All About The Canada Emergency Rent Subsidy

The new Canada Emergency Rent Subsidy (“CERS”) is now available. The program replaces the Canada Emergency Commercial Rent Assistance (“CECRA”), which ended September 30, 2020. The subsidy will benefit qualifying renters and property owners.

Eligible Entities

Eligible entities for the CERS include businesses (proprietorships, partnerships), taxable corporations and trusts, non-profit organizations, and registered charities.

All eligible entities must have either one of the following:

• a CRA payroll account in March 15, 2020, or
• a CRA business number on September 27, 2020.

Qualifying Properties

To qualify for CERS, the property must meet all of these conditions:

• Located in Canada,
• Rented or owned by the eligible entity
• Used by the entity in the course of its ordinary activities
• Not a place of residence used by the entity or a non-arm’s length person (nor land subjacent or contiguous to such residence).

Determination of Revenue Drop

Eligible entities must calculate a revenue drop percentage of either the current or the prior claim period. Table 1 outlines the reference periods pertaining to each claim period (coinciding with the CEWS claim periods). An eligible entity may choose between a general approach or an alternative approach in comparing revenues.

Base Rent Subsidy

The maximum rent subsidy that can be claimed is 65% for eligible entities that experience a revenue drop of 70% or higher. The calculation of the base rent subsidy for periods noted in Table 1 is shown in Table 2 below.

Qualifying Expenses

Once the base rent subsidy is determined, the rate is applied to qualifying expenses pertaining to each qualifying property.

Qualifying expenses are limited to expenses paid or payable pursuant to a written agreement that was entered into before October 9, 2020 (or continuation of those agreements).

Qualifying expenses for renters include the following:

• Commercial rent,
• Amounts required to be paid under a net lease agreement are considered as rent. These may include the following:
  • Base rent,
  • Property insurance,
  • Utilities,
  • Common area maintenance, and
  • Property taxes

Qualifying renters cannot include GST, damages, and interest or penalties for unpaid amounts. Additionally, tenant insurance and leasehold improvements are not considered as eligible expenses.

Qualifying expenses for owners of a qualifying property include the following:

• Property taxes, including school and municipal taxes
• Property insurance,
• Interest on commercial mortgages

Qualifying owners are required to subtract any subleasing revenues from their eligible expenses.

Eligible expenses will be capped at $75,000 per location with an overall cap of $300,000 for a qualifying period that is to be shared amongst affiliated entities.

Lockdown Support

Entities required to reduce business activities or are forced to close due to a public health order, may qualify for lockdown support if their revenue drop exceeds 25% as a result of the reduced activities or closure. The lockdown support is calculated to be 25% of the qualifying expenses and is pro-rated for the number of days the property was subject to a public health order during the claim period.

Table 3 below shows the reference periods in claiming the Lockdown Support.

How to Apply for the CERS

Eligible entities must apply for CERS through My Business Account on the CRA website.

For further information on the CERS please click here.

For assistance with the CERS, please contact our office.

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Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

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