29 May 2020
Changes to CEBA the Canada Emergency Business Account
The Government of Canada has expanded the eligibility criteria for the Canada Emergency Business Account (CEBA). Businesses carried on by sole proprietors that rely on contractors rather than employees or are family-owned corporations that pay employees through dividends rather than through payroll, can now benefit from the changes to CEBA.
What do I need to qualify for CEBA?
An active business bank account at a participating financial institution
A Canada Revenue Agency business number
Payroll costs between $20,000 and $1,500,000 for 2019
Businesses with 2019 payroll costs of $20,000 or less will need to:
Have filed a 2018 or 2019 tax return
Have eligible non-deferrable expenses between $40,000 and $1.5 million – Eligible non-deferrable expenses could include insurance, utilities, property taxes and rent. These expenses are subject to verification and audit by the Canada Revenue Agency.
How much can I borrow under CEBA?
With the changes to CEBA, qualifying small businesses and not-for-profits can borrow up to $40,000 interest-free. If repaid by December 31, 2022, 25% of the loan will be forgiven.
How do I apply?
Applications can be made through your financial institutions.
Are there restrictions on how the CEBA funds are used?
The funds received from the CEBA loan are only to be used to pay for non-deferrable operating expenses, which include insurance, utilities, property tax, rent, payroll, and regularly scheduled debt servicing costs. The Government of Canada has noted that these funds are not to be used to fund any payments of dividends or distributions, or any increases in management compensation.
We Are Here to Help
Manning Elliott is here to help if you have any questions about the new changes to CEBA. To assist business owners in navigating through these trying times, visit our blog to stay up to date on the most recent activity related to COVID-19.
If you have any questions about the new CEBA changes, please contact us directly.
This content is believed to be accurate as of the date of posting. Canadian Tax laws are complex and are subject to frequent change. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.