The Canada Emergency Rent Subsidy (CERS) provides a
federal subsidization of expenses associated with both
commercial rental payments and property ownership. The
program commenced on September 27, 2020 and is
scheduled to continue until June 2021.
The CERS program parallels the Canada Emergency
Wage Subsidy (CEWS) program in that it is largely based on
the same revenue decline calculations and related
elections. Also, the periods covered by each CERS
application are four-weeks in length, and have the same
beginning and ending dates as CEWS.
The CERS program has two components: the base CERS
and the lockdown support (LS).
Broadly, the base CERS subsidizes eligible expenses based
on the applicant’s revenue decline as compared to pre-
pandemic earnings. The base CERS provides a subsidy of
up to 65% of applicable expenses, until March 13, 2021.
Details on support beyond this date have not yet been
Lockdown support (LS)
The LS provides an additional 25%
subsidy for qualifying entities that are
subject to a lockdown and must shut
their doors or significantly restrict
their activities under a public health
order (lasting at least one week) in
response to COVID-19. The LS does
not vary based on the revenue decline;
however, the organization must be
eligible for some base CERS,
effectively requiring at least a small revenue decline. It must
also be reasonable to conclude that the ceased activities, in
the appropriate pre-pandemic prior reference period, were
responsible for at least approximately 25% of the
revenues of the entity at that location.
For example, the government notes that the LS would
generally be available where a restaurant, that previously
earned at least 25% of its revenues from indoor dining,
shifted to take-out operations due to their indoor dining being ordered to close.
An entity would not generally be eligible where, for
– is required to reduce their business hours, such as
restrictions requiring a bar to shut down by 10:00 pm;
– must modify operations due to physical distancing rules,
such as restaurants that must limit patrons to six
persons per table; and
– is suffering due to travel restrictions, such as a bed and
breakfast that has a decrease in customers but can
continue to operate.
If an entity had to cease activities for only part of a
qualifying period, the LS is pro-rated for the number of
days for which the relevant location was affected.
Eligible expenses must be paid under agreements in writing
entered into before October 9, 2020 (and continuations of
those agreements) and must relate to real property located in
Arm’s-length commercial rent (e.g. rent paid to an
unrelated corporation or individual), including amounts paid
or payable under a net lease, are eligible. Non-arm’s-length
commercial rent (e.g. rent paid to a controlling shareholder or
parent) is not an eligible expense. Sales taxes, damages,
and interest or penalties on unpaid amounts are not eligible
Tenants must reduce eligible expenses by any rent
received or receivable from arm’s length tenants (such as
in sub-lease arrangements).
Property ownership expenses
Some property owners may claim CERS in respect of
certain expenses related to their properties. The expenses
include mortgage interest (subject to limitations), property
insurance, and property tax. However, where a property is
primarily used to earn rental income, directly or indirectly,
from one or more arm’s-length entities, no expenses
related to that property are eligible.
Owners must reduce eligible expenses by any rent
received or receivable from arm’s length tenants.
For the base CERS, expenses for each qualifying four-week
period are capped at $75,000 per location. A total overall
limit of $300,000 in eligible expense claims must be shared
between all affiliated entities. For the LS, expenses for
each qualifying period are capped at $75,000 per location,
but no overall cap applies.
While the definition of an affiliated person can be complex,
the analysis generally starts by identifying entities in which a married or common-law couple, either together or
individually, have a controlling interest. Persons can be
affiliated with individuals, corporations, partnerships and
trusts. For example, consider Mr. and Mrs. A who each own
and control their own corporations, Aco and Bco respectively.
Aco and Bco would be affiliated even though Mr. A does not
have any control or ownership of his spouse’s corporation,
Application and Administration
Prior to applying, all applicants must have a business
number and will need to create a CERS account (ZA
number) which can be done through CRA’s online portals.
Business owners and/or senior employees must complete the
RC665 Attestation prior to a representative filing the
application for the subsidy.
The deadline for application is 180 days after the end of the
qualifying period. The rules authorize CRA to publish the
name of any CERS applicant. This is reiterated and included
on the RC665 Attestation form.
Finally, it is important to note that CERS is taxable and is
deemed to be received on the last day of the claim period,
the same as for CEWS.
ACTION ITEM: Prior to applying for CERS, it is important
to determine monthly revenues, which revenue
calculation elections are best, which parties you are
affiliated with, and to whom the payments are being
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