2021-0880791E5 Subsection 153(1.02) temporary wage subsidy

Principal Issues: Whether an entity is eligible for the temporary wage subsidy (TWS) if part of the payroll withholdings related to the remuneration it paid its employees resident in Canada were remitted under a related entity’s payroll account.

Position: Question of fact, general comments provided.

Reasons: The submission of payroll remittances under a related entity's account may not prevent the entity from being eligible for the 10% temporary wage subsidy. Employer Services should be contacted too see what, if any, correcting measures should be undertaken to enable the temporary wage subsidy to be claimed.

Author: Clarkson, Julia
Section: 153(1.02) and (1.03)

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                                                                                        2021-088079
                                                                                       Julia Clarkson

July 8, 2021

Dear XXXXXXXXXX:

Re: 10% Temporary Wage Subsidy

This is in reply to your email of November 23, 2020 in which you requested our views on whether an entity is eligible for the temporary wage subsidy (TWS) if some of the payroll withholdings related to the remuneration it paid its employees resident in Canada during the TWS eligible period were incorrectly remitted under a related entity’s payroll account. You have advised us that the taxpayer subsequently corrected its approach so that payroll remittances made after the eligible period have been made through its own payroll remittance accounts.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R10, Advance Income Tax Rulings and Technical Interpretations.

While your situation appears to relate to a specific taxpayer, we offer the following general comments.

Subsection 153(1.02) of the Act states:

“For the purposes of this Act, if an eligible employer pays, at a particular time that is within the eligible period, eligible remuneration in respect of which a particular amount is required to be deducted or withheld under subsection (1), then the eligible employer is deemed to have remitted to the Receiver General at the particular time in respect of the particular amount, an amount equal to the least of…”

Therefore, in order to qualify for the TWS all the following conditions must be met:

* Opco’s employees must be eligible employees

* Opco must be an eligible employer

* Opco must have paid eligible remuneration “ in respect of which a particular amount is required to be deducted or withheld” under subsection 153(1)

* that eligible remuneration must have been paid during the eligible period.

Eligible employee

We have assumed that all of Opco’s employees are employed in Canada, and therefore are considered eligible employees as defined in subsection 152(1.03) of the Act.

Eligible employer

For the purposes of the TWS, the term “eligible employer” is defined in subsection 152(1.03). To be an eligible employer, a person or partnership must employ “one or more eligible employees” (endnote 1) and have a business number with the CRA on March 18, 2020 in respect of which, through its payroll account, it “is registered with the Minister to make remittances.” (endnote 2) required under section 153 of the Act. Provided that Opco is one of the entities described in paragraph (c) of the definition, it should be considered an eligible employer.

Eligible remuneration

An eligible employer is entitled to elect to claim the TWS on eligible remuneration it paid during the eligible period. Eligible remuneration is defined in subsection 152(1.03) to mean “salary, wages or other remuneration paid to an eligible employee during the eligible period.” Whether the amounts paid to the Opco employees are eligible remuneration is dependent on the facts of the situation.

Amounts paid during the eligible period

The TWS is calculated based on the least of three amounts. One of these amount, noted in paragraph 153(1.02)(b) of the Act, is calculated as the amount of eligible remuneration multiplied by the prescribed rate. The eligible remuneration paid by Opco to its eligible employees during the eligible period that caused the remittances it made through its own payroll account may qualify for the TWS.

The determination of whether a specific employer has paid eligible remuneration to eligible employees, where payroll remittances were made through a related entity’s payroll account, requires a verification of the facts. As a result, we cannot provide a written assurance that the remittances submitted under the payroll accounts of a related entity could be viewed as having been made on Opco’s behalf or that these remittances relate to eligible remuneration paid by Opco for the purposes of the TWS.

As discussed in our telephone conversation of May 18, 2021, we suggest you contact Employer Services for further assistance and guidance for the correction of any errors made with respect to your payroll remittances.

We trust that our comments have been of assistance.

Yours truly,

Terry Young
Section Manager
for Division Director
Administrative Law Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

ENDNOTES

1 Paragraph (a) of the definition of eligible employer in subsection 153(1.03).
2 Paragraph (b) of the definition of eligible employer in subsection 153(1.03).

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