As we are striving to bring you up to date information as quickly as possible, we are now providing you with further guidance from the www.Canada.ca site for COVID programs and benefits in relation to the Canada Emergency Response Benefit (CERB).
For those individuals who have received non-eligible dividends from corporations in which they held shares as the means of remuneration, the Questions and Answers section of the CERB application has been updated to address the qualification of this type of income in the application for CERB. Please note that non-eligible dividends are indicated in box 10 of any T5’s you would have received. The update is as follows:
Are self-employed small business owners eligible for the CERB?
Yes provided they meet the eligibility criteria including that they stopped working due to COVID-19 and do not earn more than $1000 in a period of at least 14 consecutive days in the first benefit period and for the entire four-week benefit period of any subsequent claim.
Small Business owners can receive income from their business in different ways, including as salary, business income or dividends. In determining their eligibility for the Canada Emergency Response Benefit:
- Owners who take a salary from their business should consider their pre-tax salary;
- Owners who rely on business income should consider their net pre-tax income (gross income less expenses);
- Owners who rely on dividend income should consider this as self-employment income provided it comes from non –eligible dividends (generally, those paid out of corporate income taxed at the small business rate).
What counts towards the $1,000 in income I can earn?
The $1,000 includes employment and/or self-employment income. This includes among others: tips you may earn while working; non-eligible dividends; honoraria (e.g., nominal amounts paid to emergency service volunteers); and royalties (e.g., paid to artists).
However, royalty payments received from work that took place before the period for which a person applies for the Canada Emergency Response Benefit do not count as income during that specific benefit period.
Pensions, student loans and bursaries are not employment income and therefore, should not be included in the $1000.
Applications will be verified against tax records to confirm income.
What income types count towards the $5,000 in employment and/or self-employment income?
The $5,000 includes all employment and self-employment income. This includes among others: tips you have declared as income; non-eligible dividends; honoraria (e.g., nominal amounts paid to emergency service volunteers); and royalties (e.g., paid to artists). If you are not eligible for Employment Insurance, you may also include maternity and parental benefits you received from the Employment Insurance program and/or similar benefits paid in Quebec under the Quebec Parental Insurance Plan.
Pensions, student loans and bursaries are not considered employment income and should not be included.
Does the minimum income of $5,000 have to be earned in Canada?
The income does not have to be earned in Canada, but you need to reside in Canada.
If I am in receipt of dividends am I eligible for the CERB?
Yes as long as the dividends are non-eligible dividends (generally those paid out of corporate income taxed at the small business rate) and you meet the eligibility criteria.
Non-eligible dividends count towards the minimum $5000 in income required for eligibility. Non-eligible dividends also count toward the $1000 income threshold for a benefit period.
Do artists’ royalties count as employment or self-employment income with respect to the CERB?
Yes, in some cases. Artists’ royalties would be considered payments received as self-employment income if they were received as compensation for using or allowing the use of a copyright, patent, trademark, formula or secret process that is a result of their own work or invention. These royalties count towards the $5,000 income threshold, as well as towards the $1,000 that claimants can earn per month while receiving the Benefit. However, royalty payments received from work that took place before the period for which a person applies for the Canada Emergency Response Benefit do not count as income during that specific benefit period. Other royalties (i.e., from investment activities) do not count with respect to the Benefit.
To read this and more about the qualifications in order to make an application for CERB. Please go to: https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html .
For more information, please contact us today.