Over the past several weeks, we’ve heard from a number of members curious about how to calculate the federal government’s wage subsidy and tax credits. The Canada Revenue Agency has provided an update that we are sharing with you below.
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CRA indicates that members should consult paragraphs 3.27 to 3.34 of the Guidance on the income tax measures to support journalism for examples on how to calculate the labour tax credit under different scenarios.
The following information is also available in questions 18 and 20 of our Frequently asked questions.
Qualifying journalism organization (QJO) receives an amount from the Aid to Publishers
A QJO that receives amounts from the Aid to Publishers during the tax year will be eligible to claim the Canadian journalism labour tax credit. However, the Canadian journalism labour tax credit that the QJO would otherwise be entitled to receive is reduced by the amount of funding received from the Aid to Publishers in the tax year.
For example, a QJO has a taxation year of January – December 31. It received a total of $10,000 from the Aid to Publishers on December 1, 2019. Its qualifying labour expenditure for the 2019 tax year is $50,000. The amount of the refundable labour tax credit is:
(25% x $50,000) – $10,000 = $2,500 (This amount will be included in income).
If the QJO receives an amount from the Aid to Publishers during the tax year that is equal to, or in excess of, 25% of its qualifying labour expenditure ($12,500 in this example), its labour tax credit would be reduced to $0.
- amounts received from the Aid to Publishers will not be considered in the formula for calculating the qualifying labour expenditure for a QJO
- other types of assistance can also impact the calculation of the qualifying labour expenditure;
QJO receives an amount under the new Canada Emergency Wage Subsidy (CEWS) and/or the 10% Temporary Wage Subsidy (TWS) in a tax year
The Canadian journalism labour tax credit is 25% of a QJO’s qualifying labour expenditures. Qualifying labour expenditure is defined in respect of an eligible newsroom employee and is generally the salary or wages payable to the employee. However, the qualifying labour expenditure is decreased by any government assistance received in respect of an eligible newsroom employee. CEWS and the TWS are considered government assistance and therefore the qualifying labour expenditure in respect of an eligible newsroom employee must be decreased by the CEWS received and TWS claimed or intended to be claimed in respect of that employee.
For example, a QJO received a total of $4,000 in CEWS and claimed $500 TWS in respect of one of its eligible newsroom employees whose salary was $25,000 for the period during which it qualified as a QJO. The qualifying labour expenditure in respect of that employee is $20,500 ($25,000 – $4,500). Therefore, the Canadian journalism labour tax credit for the QJO in respect of that employee would be $5,125 ($20,500 x 25%).