The Government recently introduced Bill C-9, An Act to Amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy). Bill C-9 implements the new Canada Emergency Rent Subsidy (“CERS”), which provides eligible entities affected by COVID-19 with direct support for rent and property holding costs until June 2021. Bill C-9 received Royal Assent on November 19, 2020. 

Eligible Entities

Eligible entities include individuals, taxable corporations, partnerships consisting of eligible employers, non-profit organizations, and registered charities experiencing a reduction in revenue.

Public bodies are not be eligible for this subsidy (this means municipalities and local governments, crown corporations, wholly owned municipal corporations, public universities, colleges, schools, and hospitals will not be eligible).

Eligible Rent and Holding Costs

Tenants

Eligible entities who are tenants under a lease for a qualifying property can receive a subsidy for a percentage of the eligible rent expenses. Eligible rent expenses include:

• Gross rent
• Rent based on a percentage of sales
• Amounts required to be paid under a net lease (e.g. property taxes and common area costs under a triple net lease

Eligible rent expenses exclude sales taxes (such as the GST/HST) and are reduced by any amounts received for subletting the qualifying property.

Owners

Eligible entities who own a qualifying property that is not used primarily to earn rental income can receive a subsidy equal to the holding cost expenses on the qualifying property multiplied by the subsidy percentage. Eligible holding cost expenses include:

• Mortgage interest
• Insurance
• Property and similar taxes, including school and municipal taxes

Rent and holding cost expenses for each qualifying period would be capped at $75,000 per location and be subject to an overall cap of $300,000 that would be shared among affiliated entities in a group.

Amount of the Subsidy and Claim Periods

Eligible entities can receive a subsidy equal to the eligible rent expense or property holding costs on the qualifying property multiplied by the applicable subsidy percentage. The subsidy percentage is based on the reduction in revenue compared to a prior reference period. The subsidy rate structure is similar to the Canada Emergency Wage Subsidy (“CEWS”). Details about the CEWS can be found in our newsletter on the updated CEWS.

Claim period	Reduction in revenue	Subsidy percentage
September 27, 2020 to October 24, 2020	More than 70% 50% to 70% less than 50%	65% 40% + (the revenue reduction percentage for the period minus 50%) x 1.25 0.8 X the revenue reduction percentage for the period
October 25, 2020 to November 21, 2020	More than 70% 50% to 70% less than 50%	65% 40% + (the revenue reduction percentage for the period minus 50%) x 1.25 0.8 X the revenue reduction percentage for the period
November 22, 2020 to December 19, 2020	More than 70% 50% to 70% less than 50%	65% 40% + (the revenue reduction percentage for the period minus 50%) x 1.25 0.8 X the revenue reduction percentage for the period

 

Applicants will be able to make retroactive claims for the period from September 27, 2020 to October 24, 2020.

Eligible entities that are temporarily closed by a mandatory public health order issued by a qualifying public health authority can receive a top-up subsidy of 25% in addition to the 65% subsidy. Such entities could receive a maximum total subsidy of (25% + 65%) 90% of their eligible expenses.

Calculating the Reduction in Revenue

The rules for determining the percentage reduction in revenue are similar to those for the CEWS. Details about the CEWS may be found in our newsletter on the updated CEWS.

Please contact your D&H advisor if you have any questions about the CERS.