Regulations Amending the Income Tax Regulations (COVID-19 — Twenty-Fourth and Twenty-Fifth Qualifying Periods): SOR/2022-11

Canada Gazette, Part II, Volume 156, Number 4

SOR/2022-11 February 1, 2022


P.C. 2022-46 February 1, 2022

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 footnote a of the Income Tax Act footnote b, makes the annexed Regulations Amending the Income Tax Regulations (COVID-19 — Twenty-Fourth and Twenty-Fifth Qualifying Periods).

Regulations Amending the Income Tax Regulations (COVID-19 — Twenty-Fourth and Twenty-Fifth Qualifying Periods)


1 (1) Section 8901.2 of the Income Tax Regulations is amended by adding the following before subsection (1):


(0.1) The following definitions apply in this section.

partial public health restriction
means a public health restriction as defined in subsection 125.7(1) of the Act if paragraphs (f) to (h) of that definition were replaced by the following:
  • (f) as a result of the order or decision, some or all of the activities of the eligible entity — or the specified tenant — at, or in connection with, the qualifying property (that it is reasonable to expect the eligible entity — or the specified tenant — would, absent the order or decision, otherwise have engaged in) are required to be reduced by means of capacity or similar restrictions by not less than 50% (referred to in this subsection as the “limited activities”); and
  • (g) the limited activities are required to be limited for a period of at least one week. (restrictions sanitaires partielles)
qualifying partial public health restriction,
of an eligible entity for a qualifying period, means that
  • (a) one or more qualifying properties of the eligible entity — or of one or more specified tenants (within the meaning of the definition public health restriction) of the eligible entity — is subject to a partial public health restriction for at least seven days in the qualifying period; and
  • (b) it is reasonable to conclude that at least approximately 50% of the qualifying revenues of the eligible entity — together with the qualifying revenues of any specified tenants of the eligible entity — for the prior reference period were derived from the limited activities. (restrictions sanitaires partielles admissibles)

(2) Section 8901.2 of the Regulations is amended by adding the following after subsection (1):

Base percentage

(2) The percentage determined for the purposes of the definition base percentage in subsection 125.7(1) of the Act, in respect of an eligible entity, is, for the twenty-fourth qualifying period and the twenty-fifth qualifying period, the greater of

Coming into Force

2 These Regulations come into force on the day on which they are registered.


(This statement is not part of the Regulations.)

Executive summary

Issues: The Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS), as currently structured, will not provide subsidies under the Local Lockdown Program (LLP) for eligible entities subject to partial public health closures ordered in response to the Omicron wave of COVID-19.

Description: The subsidy rules are being temporarily amended to provide that the CEWS and CERS will be available for entities subject to a public health order that restricts capacity by at least 50%.

Rationale: In the face of the Omicron wave of COVID-19, many entities are being subjected to public health orders that restrict capacity in certain environments. These capacity-limiting orders are being made in the attempt to help reduce the intensity of the Omicron wave. The subsidy rules currently provide for eligibility for the CEWS and CERS if a public health order requires the cessation of all of a certain type of activity at a location. An order that limited capacity at a location by 50% would not currently qualify. Many jurisdictions are issuing capacity-limiting public health orders. The Regulations Amending the Income Tax Regulations (COVID-19 — Twenty-fourth and Twenty-fifth Qualifying Periods) [the Regulations] will expand eligibility for these subsidies on a temporary basis, providing $880 million in needed support to approximately 30 000 entities during the Omicron wave.


In December 2021, the Omicron variant of COVID-19 began spreading exponentially in Canada. In response, new regional public health restrictions are in place, which limit the capacity of certain businesses without requiring that certain activities cease. Under the Local Lockdown Program (LLP), businesses subject to these capacity-limiting restrictions would not be eligible for the LLP. On December 22, 2021, the Government announced its intention to expand the LLP to include employers subject to capacity-limiting restrictions of 50% or more; and reduce the current-month revenue decline threshold requirement to 25%. The Government also announced that under the expanded LLP eligible employers would receive wage and rent subsidies from 25% up to a maximum of 75%, depending on their degree of revenue loss. Regulations are needed to implement these changes.


The Canada Emergency Wage Subsidy (CEWS) initially received royal assent on April 11, 2020, through the COVID-19 Emergency Response Act, No. 2. It is a wage subsidy provided through the Income Tax Act to those eligible employers (i.e. corporations, unincorporated businesses, registered charities, or non-profit organizations) that are hardest hit by the COVID-19 pandemic.

On October 9, 2020, the Government of Canada announced the introduction of the Canada Emergency Rent Subsidy (CERS) and related Lockdown Support. The CERS is the successor to the Canada Emergency Commercial Rent Assistance (CECRA) program and is available, effective September 27, 2020, to eligible businesses, charities, or non-profit eligible entities with qualifying periods that align with the CEWS.

The CEWS has helped more than 5.3 million Canadians keep their jobs, with approximately $100 billion in support already paid out through the program to help employers rehire employees and avoid layoffs. The CEWS currently provides eligible employers that meet the qualifying conditions with a wage subsidy for eligible remuneration paid to their employees, with the amount varying depending on the scale of the employer’s revenue decline.

The CERS and Lockdown Support have helped more than 218 000 organizations with over $7.4 billion in support for rent, mortgage, and other expenses. The CERS provides direct support to qualifying tenants and property owners for rent, mortgage interest, and other eligible property expenses, with the amount varying depending on the scale of their revenue decline. In addition, entities with locations that have been significantly affected by a public health order are eligible for the Lockdown Support equal to 25% of eligible costs.

Budget 2021 — Scheduled phase-out and introduction of the Canada Recovery Hiring Program

Budget 2021 set the path for a gradual decrease of the rates and scope for the rent and wage subsidies, beginning July 4, 2021, in order to ensure an orderly phase-out of the programs as vaccinations are completed and the economy reopens. As of the June 6, 2021, to July 3, 2021, period, the subsidy rates for the CEWS and CERS were 75% and 65% respectively. The subsidy rates for the CEWS and CERS were scheduled to be reduced to 20% for the period of August 29, 2021, to September 25, 2021. The CEWS for furloughed employees expired on August 28, 2021.

On July 30, 2021, the Government announced a delay in the scheduled phase-out by extending the subsidies for an additional period from September 26, 2021, to October 23, 2021. The regulations enabling this delay came into effect on August 12, 2021, and set the maximum subsidy rate for the CEWS and CERS at 40% between August 29, 2021, and September 25, 2021 (instead of the scheduled 20% for that period), and at 20% for the period from September 26, 2021, to October 23, 2021, after which, the programs were scheduled to expire.

Budget 2021 also introduced the Canada Recovery Hiring Program (CRHP) for eligible employers impacted by the pandemic. Eligible employers can receive a subsidy of up to 50% of the incremental remuneration paid to eligible active employees between June 6, 2021, and November 20, 2021. The subsidy rate was scheduled to be gradually reduced from a maximum of 50% from July 4 to July 31, 2021, to 40% from August 29, 2021, to September 25, 2021, to 30% from September 26, 2021, to October 23, 2021, and to 20% from October 24, 2021, to November 20, 2021.

Eligible organizations can claim the higher of the CEWS or the CRHP. The CRHP is intended to allow firms to shift from the wage subsidy to the hiring program, as the wage subsidy is phased out. This provides an alternative support for businesses affected by the pandemic to help them hire more workers as the economy reopens.

Fall of 2021 — New subsidy programs

On October 21, 2021, the Government announced new wage and rent subsidy programs beginning October 24, 2021, under three main themes.

Tourism and Hospitality Recovery Program

Organizations in the tourism and hospitality industry (including for example hotels, restaurants, bars, festivals, travel agencies, tour operators, convention centres, convention and trade show organizers, and others) have access to wage and rent subsidies if they meet the following two conditions to qualify for this program:

Under the Tourism and Hospitality Recovery Program (THRP), the maximum subsidy rates for the wage and rent subsidies are set at 75% from October 24, 2021, to March 12, 2022. The subsidy rates start at 40% for eligible organizations with a 40% current-month revenue decline, increasing thereafter in proportion to current-month revenue loss up to a maximum rate of 75% for those with a current-month revenue decline of 75% or higher.

The rent and wage subsidy rates are reduced by half from March 13, 2022, to May 7, 2022.

Hardest-Hit Business Recovery Program

Organizations that do not qualify for the Tourism and Hospitality Recovery Program, but that have been deeply affected since the outset of the pandemic, may qualify for rent and wage support under this program, provided they meet the following two eligibility requirements:

Under the Hardest-Hit Business Recovery Program (HHBRP), the maximum subsidy rate for the wage and rent subsidies are set at 50% for eligible entities from October 24, 2021, to March 12, 2022. The subsidy rates start at 10% for eligible hard-hit organizations with a 50% current-month revenue decline, increasing thereafter on a straight-line basis to a maximum rate of 50% for those with a current-month revenue decline of 75% or higher.

The rent and subsidy rates are reduced by half from March 13, 2022, to May 7, 2022.

Local Lockdown Program

Organizations subject to a qualifying public health restriction are eligible for support equivalent to what is provided under the THRP regardless of the sector in which it operates. An organization would be eligible for this support if

Unlike the THRP, LLP applicants would not need to demonstrate a 12-month revenue decline. They would need to demonstrate a current-month revenue decline of at least 40%.

The LLP rent and wage subsidy rates are reduced by half from March 13, 2022, to May 7, 2022.

These three programs were initially implemented by regulation for the period beginning on October 24, 2021, and ending on November 20, 2021. Bill C-2, which received royal assent on December 17, 2021, extended these programs until May 7, 2022. Also under Bill C-2, the CHRP was enhanced to a maximum subsidy of 50% starting October 24, 2021, and extended to May 7, 2022. The amendments enacted by Bill C-2 provide the flexibility to extend these subsidies to July 2, 2022, by regulation.


To allow businesses subject to capacity-limiting public health orders in the Omicron wave of the COVID-19 pandemic to access the LLP, and to support a broader set of businesses being impacted under the current wave.


A public health restriction that imposes capacity limits, such as a 50% capacity limit for indoor dining, would not be sufficient to qualify under the LLP as currently legislated.

The Regulations Amending the Income Tax Regulations (COVID-19 — Twenty-fourth and Twenty-fifth Qualifying Periods) [the Regulations] temporarily expand the LLP, from December 19, 2021, to February 12, 2022, so that a business can now also qualify if

In addition, the Regulations temporarily lower the current-month revenue loss threshold from 40% to 25%. Employers will continue to need to demonstrate current-month losses only, without the requirement for a historical 12-month revenue decline.

An entity subject to such a capacity-limiting restriction would be entitled, through the LLP, to the two subsidies described hereafter.

Wage subsidy

The Regulations amend the wage subsidy rate for qualifying periods from December 19, 2021, to January 15, 2022, and January 16, 2022, to February 12, 2022:

Rent subsidy

The Regulations will also expand access to the rent subsidy, at the same rates as the wage subsidy described above.

Table 1: Subsidy rates for December 19, 2021, to February 12, 2022 (periods 24 and 25) — New capacity restrictions
Period 24 and period 25 revenue reduction percentage Subsidy rate
75% and above 75%
25%–75% revenue decline e.g. 60% revenue decline = 60% subsidy rate
0%–24% 0%

Regulatory development


Throughout the pandemic, the Government has been in regular communication with stakeholders, including direct contact and correspondence. The Government is continuously consulting with public stakeholders regarding potential adjustments to the measures implemented to support business and other eligible entities and their workers as they transition back to work through the recovery phase of the pandemic.

These Regulations respond to the requests for the Government to act urgently in the face of the sudden introduction of capacity-limiting public health orders that seek to address the exponential spread of the Omicron variant.

The Regulations were exempt from prepublication in the Canada Gazette, Part I, as they are part of an urgent Government response to the new Omicron wave of the COVID-19 pandemic.

Modern treaty obligations and Indigenous engagement and consultation

An assessment of modern treaty implications did not identify impacts on potential or established Aboriginal or treaty rights.

Instrument choice

Regulatory amendments to the LLP will allow eligible entities to apply for the CEWS and the CERS through the Canada Revenue Agency’s online portal in a timely manner. The changes could only be made through legislative or regulatory amendments and, therefore, other instruments were not considered.

Regulatory analysis

Benefits and costs


The estimated cost of the amendments to the LLP for periods 24 and 25 for the Government of Canada is $884 million, which includes funds provided to entities and employers, and the incremental cost to the CRA to administer the extended LLP.


All the measures implemented continue to meet the Government’s commitment to ensuring that Canadians have the support they need to weather the COVID-19 crisis. The Regulations will provide modified CEWS and CERS eligibility under the modified LLP, responding to capacity-limiting public health orders addressing the Omicron variant. The new access criteria for the LLP is expected to benefit approximately 30 000 employers.

These subsidies will support employers impacted by capacity-limiting public health restrictions in maintaining their employees during the Omicron wave by subsidizing the wages of these employees. This provides needed economic support to individuals and helps to retain the employer-employee relationship with the intent of helping to facilitate the return to regular employment of the employees as the COVID-19 pandemic recedes and the economy fully reopens. It will also help entities subject to such restrictions continue to meet their rent and mortgage payments, thereby helping to avoid insolvencies and the permanent shuttering of businesses.

An exemption from the regular benefits and costs analysis requirement was granted due to the urgent nature of this measure.

Small business lens

Analysis under the small business lens determined that the Regulations will impact small businesses in Canada. Small businesses may, but are not required to, apply for the CEWS or the CERS; any small business that does may encounter some administrative costs to apply for these benefits. Nevertheless, these costs should not outweigh amounts received by small businesses as a subsidy under either program. Small businesses will benefit from these measures, if eligible, as the CEWS helps to subsidize employee costs while preserving the employee-employer relationship, and the CERS is intended to supplement rental or property expenses during this period of reduced economic activity.

One-for-one rule

There may be some incremental administrative burden for businesses associated with applying for the expanded LLP benefits. These costs would include compiling pre-existing accounting and payroll information to derive revenue decline percentages and payroll and rent/mortgage expenses to input into CRA’s online application. This information would need to be input into the required fields of CRA’s online application.

Paragraph 6(a) of the Red Tape Reduction Regulations allows for a regulation to be exempted from the requirement to offset administrative burden if it is related to tax or tax administration. Given that the these Regulations amend the Income Tax Regulations under the authority of the Income Tax Act, they are exempt from the requirement to offset administrative burden under the one-for-one rule.

Regulatory cooperation and alignment

These measures are a continuation of the respective subsidy programs that were launched on an urgent basis at the beginning of the COVID-19 pandemic. Due to the urgency and specificity of these measures, no steps were taken to coordinate or to align them with other regulatory jurisdictions.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

The expansion of the LLP is expected to directly benefit employers subject to local lockdown or a capacity-limiting restriction of 50% or more and with current period revenue losses of at least 25%. In comparison to the original LLP, which required a complete lockdown and current-period revenue losses of at least 40%, the expanded LLP is expected to primarily benefit the retail trade, accommodation and food services industries, as well as employers in the “other services except public administration” and “arts, entertainment and recreation” industries. Women represent 55% of employees in accommodation and food services and 52% of those in retail trade. Women also represent 52% of employees in the “other services except public administration” category. Within this category, preliminary analysis suggests that the subgroup primarily impacted by the expansion of the LLP would be “personal care services,” which may have a higher share of female employees than the broader industry group.

In 2019, about 14% of those employed were between the ages of 15 and 24 years, but this age group was heavily overrepresented in some of the hardest-hit industries, including accommodation and food services (42%), arts, entertainment and recreation (32%), and retail trade (30%).

Implementation, compliance and enforcement, and service standards


The Canada Revenue Agency (CRA) administers the CEWS, the CERS and the CRHP, and will apply the Regulations accordingly.

The Income Tax Regulations are subject to the existing reporting and compliance mechanisms available under the Income Tax Act. These mechanisms allow the Minister of National Revenue to assess and reassess tax payable, conduct audits and seize relevant records and documents.

These Regulations come into force upon registration.


Michael McGonnell
Income Tax Legislation
Tax Policy Branch
Telephone: 343‑572‑5136

Dominique D’Allaire
Finance Department Legal Services
Telephone: 613‑369‑3992