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Forgivable Portion of CEBA and Income Inclusion

Many businesses in Canada have taken advantage of Canada Emergency Business Account (CEBA).

The initial program offered $40,000 with 1/4 i.e. $10,000 is forgivable if certain conditions are met. Later on, the program expanded and offered an additional $60,000 with an additional $10,000 forgivable.

The forgivable portion of the CEBA loans must be included in the income during the year funds were received.

The Income Tax Act (ITA) provides under the s. 12(1)(x) that these amounts be included in the income at the time when the assistance is received. ITA further provides, under s. 20(1)(hh) that a deduction can be available if the amounts are repaid in the future.

All the businesses that have received the funding under CEBA should include these amounts in their respective tax years. Since the proceeds are used to pay off non-deferrable expenses, s. 12(2.2) also provides an option to reduce the amount of the expenses paid instead of including the amounts in income.

Whether you chose to include the amounts in income or reduce expenses, the net effect on the taxable income should stay the same.

This post cannot be considered as tax advice. The readers are cautioned to consult their professional corporate tax accountants to discuss the matters further. 

Maroof HS CPA Professional Corporation provides comprehensive corporate income tax planning and preparation services.

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Maroof Hussain Sabri

Maroof Hussain Sabri

Maroof is a CPA, CA in the province of Ontario and Alberta in Canada. He is also a licensed CPA from North Dakota in the United States. He lives in Toronto.

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Maroof Hussain Sabri

Maroof Hussain Sabri

Maroof is a CPA, CA in the province of Ontario and Alberta in Canada. He is also a licensed CPA from North Dakota in the United States. He lives in Toronto.

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