On October 9, 2020, Deputy Prime Minister and Finance Minister Chrystia Freeland announced the creation of the new Canada Emergency Rent Subsidy (CERS) program to replace the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses program, which ended on September 30, 2020. The CERS program provides support directly to qualifying tenants and property owners.
- Many of the criteria applied to determine eligibility for the CERS are the same as the CEWS, and the qualifying periods for both programs are aligned.
- The government ‘s intention in linking these two programs is to simplify the CRA’s administration of this new rent subsidy program.
The new CERS program is comprised of two parts: the base rent subsidy that is available to organizations that continue to endure declining revenues, and the new Lockdown Support, which provides an additional top-up to those entities that must either close or significantly restrict their activities due to a public health order.
Base rent subsidy for organizations impacted by COVID-19
Eligible entities that suffer a decline in revenue because of the ongoing pandemic may qualify to receive rent subsidy support on a sliding scale, up to a maximum base subsidy rate of 65 per cent of eligible expenses.
An eligible entity’s percentage revenue decline will determine its base subsidy rate for the qualifying period. The base rent subsidy amount is calculated by multiplying the qualifying rent expenses by the base subsidy rate. The maximum base subsidy rate is 65 per cent and is available to those organizations with a revenue decline of 70 per cent or more. This rate gradually reduces to 40 per cent where an entity experiences a decline in revenue of 50 per cent, and then further declines to zero where no revenue drop is experienced.
Lockdown Support for businesses facing significant public health restrictions
- An additional top-up of 25 per cent, known as the new Lockdown Support, may be available to those eligible entities forced to close or limit their activities at a qualifying property because of a public health order.
- Only an eligible entity that qualifies for the base rate subsidy will be eligible for the additional Lockdown Support.
Eligibility criteria for the CERS
The type of expenses that qualify for tenants are:
- rent, including gross rent, and rent based on percentage of sales, profit or similar criteria; and
- amounts required to be paid under a net lease (either to the lessor or a third party) including:
- base rent;
- operating expenses such as insurance, utilities and common area maintenance expenses;
- property taxes, including school and municipal taxes; and
- other amounts paid for ancillary services customarily supplied or rendered in connection with rent.
Property owners who use the real property in the course of their entities’ ordinary activities can also claim a rent subsidy.
An eligible entity must calculate its qualifying revenue in order to determine its percentage revenue decline for each qualifying period. Note that this calculation is the same as for the CEWS program.
Once an eligible entity has chosen a method for determining its revenue decline, it must use that same approach for each of the qualifying periods of the CERS.
A tax professional can help a business owner understand the uncertainty and challenges during the COVID-19 crisis. Reach out to your advisor soon to see whether your business can benefit from the new rent subsidy program.
Scott Conner is an experienced tax practitioner and practical problem solver at BDO. As a partner specializing in Canadian income tax, Scott has particular specialties in private companies, planning for estates, trusts, and complex transactions. As personal tax season approaches, Scott and his team understand personal taxes are as individual as clients themselves. BDO works closely with their clients to understand their specific needs and adjust strategies accordingly. BDO partners and staff take a proactive, hands-on approach. They closely follow existing and proposed legislation to determine how it will affect individual financial goals, and provide ongoing guidance.