Maroof HS CPA Professional Corporation, Toronto

Non-Deferrable Expenses Stream – CEBA

Almost a month ago, in May, the government announced expanded eligibility for Canada Emergency Business Account (CEBA). Previously, only the businesses with a minimum of $20,000 in payroll were eligible. After facing a lot of criticism and feedback, the government decided to expand the eligibility program to include more businesses.

This post is not being updated anymore!

UPDATE: BUSINESSES CAN NOW APPLY FOR $20,000 EXPANSION FOR CEBA. NEW BUSINESSES CAN APPLY FOR 60,000.

As of now, CEBA program includes two streams:

  1. Payroll stream – eligibility same as for old program when initially rolled out 
  2. Non-deferrable expenses stream

Non-Deferrable Expenses Stream comes with its own rules.

If you did not qualify for the CEBA, there might be other options available for you to ease the liquidy pressures and access capital. 

Read: 5 Alternatives to CEBA loan

How to Apply for CEBA under Non-Deferrable Expenses Stream?

Non-Deferrable Expenses Stream applications open on Friday, June 19, 2020.

UPDATE: Expanded CEBA eligibility program is open now on June 26, 2020.

This is a two-step process:

  1. Apply on your bank’s (financial institution) website
  2. The application will be directed to the CEBA website, where applicants need to complete the application by submitting supporting documents.

If your application is successful, your bank will be notified.

This post only discusses non-deferrable expenses, for expanded eligibility details, please visit this post

CEBA Expanded eligibility launch date updates can be followed here. 

What are Non-Deferrable Expenses?

There was much of guesswork involved before and different people were expressing different opinions on what can be considered as non-deferrable expenses for CEBA loan.

Good news! the government has clarified and specifically explained what can be considered as a “non-deferrable expense”.

Bad News! There are specific categories of expenses that are eligible and might leave some businesses out of the program again.

1.Payroll expenses:

Only the “arm’s length” transactions with independent third parties are eligible. If you have employees who deal with you at arm’s length, their wages and other employment expenses are eligible. Non-arms length wages and salaries are not eligible. Another post discusses what is meant by arm’s length.

If you are a shareholder-employee, your wages and salaries are not eligible because you are no dealing at arm’s length. If you had paid yourself a salary in 2019, you may qualify under the payroll stream of CEBA instead of non-deferrable expenses. You might be interested in another post about late filing of T4 for CEBA.

2. Rental and Lease Payments:

Two types of rental and lease payments are identified in the CEBA rules which are eligible as non-deferrable expenses:

  1. Real estate used for business purposes, for example, office rent and lease.
  2. Capital equipment used for business purposes, for example, a truck or equipment used for business purposes.

3. Insurance, Property Taxes and Utilities

Some of the operating expenses which are considered as non-deferrable expenses for CEBA purposes and clearly categorized in CEBA rules:

  • Insurance payments, for example, liability insurance or general insurance.
  • Payments of property taxes for businesses.
  • Payments for different utilities for business purposes such as electricity and water, telephone and internet, or utilities powered by oil and gas.

4. Scheduled Debt Service

Payments for regularly scheduled debt service. It does not mean that a business can take CEBA loan and clear off its existing debt in full. Only the scheduled debt payments are considered for this purpose.

5. Independent Contractors

If you are working with independent contractors under the agreement, the payments to these independent contractors are eligible.

6. Business Licenses and other Fee

In order to run a business, there might be some license fee to pay. Such payments are considered non-deferrable under new eligibility rules. For example, you might have to pay a franchisor or licensor for trademarks and know-how.

How to prove Non-Deferrable Expenses and What are the supporting documents?

You will be required to submit all the supporting documents. Supporting documents include invoices, receipts, bank loan agreements showing the schedule of payment, lease or rent agreement, franchise agreements, employment agreements or independent contractors agreements, or any other document which proves the non-eligible deferrable expenses you are including.

Supporting documents can be either in electronic form or paper copy.

Is Dividend Considered Non-Deferrable Expense for CEBA?

No, dividends are paid out of the corporation’s profits. It’s not even an expense! In short, the dividend is not a non-deferrable expense. At personal taxes, level dividend is investment income.

Is Business Bank Account needed for CEBA?

Yes, you must have a business bank account. If you use your personal bank account for doing business transactions, you do not qualify for CEBA. Further, this business bank account must have been opened on or before March 01, 2020.

Using Other COVID-19 Response Programs in Conjunction with CEBA

If you are using other government support programs, it will affect the calculation of non-deferrable expenses.

For example, if you are taking a 10% wage subsidy or 75% Canada Emergency Wage subsidy you need to adjust your payroll expenses while calculating CEBA non-deferrable expenses. If you are having a payroll of $10,000 and you have already taken 10% subsidy of $1,000, you cannot include a full $10,000 as a non-deferrable expenses.

Specifically included programs that affect the calculation of non-deferrable expenses are Canada emergency wage subsidy, 10% wage subsidy, rent assistance, regional relief, recovery fund, northern business relief fund, Fish harvest grant, Futurepreneur Canada, indigenous businesses relief, and IRAP subsidy program.

If you are not sure which expenses to include or how to calculate your non-deferrable expenses, please contact your professional corporate tax accountant.

How Long is the Process?

CEBA website says it takes 10-15 business days once all the supporting documents are submitted.

Maroof HS CPA Professional Corporation is a professional accounting firm located in the Greater Toronto Area. We are registered with the province of Ontario and Alberta in Canada. We assist businesses in achieving compliance and are helping them in these difficult times.

If you need assistance with the completion of requirements for different relief programs such as updating your corporate income tax filings, the calculation for non-deferrable expenses or any other tax and accounting matters, please contact us. However, due to the limitation of resources and a higher volume of inquiries, we provide assistance related to CEBA questions to our existing or new clients only.

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.

Like this Post?
You can share the post and subscribe for more interesting content.

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.

Like this Post?
You can share it…

33 thoughts on “Non-Deferrable Expenses Stream – CEBA”

    1. Maroof Hussain Sabri

      It depends on what is included in the cost of sales!
      If you are going to purchase raw material to fill in your sale, it’s not a non-deferrable expense (for CEBA). However, there is some exception if it was committed before March 2020 and you cannot back out of that commitment.

      1. Good post! I have a corporation and I am the sole director/employee.
        I do have contractors but I’m wondering if I work from home nowadays, what expenses can I use as non-defferable?

        1. Maroof Hussain Sabri

          Hello Naz

          Payments to contractors are eligible to be counted as non-deferrable expense. However, you will be needing their contracts to be uploaded there. CEBA rules keep on changing. As of now, they review the documents you submit to them.
          When you say you work from home, I am not sure, if you can claim non-business like expenses as non-deferrable expenses. The whole idea behind this is to support businesses that cannot pay expenses that they can not defer.

        2. Hi Maroof.

          I run a small business as Truck driver without owning a truck. I need to get my own truck. The cost of the truck I want to buy can be considered as non deferral expense…??

          1. Maroof Hussain Sabri

            Dear Saad
            Buying a truck will be considered as a Capital expenditure. Capital expenditures are not “non-deferrable expenses”(NDE) for CEBA purposes. You cannot consider it as an NDE. Even if you get the loan on some other basis, you cannot use the funds to buy a new truck (or any other capital expenditure).

      2. I was denied through the deferrable expenses Avenue because my contracts werent legible. They stated that I did not have enough expense when I am over the 40000. I figure this may be due to them not understand the amounts on the contracts. I also did my 2019 tax for the business and only paid myself as a contractor. Can I add on a T4? Also Is it possible to go through the payroll stream with my 2020 tax return? Thank you in advance. Sorry for too many questions

        1. Maroof Hussain Sabri

          Hello David, sometimes the contracts are deferrable. When you pay yourself that’s non-arm’s length transaction. I doubt there is an option for the 2020 payroll stream.

  1. I have a home office. Are a portion of my property tax , and utilities considered a non deferrable expense by cews ? I submitted them and was approved but want to make sure its an expense bill I can pay.

    1. Maroof Hussain Sabri

      If you got approved for a portion of property tax, that’s good. If that expense is considered as a non-deferrable expense by them to approve the loan, there should not be any problem in paying it from those funds. There are many grey areas in this CEBA application processing. In my opinion, you should be okay to pay this expense since the accepted it as non-deferrable expense. Please don’t consider it as advice, exercise your judgement.

  2. Thanks and that makes sense. Im just trying to ensure I am following the rules as correctly as possible. Im working from home fulltime as a consultant to do business and I require the use of a mobile phone and internet to function. These are absolutely required for the company to make income.

  3. Hi Maroof,
    We have a holding company that owns property and leases to customers. We are looking for clarity on whether condo fees and special assessments are considered non-deferrable expenses.

    1. Maroof Hussain Sabri

      As per the published information on their website, Property taxes and condo fees are non-deferrable expenses. However, you should give them a call. They have now a helpline.

  4. Hi,
    My commercial unit is in a commercial condo building and I pay a maintenance fee as a Condo fee every month. I heard the CEBA program doesn’t confirm that payment as non Deferrable.
    Please advise is it true or not? and if it is acceptable what is the related reference and can I put it in, Utilities part or other? Thanks in advance for your reply.

    1. Maroof Hussain Sabri

      Dear Siamak

      What I understood from your comment is that you pay a condo fee for your commercial unit. If you are renting a commercial unit to run your business, I don’t see any reason why the Condo fee will not be considered as a non-deferrable expense (NDE)? To me, it appears to be the same as rent expenses. On another note, you might need to look into CERS as well.
      If you own a commercial unit and rent it to someone, that might be a different story.

  5. Hi, I established my small used cars dealership in August 2019 and filed T2 year 2020.
    On March 02,2020, My brother transferred to my personal US$ account the sum of US$ 20000.00 (which was exchanged into C$ 27000.00 )as loan free interest for the purpose of using this fund to help me in my business and I should repay this loan as following : C$12000.00 on 30/12/2020 and C$17000.00 on 30/12/2021.
    Am I eligible to include the C$12000.00 in my company non deferrable expenses when I apply for CEBA?
    Thanks in advance.

    1. I would add other information regarding my previous message. We, myself as borrower and my brother as lender, signed a loan agreement on February 24,2020.
      The C$27000.00 was transferred from my personal bank account to my company bank C$ account and reported as loan in my company records on March 06, 2020.

    2. Maroof Hussain Sabri

      A brother is a related person under ss 251(2) of the income tax act. Transactions being done at non-arms length are generally not counted towards CEBA eligibility since they can be avoided and deferred. I’d recommend contacting your accountant and let him read the contract and look at the transactions.

  6. I sell consumables (food items) – are the cost of my supplies considered non-deferrable expenses? e.g. Revenue in 2020 was $55k, Cost of sales was $45k (food supplies for re-sale), other fixed expenses $20k (Rent / taxes, etc), would $45k be considered “non-deferrable”? or $20k?

    1. Maroof Hussain Sabri

      List down all the expenses properly categorised and then apply the rules one by one on all of them. The cost of purchases can be (sometimes) included. Taxes, of course not. Rent, always yes.

      1. for cafes and diners. does ordering food supplies (in order to run a diner of course and make meals) count as a nond eferable expense?

  7. The Canada website also says that “Payments incurred for materials consumed to produce a product ordinarily offered for sale by the Borrower” is an approved non-deferrable expense. Does that include payments made for a product bought overseas to re-sell in Canada?

    1. Maroof Hussain Sabri

      I recommend reading the full paragraph from ceba website. I think that’s when you have a purchase commitment and cannot get out of it. Just double check from the link posted in the above post for the updated rules. They change rules regularly.

  8. Very informative post, thank you. I have a question does the downpayment and financing of a business vehicle can be considered an NDE?

    1. Maroof Hussain Sabri

      If you are financing a new vehicle, i doubt that it can be considered non-deferrable expenses. Further, even the CEBA funds cannot be used to buy capital assets.

    1. Maroof Hussain Sabri

      Well, it depends on what are they for. I doubt that your business travel expenses, which might be deferrable, can be considered for this purpose. I’d recommend checking the updated rules. The link is in the post.

  9. Hi Maroof,

    My company owns a commercial building which has three separate units which I lease out. In 2019, we started having some roof leak issues which caused problems for my second floor tenants. I ended up providing them with ‘rental relief’ in 2019 and the start of 2020, as we worked on stop-gap measures to repair the roof. In November 2019, I entered into a contract to have the entire roof replaced in the Spring of 2020, as time (the roofer’s) and weather permitted. COVID hit, but I could not realistically postpone the re-roofing due to the necessity of looking after my tenants interests (and to stop my resulting loss in rental income). The re-roofing took place at the end of May 2020 and cost $38,000. This coupled with insurance, property taxes and utilities puts my expenses well over $60,000 for 2020.

    Will CRA consider the re-roofing to be an eligible, non-deferrable expense (it was expensed, not capitalized by my accountant).

  10. Hi Maroof,
    I am a white collar employee and working as an Independent Contractor. I am not paying myself salary and I am getting only dividend instead. Am I eligible to apply for the CEBA?

Leave a Comment

Your email address will not be published.

Need Help?

If you have a generic question, you can submit a comment at the end of this post. If you’d like a formal consultation or advice, getting a quote is very simple!

GO TO:

RECENT POSTS

Do You Have A Tax Question?

Write to us and if there are more requests, we may post an answer for you.

Subscribe Now!

Please subscribe to our mailing lists for occasional informational notifications.

Looking for Tax Help?

If you are looking for specific tax advice, start the process now!.

Do you have a Tax Question

Write to us and if there are more requests, we may post an answer for you.

Subscribe Now!

Please subscribe to our mailing lists for occasional informational notifications.

Looking for Tax Help?

We are here to help!

If you are looking to hire our services, you can start the process here.

Scroll to Top