Feigenbaum Law

Government of Canada Announces Changes to CEBA

Corporate Tax Planning
September 4, 2020

Since the outbreak of the COVID-19 pandemic in Canada, the government of Canada announced a number of support programs for individuals and businesses. One of these, the Canada Emergency Business Account (“CEBA”) provided loans of up to $40,000 for qualifying businesses. The government has recently announced an expansion of this benefit.

What is CEBA?

CEBA was originally launched on April 9, 2020, to provide interest-free loans of up to $40,000 to small businesses to help cover operating costs such as rent, utilities, and insurance at a time when many businesses were experiencing a reduction in income. If the loans are repaid on or before December 31, 2022, 25% of the loan will be forgiven.

Expansion to CEBA Eligibility

The original CEBA eligibility requirements stipulated that in order to receive a loan, the borrower must be a registered business that had paid between $20,000 and $1.5 million in payroll in 2019. In addition, borrowers much have business accounts at a Canadian bank. The business must agree to use the money borrowed only for expenses such as payroll, rent, property tax, insurance, and other qualifying uses. As of August 27, 2020, more than $29 billion has been provided to over 730,000 businesses in Canada.

Many businesses did not qualify under the original CEBA rules. This could be for a number of reasons, including operating as a sole proprietor with a personal bank account, running a family business that pays dividends, or contract work. As a result of this, the government announced an expansion to who would qualify on August 31, 2020. Soon, sole-proprietors with personal bank accounts will be able to apply for the loan. This is in addition to another expansion in June which allowed for businesses without the qualifying payroll requirements (such as those that pay dividends) to get the loan if they can demonstrate at least $40,000 in non-deferrable expenses.

CEBA Loans Available for Longer

In addition to opening up who can qualify for a CEBA loan, the government has also extended the time window in which a business can apply. The previous deadline for applying to CEBA was August 31, 2020. That deadline has been moved to October 31, 2020. Mary Ng, Canada’s Minister of Small Business, Export Promotion and International Trade said:

“By extending the Canada Emergency Business Account through to the end of October, we are taking the necessary steps to ensure that small businesses will be able to access the liquidity they need to keep operating while times are still tough, so they will be able to rebuild on the road to economic recovery.”

This will likely come in handy as many small businesses are anticipating a reduction in business as the weather begins to cool in the fall and early winter. As the weather forces people indoors, businesses such as restaurants that have relied on outdoor patios to make customers feel safe are expecting their business to drop off. In addition, there are also fears that a new wave of infections may hit as children return to school, which may necessitate business closures once again.

Businesses wishing to apply for CEBA or those looking for more information on the program can refer to the program’s website for details. In addition, our own blog has covered many of the COVID-19 relief programs offered in both Canada and the United States. You can browse our latest blogs to read up on these programs and other tax-related issues.

Mark Feigenbaum and the team at Feigenbaum Law have been a leader in the field of cross-border tax services for decades. We provide personalized, private service to a variety of clients including businesses of all sizes on both sides of the border. Each client is unique and we see personal service as a hallmark of our approach to meeting your cross-border tax needs. Contact us to learn how our skilled team can assist you with your cross-border tax matters and provide you with comfort in knowing that you are in experienced hands. We offer services to clients in the US, Canada and around the world. Contact us online or call us at (905) 695-1269 or toll-free at (877) 275-4792.

 


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