flow considerations for construction Presented by BDO Canada In - - PowerPoint PPT Presentation

Navigating COVID19:Financing programs and financial recovery cash flow considerations for construction

Welcome to CONnected

Presented by BDO Canada In partnership with Bockstael Construction

TODAY’S SPEAKERS

Partner Domestic & Transaction Tax

JUSTIN MASTRANGELO

Partner Financial Advisory Services

AMANDA FAVOT

Senior Manager Domestic & Transaction Tax

JENNIFER LUCIER

Vice President People Advisory

HALI VAN VLIET

AGENDA

Wage Subsidies Tax Deadlines Workforce Government Support Financing Options

4

GOVERNMENT SUPPORT – CEWS

5

CEWS – HIGH LEVEL PROGRAM OVERVIEW

KEY CONCEPTS

QUALIFIED REVENUES ELIGIBLE EMPLOYER ELIGIBLE EMPLOYEES ELIGIBLE REMUNERATION

Information current as of May 7, 2020.

6

CEWS – HIGH LEVEL PROGRAM OVERVIEW

ELIGIBLE PERIODS

PERIOD CLAIMING PERIOD REQUIRED REDUCTION IN REVENUE REFERENCE PERIOD FOR ELIGIBILITY PERIOD 1 March 15 to April 11 15%

March 2020 over:

• March 2019 or
• Average of January and February 2020

PERIOD 2 April 12 to May 9 30%

Eligible for Period 1

OR

April 2020 over:

• April 2019 or
• Average of January and February 2020

PERIOD 3 May 10 to June 6 30%

Eligible for Period 2

OR

May 2020 over:

• May 2019 or
• Average of January and February 2020



Election under paragraph 125.7(4)(e)(Cash Method)



Election under 125.7(1) (Prior reference period) – January / February 2020 Average



Finance has the ability to extend eligible periods to September 30

Information current as of May 7, 2020.

7

HOW CAN YOU APPLY FOR THE SUBSIDY

APPLICATION PROCESS



Requires a pre-existing account with the program; or



Request to open account by an authorized person

• 1. APPLY THROUGH THE CRA’S My Business Account Portal



Only representatives authorized at Level 2 or 3 will be able to apply

• 2. APPLY THROUGH REPRESENT A CLIENT



Web based application



Requires a Web Access Code (WAC)



You can apply online with CRA for a Web Access Code and will be asked for your account number, date of

• 3. APPLY THROUGH THE CRA’S ONLINE WEB FORM USING A WEB ACCESS CODE

registration and total income tax reported in box 22 of the most recent 2018 T4 Summary

Information current as of May 7, 2020.

8

INFORMATION NEEDED FOR EACH APPLICATION

APPLICATION PROCESS



Line A = Number of eligible employees



Line B = Total eligible remuneration paid during the period



Line C = Calculation of your Canada Emergency Wage Subsidy (CRA Excel File)



Line D = Employers EI, QPIP Premiums payable on salary paid to furloughed employees



Line E = Employer’s CPP and QPP contributions payable on salary paid to furloughed employees



Line F = 10% Temporary Wage Subsidy reduction for employers (If applicable)



Line G = Amounts received by eligible employees under the Work Sharing Benefit program



Line H = CEWS (Automatically calculated)

EACH COMPANY WITH A SEPARATE RP NUMBER MUST APPLY SEPARATELY ATTESTATION FORM TO BE COMPLETED FOR EACH ENTITY – AVAILABLE TO DOWNLOAD ON CRA’S WEBSITE CONSISTENT ELECTIONS AND FORMS SHOULD BE FILED FOR THE ENTIRE GROUP

Information current as of May 7, 2020.

9

FREQUENTLY ASKED QUESTIONS

Can an eligible employer claim the wage subsidy for an employee that the employer hires back and pays retroactively?

1

When calculating the wage subsidy, should I consider wages paid or wages paid in respect of that week?

2

Can an eligible employer claim CEWS in respect of an eligible employee who has received payments under the CERB?

3

What is baseline remuneration?

4 5

Will I be eligible for both the CEWS and the 10% Temporary Wage Subsidy? Can owners and non- arms length employees claim the wage subsidy?

6

Is the wage subsidy considered taxable income?

8

Can I claim the wage subsidy twice if an eligible employee is employed by two or more eligible employers?

7

Information current as of May 7, 2020.

10

Calculating qualified revenue of a group of employers 125.7(4)(a) Joint Election

EXAMPLES

Corporation A owns all the shares of Corporation B. Both corporations are eligible employers. Corporation A prepares consolidated financial statement for accounting purposes. Assume that that there is no intercompany revenue. Below are the qualifying revenue for each corporation as well as their qualifying revenue on a consolidated basis for March 2019 and March 2020. In accordance with normal accounting practice Corporations A and B will not be eligible for the wage subsidy as their qualifying revenue, determined on a consolidated basis, has not experienced the required reduction in revenue of at least 15%. Therefore, Corporation A and Corporation B have decided to determine their qualifying revenue separately. In that case, while Corporation A will not qualify for the wage subsidy, as it has not experienced the required reduction in revenue of at least 15%, Corporation B will qualify for the wage subsidy because its qualifying revenue has dropped by more than 15%. QUALIFYING REVENUE FOR MARCH 2019 QUALIFYING REVENUE FOR MARCH 2020 REDUCTION IN QUALIFYING REVENUE IN MARCH 2020 AS COMPARED TO MARCH 2019

CORPORATION A

$1,000,000 $1,000,000 0%

CORPORATION B

$1,000,000 $800,000 20%

TOTAL ON A CONSOLIDATED BASIS

$2,000,000 $1,800,000 10%

Information current as of May 7, 2020.

11

Calculating qualified revenue of members of an affiliated group 125.7(4)(b) Joint Election

EXAMPLES

QUALIFYING REVENUE FOR MARCH 2019 QUALIFYING REVENUE FOR MARCH 2020 REDUCTION IN QUALIFYING REVENUE IN MARCH 2020 AS COMPARED TO MARCH 2019

CORPORATION A

$200,000 $200,000 0%

CORPORATION B

$200,000 $100,000 50%

TOTAL ON A CONSOLIDATED BASIS

$400,000 $300,000 25%

Individual Mr. A, owns all the shares of Corporation A and his spouse Mrs. A, owns all of the shares of Corporation B. Both corporations are eligible employers. Corporation A and Corporation B form an affiliated group and each corporation is a member of that group. Below are the qualifying revenues for each corporation as well as on a consolidated basis, assuming such a consolidation was done, for March 2019 and March 2020. Because Corporation A and Corporation B are members of an affiliated group, they could jointly elect that the qualifying revenue of the affiliated group be determined on a consolidated basis in accordance with relevant accounting principles, and the consolidated amount will be used as the qualifying revenue by each member of the group. Thus, both Corporations A and B will be eligible for the wage subsidy, as their qualifying revenue, determined on a consolidated basis, has dropped by more than 15%. Without this election only Corporation B would qualify for the wage subsidy.

Information current as of May 7, 2020.

12

Calculating qualifying revenue in a non-arm’s length relationship 125.7(4)(d) Joint Election

EXAMPLES



All or substantially all of the revenues of Corporation X, (an eligible employer), are from two corporations (Corporation Y and Corporation Z) with which it does not deal at arm's length.



Corporation X's total revenue for March 2020 was $1,450 of which $400 was attributable to Corporation Y and $1,000 was attributable to Corporation Z. $50 was from an arm's-length taxpayer.



Corporation Y's qualifying revenue for March 2020 was $1,000 and for March 2019 was $1,500.



Corporation Z's qualifying revenue for March 2020 was $1,300 and for March 2019 was $2,000.



Calculation of Corporation X's qualifying revenue for the current reference period:



Qualifying revenue (QR) calculation in relation to Corporation Y:



$100 x $400 (QR attributable to Corporation Y)/$1,400 (Corporation X's total QR from non-arm's-length persons or partnerships) x $1,000(Corporation Y QR for current reference period)/$1,500 (Corporation Y QR for prior reference period) = 19



QR calculation in relation to Corporation Z:



$100 x $1,000 (QR attributable to Corporation Z)/$1,400 (Corporation X's total QR from non-arm's-length persons or partnerships) x $1,300(Corporation Z's QR for current reference period)/$2,000 (Corporation Z's QR for prior reference period) = 46



The weighted average qualifying revenue for Corporation X for the current reference period is $65 ($19+$46). Since the prior reference period's qualifying revenue is deemed to be $100, Corporation X has experienced the required reduction in revenue of at least 15% for the claim period. Corporation Y and Corporation Z must jointly elect with Corporation X in order to use this special rule.

Information current as of May 7, 2020.

13

EXAMPLE – CEWS CALCULATOR

Eligible employees Employee at arm's length*: yes/no Average weekly gross pay Jan 1 to Mar 15 2020* Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4 Claim period total for employee*

An eligible employee is an individual employed in Canada by you (the eligible employer) during the claim period, except if there was a period of 14 or more consecutive days in that period in respect of which they were not paid eligible remuneration by you. March 15 to March 21 March 22 to March 28 March 29 to April 4 April 5 to April 11 March 15 to March 21 March 22 to March 28 March 29 to April 4 April 5 to April 11 Columns B through G must be completed before this field calculates

Salary Employee - $78,000 Yes $1,500.00 $1,500.00 $1,500.00 $1,500.00 $1,500.00 $847.00 $847.00 $847.00 $847.00 $3,388.00 Salary Employee - $52,000 Yes $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $750.00 $750.00 $750.00 $750.00 $3,000.00 Salary Employee - $78,000 / Reduced to $44K Yes $1,500.00 $847.00 $847.00 $847.00 $847.00 $847.00 $847.00 $847.00 $847.00 $3,388.00 Commission Sales Employee - $25K Base Yes $1,200.00 $500.00 $900.00 $200.00 $0.00 $500.00 $847.00 $200.00 $0.00 $1,547.00 Hourly Employee Yes $950.00 $1,000.00 $847.00 $1,500.00 $350.00 $750.00 $712.50 $847.00 $350.00 $2,659.50 Employee Laid off in Week 2 Yes $1,500.00 $1,500.00 $1,500.00 $0.00 $0.00 $847.00 $847.00 $0.00 $0.00 $1,694.00 Non-Arms Length Employee No $0.00 $1,500.00 $1,500.00 $1,500.00 $1,500.00 $0.00 $0.00 $0.00 $0.00 $0.00

Weekly gross pay in respect of the claim period Employee amount (calculated)

Information current as of May 7, 2020.

14

WORKFORCE GOVERNMENT SUPPORT

COVID-19 Fiscal stimulus

WORKFORCE GOVERNMENT SUPPORT

CANADA EMERGENCY RESPONSE BENEFIT (CERB)

 Eligible recipients would have access to this

taxable benefit of $2,000 a month for up to four months.

 Simple and easy to access where Canadians

would begin to receive their CERB payments as early as 2-3 days.

 The program is available from

March 15, 2020 until October 3, 2020. This is a taxable benefit for workers who lose their income as a result of the COVID-19 pandemic.

Information current as of May 7, 2020.

COVID-19 Fiscal stimulus

WORKFORCE GOVERNMENT SUPPORT

CANADA EMERGENCY RESPONSE BENEFIT (CERB) – RETURNING OR REPAYING THE CERB

 You applied but later realize you are not

eligible

 You received payment from both Service

Canada and CRA

 You earned employment or self-

employment income earlier than expected You must return or repay the CERB if you no longer meet eligibility requirements Repay before Dec 31st to ensure T4 slips are issued properly

Information current as of May 7, 2020.

17

GOVERNMENT SUPPORT

− Canada Emergency Business Account (CEBA) − Business Credit Availability Program (BCAP) − Guarantees on Loans and Co-lending Program

GOVERNMENT SUPPORT

• 4. Canada Emergency Business Account (CEBA)

COVID-19 Fiscal support for Businesses

 Government guaranteed loan of up to

$40,000 to help eligible businesses pay for

• perating costs.

 Repaying the balance of the loan on or

before Dec 31, 2022 will result in loan forgiveness of 25% (up to $10,000).

 To qualify organization will need to

demonstrate they paid between $20,000 to $1.5 million in total payroll in 2019. $25 billion providing loans to small businesses and not-for- profits.

Information current as of May 7, 2020.

GOVERNMENT SUPPORT

• COVID-19 Relief Program – Business Credit Availability Program (BCAP)

COVID-19 Fiscal support for Businesses

$65 billion program through EDC and BDC in direct lending to help Canadian business owners with financing and credit insurance solutions.

 Purpose is to cover cash flow shortages over

the next 6 months

 BDC Application requirements; including

cash flow projections, financial statements and evidence of discussing need with current lender.

 To date EDC has not provided specifics for

its requirements for the BCAP program.

Information current as of May 7, 2020.

GOVERNMENT SUPPORT

• COVID-19 Relief Program – Guarantees on Loans and Co-lending Program

(with financial institutions)

COVID-19 Fiscal support for Businesses

$20 billion potential lending under each the Loan Guarantee and Co-lending Programs.

 EDC will guarantee new operating credit and

cash flow term loans up to $6.25 million.

 Co-lending program, eligible businesses may

• btain incremental credit amount up to

$6.25 million. Eligible financial institutions will conduct underwriting and manage customers.

Information current as of May 7, 2020.

21

FEDERAL TAX FILING AND PAYMENT DEADLINES

22

FEDERAL TAX FILING PAYMENT DEADLINES

Tax Filing Deadlines (New Federal) Payment Deadlines (New Federal) Individuals

June 1, 2020 September 1, 2020

Self-Employed Individuals and their Spouse

June 15, 2020 September 1, 2020

Trusts*

May 1, 2020 September 1, 2020

Partnerships*

May 1, 2020 Not applicable

Corporations

The due date is extended to June 1, 2020, if the return is due

• n between March 18 and

June 1, 2020 Part I tax payment and instalments are extended to September 1, 2020

Information current as of May 7, 2020.

23

FILING AND PAYMENT DEADLINES INDIRECT TAX: GST/HST, QST, PST

Tax Filing Deadlines (New Federal) Payment Deadlines (New Federal) Federal No change – No late filing penalty will be applied if filed by June 30, 2020 June 30, 2020 Quebec No change June 30, 2020 British Columbia - PST September 30, 2020 – with due dates after March 23rd September 30, 2020 – with due dates after March 23rd Manitoba - RST June 22, 2020 – April and May deadlines for small businesses with remittances </= to $10,000 June 22, 2020 – April and May deadlines for small businesses with remittances </= to $10,000 Saskatchewan Relief on penalties and interest for 3 months on an as needed basis Relief on penalties and interest for 3 months on an as needed basis

Information current as of April 21, 2020. Information current as of May 7, 2020.

24

TAX PLANNING AND CASH FLOW CONSIDERATIONS

25

COVID19 – GOVERNMENT SUPPORT

Canada Emergency Commercial Rent Assistance (CECRA)

 Limited program for commercial landlords renting in April - June  25% rent forgiven, 25% paid by tenant, 50% paid between governments  Small businesses/NFP or charitable organizations with 70% revenue

decline or temporarily ceased operations

 Details still in development – more to come…

Information current as of May 7, 2020.

26

To help with cash flow

TAX PLANNING CONSIDERATIONS

To save Cash Flow

RECALCULATE INSTALLMENTS

Estate tax savings, additional cash flow preserved for next generation/estate

ESTATE FREEZE OR REFREEZE/THAW

Watch for various stop- loss, superficial loss and CDA rules

CARRY BACK OF LOSSES

Information current as of May 7, 2020.

QUESTIONS

HOW DO WE ADAPT TO COVID-19?

CHECK OUT OUR HUB FOR THE LATEST NEWS AND INFORMATION: HTTPS://WWW.BDO.CA/COVID-19

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