CERB – An Important Development for Entrepreneurs

The CERB program announced in late March provides for substantial benefits for workers who are unable to work as a consequence of the Covid-19 pandemic.  A worker is defined under the Canada Emergency Response Benefit Act to be a person who is at least 15 years of age, a resident of Canada and who, for 2019 or the 12 month period preceding the day on which they make an application for benefits, had a total income of at least $ 5,000 from employment, self employment, employment insurance (EI)or certain provincial allowances related to pregnancy.

A worker who did not receive income from employment, self employment, EI or the aforementioned pregnancy allowance for 14 consecutive days within a four-week period in respect of their application are eligible for CERB benefits under legislation enacted late last week.

We expressed concern with the legislative provisions as enacted, in a letter to the Minister of Finance, as those entrepreneurs who remunerated themselves with dividends, would not appear to have been eligible for benefits under CERB.  Dividend income is not considered to be income from self-employment for purposes of the Income Tax Act which was a cause for concern for some shareholder managers.  Consequently, we asked the Department of Finance to address this inequity and provide clarification.

 It would appear that our representations and those made by others on behalf of entrepreneurs struck a chord with Finance.

 In a document entitled “Questions and Answers on the Canada Emergency Response Benefit” updated by the Federal Government today a question and answer were reported as follows:

Q.  “If I am in receipt of dividends am I eligible for the Canada Emergency Response Benefit?”

A.   “Yes, as long as the dividends are non-eligible dividends (generally those paid out of corporate income taxed at the small business rate).  An individual could count this income towards the $ 5,000 income requirement to be eligible for CERB”.

As a consequence of this clarification those clients who were in limbo as they have been taking their remuneration in the form of dividends, now have clarity in the affirmative as to their eligibility.  We applaud the Department of Finance for taking a comprehensive view of eligibility for benefits under CERB for Canada’s small and medium sized entrepreneurs.

We will continue to advocate for our clients to ensure that programs and policies enacted by Federal and Ontario governments provide effective assistance to our clients big or small.

If you have questions please contact us, we’re here to help!

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