revenue
- special rules apply for calculating eligible revenue when two or more entities have amalgamated, or when an entity has purchased the assets of another person or partnership

4. Have eligible expenses

To apply for CERS, you must have a qualifying property. Only certain expenses you pay for qualifying properties are eligible for CERS.

Qualifying Property

Properties (business locations) that do qualify include any "real or immovable property" (buildings or land) in Canada that your business or organization
- owns or rents, and
- uses in the course of your ordinary business activities

Properties that do not qualify include:
- your home, cottage, or other residence used by you, your family members, or other non-arm’s-length persons
- any properties you own that are primarily used to earn rental income from arm’s-length parties

Eligible Expenses

For each claim period, you can claim eligible expenses up to a maximum of:
- $75,000 per business location (base and top-up)
- $300,000 in total for all locations (including any amounts claimed by affiliated businesses)
 • applies to the base subsidy only
 • there is no maximum for the top-up subsidy

Eligibility Criteria For Expenses

There are a few criteria expenses need to meet, in order to be eligible to be included in your claim for a particular claim period: 
- only amounts paid or payable to an arm’s-length party can be included
- the expense must be in respect of the claim period
- the expense must be paid or payable under a written agreement in place before October 9, 2020 (or a renewal on substantially similar terms or assignment of such an agreement)

If you have not paid the amounts due for your eligible expenses yet, you must attest (confirm) that these amounts will be paid within 60 days of receiving your rent subsidy payment.

You cannot claim expenses that were paid or payable:
- to non-arm’s-length entities
- for a timeframe that falls outside of the claim period you are applying for

Eligible Expenses If You Rent A Qualifying Property

If you rent the qualifying property, your eligible expenses are:
- rent (including rent based on a percentage of sales, profit or similar criteria)
- amounts required to be paid or payable by you under a net lease (either to the lessor or a third party):
 • base rent
 • regular payments for customary operating expenses
 • property and similar taxes
 • regular payments to the lessor for customary ancillary services

You cannot include amounts paid or payable for:
- sales taxes (such as GST/HST and provincial sales taxes)
- damages
- interest or penalties on unpaid amounts
- other special amounts

If your landlord received an amount under the Canada Emergency Commercial Rent Assistance (CECRA) program and they applied the amount to your future rent payments, you can still claim the full rent amount in the current period.

Eligible Expenses If You Own A Qualifying Property

If you own the qualifying property, your eligible expenses are:
- property and similar taxes
 • includes school taxes and municipal taxes, if these are part of your property tax assessment
- property insurance
- interest on commercial mortgages for the purpose of purchasing real property
 • your mortgage amount cannot exceed the lesser of:
  i. the lowest principal amount secured by one or more mortgages on the property at any time it was acquired, or
  ii. the cost amount of the property

Expenses that are not eligible include:
- payments between non-arm’s-length entities
- amounts that were paid or payable for a time that fall outside of the claim period

If you earned any revenue from sub-leasing space on the property to arm’s-length parties, you must subtract that revenue from your eligible expenses.

A CERS application must be filed no later than 180 days after the end of a claim period.

HOW TO CALCULATE YOUR SUBSIDY AMOUNT

The base subsidy rate applies to a maximum of $75,000 in eligible expenses per location and an overall maximum of $300,000 in expenses for you and any affiliated entities per claim period.

The CERS provides both a base subsidy and, in some cases, a lockdown support amount. If you must close or cease certain activities at one or more of your locations under a public health order for one week or longer, you may be eligible for lockdown support of up to 25% of eligible expenses per affected location for the days the order was in place.

Calculating Your Base Rent Subsidy Rate

The amount you can claim of your expenses (your rent subsidy rate) is based on the revenue drop you experienced between:
- Corresponding Month of 2019 Method: the months of 2019 and 2020 that relate to the claim period you're applying for, OR
- Alternative Method: January and February 2020 compared to the months of 2020 that relate to the claim period

Calculating Your Top-Up (Lockdown Support) Rate

In addition to the rent subsidy rate, you can receive a lockdown support amount for certain locations affected by public health restrictions.

Your CERS top-up (lockdown support) rate is 25% on lockdown, calculated as:

25% (fixed top-up rate) x days the location was locked down ÷ 28 (days in the CERS period) = Your Rate

Example: If your business was locked down for 11 days.

25 x 11 ÷ 28 = 9.82

Lockdown Support Eligibility Criteria

Lockdown support is calculated on a location-by-location basis. To qualify for lockdown support, you must have:
- a base rent subsidy rate of more than 0% for the claim period
- one or more locations temporarily closed, or have activities significantly restricted for a week or longer due to a COVID-19-related public health order

A public health order must:
- be issued by a federal, provincial, or municipal government, or a local health authority
- be limited based on at least one of these factors:
 • geographical boundaries
 • type of business or other activity
 • risks associated with a particular location
- result in sanctions or be an offence if you do not comply
- require you to stop some or all of your regular activities while the order is in place
 • activities you were not able to carry out must account for at least approximately 25% of total revenues at that location during the prior reference period

An order that restricts or reduces activities but doesn’t require you to close or stop certain activities does not qualify for lockdown support. Examples include:
- travel restrictions that reduce the number of clients
- rules about when you can perform your regular activities, such as
 • restricted or reduced service hours or hours of operation
- any other restrictions that do not specifically order you to stop or close an activity, such as
 • reduced seating capacity or other physical distancing strategies

You do not qualify for lockdown support if you are already restricted or closed because you failed to comply with a previous public health order or decision.

CLICK HERE to use the online subsidy calculator

HOW TO APPLY

1. You must apply for CERS online through either:
   - My Business Account, OR
   - Represent a client
2. In My Business Account, review or update your mailing address and other contact information.
3. Create a CERS (ZA) number
   - make sure your business number is valid.
   - sign into your CRA My Business Account(opens in new window) and look for Create a CERS number
4. Set up direct deposit
   - the CRA will collect applications over the coming days and, on November 30, process applications received to date
   - qualifying organizations whose claims successfully clear the CRA’s automated verification system and that are registered for direct deposit should expect to begin receiving payments starting on December 4
   - direct deposit payments take 3 to 8 days whereas a cheque takes about 14 days

You must submit a separate application for each CERS claim period you are eligible for.

What You Need - Qualifying Property

For each qualifying property, you will need the:
- amounts you owe or have paid for all eligible expenses
- property address
- name and contact information of your
 • mortgage holder if you have a mortgage on the property
 • landlord if you rent the property

The application form will accept information for up to 3 properties. If you have more than 3, enter information for the 3 properties with the highest eligible expenses.

*Keep the information for all properties in your records in case we ask for it at a later date.

Affiliated Entities - What You Need

For affiliated entities that have claimed, or will be claiming the CERS for the same claim period, you will need the:
- number of affiliated entities in the agreement
- percentage assigned to you under the agreement with your affiliated entities
- business number of each affiliated entity
- percentage assigned to each affiliated entity under the agreement

The application form will accept information for up to 10 affiliated entities. If you have more than 10, enter information for the 10 entities with the highest assigned percentages.

AFTER YOU APPLY

The CRA will collect applications over the coming days and, on November 30, process applications received to date.

Qualifying organizations whose claims successfully clear the CRA’s automated verification system and that are registered for direct deposit should expect to begin receiving payments starting on December 4
- if you have set up direct deposit, you can generally expect to receive your payment within 3 to 8 days after filing your claim
- your payment may be delayed if we need to contact you for additional information as part of the review of your claim
- the CERS is paid by direct deposit or by cheque

Consequences Of Fraudulent Claims

- if you do not meet the CERS eligibility requirements for a period, you will be required to repay any amounts you received for that period
- penalties may apply in cases of fraudulent claims, including fines or even imprisonment
- if you artificially reduce your revenue or increase your expenses for the purpose of claiming the rent subsidy, you will be required to repay any subsidy amounts you received, plus a penalty equal to 25% of the total value

Keep Your Records

You must keep records showing information that supports your rent subsidy claim, such as your reduction in revenue and amounts for your eligible expenses:
- sales journal
- general ledger
- revenue amounts
- working paper calculations
- rental or lease agreements
- property tax bills
- insurance documents
- mortgage documents
 • provincial land title or property abstract, or
 • title number, legal description, or other property identifying numbers such as
   - parcel identifier number (PID)
   - land identifier numerical codes (LINC)
   - property identification number (PIN)
   - mortgage registration number
- bank statements
- receipts or other proof of payment

Include The Subsidy On Your Returns

The Canada Emergency Rent Subsidy is taxable. You must include the amount of CERS you receive on your Annual Return of Income (e.g. Corporation Income Tax Return, Partnership Return) when calculating your taxable income.

QUESTIONS?

Contact our subsidy expert, Andrea Harper, at andrea.harper@availcpa.com OR 403-382-6800 OR complete our contact form below.

For a complete list of our COVID-19 resources for individuals and businesses, please visit availcpa.com/resources

To view more information about the Canada Emergency Rent Subsidy as provided by the Government of Canada, please visit https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy.html