Government introduces the new Canada emergency rent subsidy program

March 15, 2021

On October 9, 2020, Deputy Prime Minister and Finance Minister Chrystia Freeland announced the creation of the new Canada Emergency Rent Subsidy (CERS) program to replace the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses program, which ended on September 30, 2020. In contrast to the CECRA, which required commercial property owners to apply instead of their small business tenants, the CERS provides support directly to qualifying tenants and property owners. It is also not restricted to small businesses. The CERS program is available retroactive to September 27, 2020, and until June 2021. The name of the CERS program is a bit misleading, as property owners who are eligible entities and who use property in the course of ordinary activities can also receive a “rent subsidy”.

The rent subsidy legislation was enacted on November 19, 2020. It interlaces the CERS measures with the existing rules governing the Canada Emergency Wage Subsidy (CEWS) program. Many of the criteria applied to determine eligibility for the CERS are the same as the CEWS, and the qualifying periods for both programs are aligned. The government 's intention in linking these two programs is to simplify the CRA 's administration of this new rent subsidy program.

The new CERS program is comprised of two parts — the base rent subsidy that is available to organizations that continue to endure declining revenues, and the new Lockdown Support, which provides an additional top-up to those entities that must either close or significantly restrict their activities due to a public health order.

Base rent subsidy for organizations impacted by COVID-19

Eligible entities that suffer a decline in revenue because of the ongoing pandemic may qualify to receive rent subsidy support on a sliding scale, up to a maximum base subsidy rate of 65% of eligible expenses.

An eligible entity's percentage revenue decline will determine its base subsidy rate for the qualifying period. The base rent subsidy amount is calculated by multiplying the qualifying rent expenses by the base subsidy rate. The maximum base subsidy rate is 65% and is available to those organizations with a revenue decline of 70% or more. This rate gradually reduces to 40% where an entity experiences a decline in revenue of 50%, and then further declines to zero where no revenue drop is experienced. Please see Table 1 in the Appendix for the examples of how the base subsidy rate is determined.

Lockdown Support for businesses facing significant public health restrictions

An additional top-up of 25%, known as the new Lockdown Support, may be available to those eligible entities forced to close or limit their activities at a qualifying property because of a public health order. Lockdown Support may also be available to an eligible entity in such situations where the eligible entity rents qualifying property to a non-arm 's length tenant (referred to as a “specified tenant”) and activities of the specified tenant are significantly affected by a public health order. With Lockdown Support, the maximum subsidy available under the CERS program increases to 90% of eligible expenses.

Only an eligible entity that qualifies for the base rate subsidy will be eligible for the additional Lockdown Support. Unlike the base rent subsidy, the Lockdown Support is not subject to a sliding scale based on the percentage revenue decline of an eligible entity. Rather, the 25% top-up is a fixed rate that is multiplied by the amount of qualifying rent expense, and then added to the base rent subsidy to determine the total amount of CERS support.

An eligible entity, or specified tenant of an eligible entity, must be required to either temporarily shut their doors or significantly limit the type of activities they perform in compliance with a qualifying public health restriction for the eligible entity to qualify for Lockdown Support. A qualifying public health restriction:

  • is made under the laws of Canada, a province or territory (including orders made by a municipality or regional health authority under one of those laws) in response to COVID-19;
  • is limited in scope based on factors such as geographical boundaries, business or activity type, or risks associated with a particular location;
  • is a federal, provincial or territorial offence if not complied with, or can result in the imposition of a monetary penalty or other sanction;
  • cannot result from a violation by the eligible entity or the specified tenant of an order that meets any of the above conditions;
  • is in effect for at least a week; and
  • must result in either the eligible entity or the specified tenant being required to cease all or some of its activities at the qualifying property (i.e. it is a limitation on the type of activity rather than the extent to which, or the time during which, an activity can be performed)

In technical guidance provided on the CRA 's CERS website, the CRA states that the following are examples of restrictions that do not qualify for lockdown support:

  • travel restrictions that reduce the number of clients;
  • rules about when an entity can perform their regular activities, such as restricted or reduced service hours or hours of operation, and
  • any other restrictions that do not specifically order an entity to stop or close an activity, such as reduced seating capacity or other physical distancing strategies.

If a public health order does not trigger a complete shutdown, it must be reasonable to make specific conclusions about revenue. The restricted activities covered by the order must represent no less than approximately 25% of the total qualifying revenues earned from that location (as determined in relation to the appropriate pre-pandemic reference period for that location) by the eligible entity or the specified tenant.

In the event that a public health restriction order applies for a duration that is less than the full qualifying period, the amount of an eligible entity's Lockdown Support for that qualifying period will be pro-rated over the number of days in the period that the location was subject to the public health restriction.

Eligibility criteria and relevant definitions

Eligible entities

To qualify for the CERS, an organization must meet the criteria of an “eligible entity”. The definition of an eligible entity for the purposes of the CERS is the same as that for the CEWS. Eligible entities for both programs can include individuals, taxable corporations and trusts, non-profit organizations, and registered charities.

According to government documents, eligible entities can also include:

  • partnerships that are up to 50% owned by non-eligible members;
  • Indigenous government-owned corporations carrying on business, as well as partnerships with partners that are Indigenous governments and eligible entities;
  • registered Canadian amateur athletic associations;
  • registered journalism organizations; and
  • non-public colleges and schools (including art schools, driving schools, language schools, flight schools, or other institutions offering specialized services)

An eligible entity must also meet one of the following criteria to claim the rent subsidy:

  • as of March 15, 2020, either have a payroll account or have been using a payroll service provider;
  • have a business number as of September 27, 2020 (and satisfy the Canada Revenue Agency (CRA) that it is a bona fide rent subsidy claim); or
  • meet other conditions that may be prescribed in the future.

Eligible expenses

Eligible expenses are referred to as qualifying rent expenses in the legislation and can broadly be divided into two categories – one for tenants, and one for owners of real property. In both cases, the amounts must be paid to an arm's length person, pursuant to a written agreement entered into before October 9, 2020.

An eligible expense that is payable will be deemed to have been paid at the time it first became due, provided that the entity attests that it will pay these amounts within 60 days of receiving its CERS support payment. If the expense is not paid within this timeframe, it will not be considered an eligible expense.

The type of expenses that qualify for tenants are:

  • rent, including gross rent, and rent based on percentage of sales, profit or similar criteria; and
  • amounts required to be paid under a net lease (either to the lessor or a third party) including:
    • base rent;
    • operating expenses such as insurance, utilities and common area maintenance expenses;
    • property taxes, including school and municipal taxes; and
    • other amounts paid for ancillary services customarily supplied or rendered in connection with rent.

Where a landlord received an amount under the CECRA program and, rather than refund that amount to the tenant, the tenant and the landlord agreed to apply this amount against rent payable in a qualifying period, the tenant may claim the full amount of the rent in respect of that qualifying period.

Sales taxes, amounts paid for damages, and amounts paid for special services are specifically excluded.

Property owners who use the real property in the course of their entities' ordinary activities can also claim a rent subsidy. Expenses incurred in respect of an owned property that is used, whether directly or indirectly, to earn rental income from an arm's length entity will not be eligible.

The types of expenses that qualify for property owners are:

  • mortgage interest (determined within defined limits);
  • insurance on the real property; and
  • property taxes, including school and municipal taxes.

Entities applying for the CERS program should be aware of other limitations that apply to eligible expenses. There is a limit of $75,000 on the total amount of eligible expenses allowed per location per qualifying period and an overall cap of $300,000 of eligible expense per qualifying period. For example, if a business has 10 qualifying locations, the maximum amount of eligible rent expenses per location is limited to $75,000 but the overall amount of qualifying expenses for the business for the period will be capped at $300,000. Where an entity is a part of an affiliated group that is claiming the base rent subsidy, the affiliated group must share the overall cap of $300,000. This overall cap only applies for the purposes of calculating the amount of base rent subsidy and does not affect the calculation of the Lockdown Support, if applicable. These limits restrict the amount of base rent subsidy available to larger organizations.

Outlays must relate to real property located in Canada in order to be included as an eligible expense. Expenses relating to residential property are specifically excluded from eligible expenses.

Any amount received from sub-leasing the property to an arm's length person will reduce the total amount of eligible expenses for the purposes of computing the CERS.

Calculating revenue

An eligible entity must calculate its qualifying revenue in order to determine its percentage revenue decline for each qualifying period. Note that this calculation is the same as for the CEWS program.

An entity's qualifying revenue for the purposes of the rent subsidy is the amount of revenue it earned in the course of its ordinary activities in Canada. Qualifying revenue must arise from arm's length sources and is determined using the entity's normal accounting practices. It excludes income from extraordinary items and amounts on account of capital. While registered charities and non-profit organizations must also exclude revenue from non-arm's length persons in determining qualifying revenue, they are permitted to choose whether to include revenue from government sources.

Specific rules are provided in the legislation to account for non-arm's length transactions, and affiliated groups may elect to compute revenue on a consolidated basis if they do not already do so.

Determining percentage revenue decline

An eligible entity may choose from one of two following options to determine its percentage revenue decline:

  1. General approach — Determine the change in monthly revenues, year-over-year, for the applicable calendar month, or
  2. Alternative approach — Compare its current reference month revenue with the average of its January and February 2020 revenues

Once an eligible entity has chosen a method for determining its revenue decline, it must use that same approach for each of the qualifying periods of the CERS. Note that the selected approach will apply for both the purposes of the CERS and the CEWS programs, so for entities that have already submitted a CEWS application, the choice of method has already been made. Please see Table 2 in the Appendix for a comparison between the two approaches for determining the change in revenue for each of the qualifying periods of the CERS.

To determine its base subsidy rate for a given qualifying period, an entity will apply the greater of its percentage revenue decline for the current qualifying period and that of the previous qualifying period.

Qualifying periods

The legislation initially included details relating to the first three qualifying periods for the CERS, spanning from September 27 to December 19, 2020. As part of its Economic Statement released on November 30, the government announced further details regarding the next three qualifying periods of the program (Periods 4 to 6), from December 20, 2020 to March 13, 2021. The details of these periods were enacted by regulation on December 29, 2020. On March 3, 2021, the government announced details for Periods 7 through 9 of the CERS, from March 14 to June 5, 2021. Note that the base subsidy rate and Lockdown Support rate legislated for the first three qualifying periods are to be maintained for the next six qualifying periods of the CERS.

Each qualifying period is four weeks long. As mentioned, the qualifying periods align with the qualifying periods under the CEWS program. The nine qualifying periods of the CERS are:

  • Period 1 — September 27 to October 24, 2020
  • Period 2 — October 25 to November 21, 2020
  • Period 3 — November 22 to December 19, 2020
  • Period 4 — December 20, 2020 to January 16, 2021
  • Period 5 — January 17 to February 13, 2021
  • Period 6 — February 14 to March 13, 2021
  • Period 7 — March 14 to April 10, 2021
  • Period 8 — April 11 to May 8, 2021
  • Period 9 — May 9 to June 5, 2021

How to apply for the CERS

The CERS must be applied for online, through CRA's My Business Account (or through the Represent a Client portal for applications made by a representative of a business). In order to apply for the CERS, an entity must first create a CERS (ZA) number. The applicant will be prompted to create this number upon accessing the CRA's online application, and it will be generated immediately.

Applications for the CERS opened on November 23, 2020, and the CRA began processing applications on November 30, 2020. Successful applicants registered for direct deposit started receiving payments on December 4, 2020. The CERS is paid by cheque or by direct deposit. Generally, claimants who opt to receive payments via direct deposit should expect to receive payment within three to eight days after filing their claim. The CRA has indicated that it will be reviewing claims to confirm the information submitted. Information used to calculate a CERS claim, including documentation in support of eligible expenses and reduction in revenue, must be retained in case the CRA requests to see it. Payments can be delayed if the CRA requires additional verification of information included in the CERS claim.

A separate application is required for each qualifying period of the CERS. Applications for the CERS must be made on or before 180 days after the end of each qualifying period.

The amount of CERS support that an entity receives is taxable and must be included in taxable income on the recipient's annual income tax return.

How BDO can help

Our BDO Tax professionals understand the uncertainty and challenges your business is facing during the COVID-19 crisis. We can help you assess whether your business can benefit from the new rent subsidy program and assist in determining next steps.

If you have any questions as to how the CERS program applies to your organization, please contact your BDO advisor.

Dave Walsh, Partner, Tax Service Line Leader

Bruce Sprague, Partner, Western Canada Tax Leader

Greg London, Partner, Eastern Canada Tax Leader

Peter Routly, Partner, Southern Ontario Tax Leader

Rachel Gervais, Partner, GTA Tax Leader


Table 1: Structure of the base subsidy rate
Revenue Decline Base Subsidy Rate
70% and over 65%
50% to 69%

40% + (Revenue drop - 50%) x 1.25

(e.g. 40% + (60% revenue drop – 50%) x 1.25 = 52.5% subsidy rate)

1% to 49%

Revenue drop x 0.8

(e.g. 25% revenue drop x 0.8 = 20% subsidy rate)

* Source: Department of Finance Canada, Backgrounder: Canada Emergency Rent Subsidy, November 5, 2020
Table 2: Comparison of General and Alternative approach for determining decline in revenues for Periods 1 to 3 of the CERS
  Qualifying Period General Approach Alternative Approach
Period 1 (Period 8 for the CEWS) September 27 to October 24, 2020 October 2020 over October 2019 or September 2020 over September 2019 October 2020 or September 2020 over average of January and February 2020
Period 2 (Period 9 for the CEWS) October 25 to November 21, 2020 2020 November 2020 over November 2019 or October 2020 over October 2019 November 2020 or October 2020 over average of January and February 2020
Period 3 (Period 10 for the CEWS) November 22 to December 19, 2020 December 2020 over December 2019 or November 2020 over November 2019 December 2020 or November 2020 over average of January and February 2020
Period 4 (Period 11 for the CEWS) December 20, 2020 to January 16, 2021 December 2020 over December 2019 or November 2020 over November 2019 December 2020 or November 2020 over average of January and February 2020
Period 5 (Period 12 for the CEWS) January 17 to February 13, 2021 January 2021 over January 2020 or December 2020 over December 2019 January 2021 or December 2020 over average of January and February 2020
Period 6 (Period 13 for the CEWS) February 14 to March 13, 2021 February 2021 over February 2020 or January 2021 over January 2020 February 2021 or January 2021 over average of January and February 2020
Period 7 (Period 14 for the CEWS) March 14 to April 10, 2021 March 2021 over March 2019 or February 2021 over February 2020 March 2021 or February 2021 over average of January and February 2020
Period 8 (Period 15 for the CEWS) April 11 to May 8, 2021 April 2021 over April 2019 or March 2021 over March 2019 April 2021 or March 2021 over the average of January and February 2020
Period 9 (Period 16 for the CEWS) May 9 to June 5, 2021 May 2021 over May 2019 or April 2021 over April 2019 May 2021 or April 2021 over the average of January and February 2020
* Source: Based on information released by the Department of Finance Canada on

The information in this publication is current as of March 15, 2021.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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