The outbreak of the COVID-19 pandemic has led to the government having to make some tough decisions. They have had to classify all businesses nationally as essential and non-essential due to social distancing measures to help reduce the spread of the virus. Amongst this new set of classifications comes the medical cannabis production industry.

Canada has been a leader in the global cannabis market on both fronts; medicinal and commercial. Dating back to the early 2000s, when it first legalized the use of cannabis for medicinal purposes, Canada has been a ground breaker in the legalization of marijuana (https://www.leafly.ca/news/canada/history-cannabis-canada). The cannabis market in 2019 alone reached $7.2 billion in the country. With this significant contribution and projected growth over the coming years, the Canadian cannabis industry shows signs of great potential and importance to the nation’s GDP (https://www.prnewswire.com/news-releases/canada-cannabis-markets-report-2019-canada-is-fast-becoming-the-worlds-leading-market-with-revenues-expected-to-reach-7-2-billion-300815795.html).

Coming off such significant sales and production in the past year, the federal government has deemed the medicinal cannabis production as an ‘essential’ business amid the COVID 19 pandemic. Though this classification comes as a recommendation that is nonbinding and at each province’s discretion, it is required as all cannabis production, commercial and medicinal, is regulated by the federal government.

In the current situation Health Canada continues to study and monitor the challenges that these producers are currently facing. Cohesively, the country has 370,000 active medical cannabis registrations as well as another 30,000 personal or designated production registrations. Under this essential classification, most provinces are allowing cannabis businesses to remain functional and operational.

This classification as an ‘essential’ business came after multiple patient groups lobbied the federal government by signing petitions which had up to 2600 signatures. Cannabis Council of Canada CEO George Smitherman responded by agreeing and understand how critical medical cannabis is to national health care. He added that though this is an established service and industry, it remains a Startup sector and is equally vulnerable to disruptions during the COVID-19 pandemic.

He later stressed that this industry too, like other vulnerable sectors, should have equal access and support provided from government backed services. Canadians for Fair Access to Medical Marijuana VP Max Monahan-Ellison added that he is “thrilled to see the government take this step to ensure patient access to medical cannabis is maintained” signalling that their next focus will be to work towards the increased affordability challenges that the patients face.

The cannabis industry, like other tech and start-ups, requires assistance and support to be able to survive and thrive past this pandemic. It is essential for the government to help foster growth in these vulnerable sectors during this time. The government has been working diligently to release additional funding in installments for businesses as their needs are identified. Amongst wage subsidy programs such as CEWS, 10% Temporary Wage Subsidy, CEBA etc. there are some new programs to also support the innovation and start up sector such as the specialized COVID-19 IRAP program with calls to the government to create more.

It is innovation and creativity that led to the discovery of the medicinal use of cannabis. The same innovations over time have proved to make revolutionary medical discoveries to improve the lives of many, proving that R&D funding is the way forward. The Government of Canada, understanding how essential innovation is to evolution and technological advancements, facilitates research and development through its federal programs such as the Scientific Research and Experimental Development (SR&ED) program. This offers tax credits and occasionally refunds to all businesses within the country that participate in SR&ED eligible research. SR&ED eligibility is dependent on the nature of the projects involved. Claimants are permitted to file for tax credits for all expenses incurred during the project which in return contribute to Canada’s innovative pool.

EVAMAX works diligently to provide businesses the innovation and research and development funding they need through government provided services. Contact EVAMAX today for a no-obligation consultation to see if your projects qualify for funding.

The Government of Canada has created a revised criterion for applicants of the Canada Emergency Wage Subsidy (CEWS) program. For eligible businesses affected by COVID-19, this subsidy works to cover 75% of employee wages for up to 12 weeks between the periods of March 15th, 2020 and June 6th, 2020.

When can businesses apply?

From April 27th businesses can begin applying for CEWS through their CRA My Business Account.Until this program becomes available on April 27th, businesses can ensure that their information is up to date in their CRA account.

To assist businesses, the government has provided a new online calculator to estimate the amount of subsidy they can expect to receive. In order to use this, an eligible employer will need their total number of eligible employees and their gross payroll.
An eligible employer includes individuals, taxable corporations, persons exempt from corporate tax, registered charities and partnerships that have experienced the revenue reduction mentioned below and have had a CRA payroll account as of March 15th, 2020.

To qualify for this subsidy, a business must demonstrate a minimum of 15% decline in revenue for the month of March and a minimum 30% decline for the months of April and May. This decline will be determined by a comparison of March, April, or May 2020 revenues to the same months in 2019 or by comparing them against January 2020 or February 2020 revenues. For this comparison, businesses can use either a cash or accrual method, however, the chosen method must stay consistent throughout the duration of the program.

The government expects to process 90% of applications by May 5th, after which direct deposits and cheques should follow. More information regarding CEWS and how to apply, please visit CRA’s website.

business loan Given the COVID-19 circumstances, the Government of Canada is working hard to release adequate amounts of funding to aid businesses in need of assistance during this time. The following are programs that may apply and are of interest to your business:

Canada Emergency Business Account (CEBA) Financing Program

Announced on March 27th, the Canada Emergency Business Account provides easy loans to small independent businesses to stay open and operational during this pandemic. The following is an outline of the program:

Loan Conditions:

  • Up to $40,000 to help towards operational costs that cannot be deferred
  • Interest-free, government-guaranteed
  • 25% of the loan ($10,000) is eligible for forgiveness if the other 75% ($30,000) is fully paid before December 31, 2022
  • If not repaid by December 31, 2022, the debt is then converted into a 3-year term loan with an interest rate of 5%

Eligibility:

To qualify for this loan, a business or NGO must have:

  • An operating company registered in Canada
  • 2019 annual payroll between $50,000 and $1 million

Application Process:

Although the application intake was to start on Apr 6 2020, most Financial institutions are still working towards gathering eligibility criteria and creating application processes through their online portals.

Please contact your primary financial institution for more information regarding CEBA.

Canada Emergency Wage Subsidy (CEWS) Program

The Canada Emergency Wage Subsidy (CEWS) aims to provide support to “enable employers to re-hire previously laid off, and to keep those who are already on payroll”. The subsidy is equivalent to 75% of “eligible remuneration” paid by “eligible employers” for up to three months from March 15, 2020 onward.

Subsidy Conditions:

  • Eligible employers qualify for remuneration including salary and wages paid to current payroll employees and new employees
  • This subsidy covers 75% of the amount of eligible remuneration actually paid, up to a maximum of $847 a week
  • Employers must provide supporting evidence that their monthly revenues have dropped by at least 30% in the month(s) of March, April or May 2020
  • They must continually do so for each eligibility period as follows:
Eligible Period
 Claiming periodReference period for eligibility
Period 1March 15 – April 11March 2020 over March 2019
Period 2April 12 – May 9April 2020 over April 2019
Period 3 May 10 – June 6May 2020 over May 2019

 

  • For eligible employers established after February 2019, eligibility would be determined by comparing monthly revenues to a reasonable benchmark.

Eligibility:

  • Eligible employers include individuals, taxable corporations, non-profit organizations and registered charities

Application Process:

  • This program is expected to start accepting applications in the upcoming weeks
  • Once made available, employers would have to apply through Canada Revenue Agency’s My Business Account portal
  • For this, employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees.

The 10% Temporary Wage Subsidy program remains unchanged with the addition of the CEWS program.

Applicants must adhere to eligibility requirements as in case of fraud, employers would be required to repay amounts granted under CEWS with additional penalties.

Please refer here for more information regarding CEWS from the Government of Canada.

Covid 19 research updatesOn March 18, 2020, the Government announced a new set of economic measures to help stabilize the economy during this challenging period. These measures, delivered as part of the Government of Canada’s COVID-19 Economic Response Plan, will provide up to $27 billion in direct support to Canadian workers and businesses. Additionally, $55 billion will be used through tax deferrals to help stabilize the economy.

For Businesses:

The Canada Revenue Agency (CRA) will allow all businesses to defer the payment of any income tax amounts that become owing on or after March 18, until after August 31, 2020. This income tax deferral includes tax balances and installments. There will be no interest or penalties accrued on these amounts during this period.

As per our communication with the CRA, we have the following information –

Filing date for current tax year for Corporate filings have been extended to June 1, 2020 which applies to corporations that would otherwise have a filing due date after March 18th and before June 1st, 2020.
All other Corporate Tax & SR&ED Filing deadlines remain unchanged.

Any In person SR&ED Audits or Corporate Tax Audits scheduled for the month of March & April will be rescheduled and the respective reviewers will be contacting clients directly for rescheduling. Some communication delays expected. CRA will generally not contact SMEs to initiate any post assessment GST/HST or Income Tax Audits for next 4 weeks. All other audits are suspended until further notice.

The CRA offices remain open as of now with limited staff. Processing returns is essential, so there are groups still processing and the claims processing department will always be working. Any claims submitted so far or that will be submitted in future will be processed. Refunds will be processed, but delays can be expected.

At EVAMAX, our team is fully functional remotely to ensure all SR&ED Claims filing deadlines are met or expedited to avoid further delays in processing expected at CRA.

We understand that everyone is dealing with the effects of COVID-19 pandemic and we are here to assist & avoid any delays in receiving these tax incentives.

More information and updates from the Government can be found at the following link:
Canada’s COVID-19 Economic Response Plan: Support for Canadians and Businesses