The CRA has released a technical interpretation (2020-0846711I7) outlining its views on what “extraordinary items” means for purposes of the Canada Emergency Wage Subsidy (“CEWS”). Read our detailed blog post on the CEWS here.

Qualifying revenue of an eligible entity for purposes of the CEWS is defined in subsection 125.7(1) of the Income Tax Act (Canada) as “the inflow of cash, receivables or other consideration arising in the course of the ordinary activities of the eligible entity”, but excludes “extraordinary items”.

The CRA commented that it would expect “extraordinary items” to generally meet all three of the following criteria:

  1. Not be expected to occur regularly or frequently within several years
    • Grants or other government assistance that an entity is eligible to receive on a regular or reoccurring basis would not meet this criterion
  2. Not typical of the normal activities or risks inherent in the normal operations of the entity
    • Consideration should be given to the nature of the services or products offered by an entity and the normal environment in which it operates
  3. Primarily out of the control of owners or management
    • Consideration should be given to the extent that inflows are influenced by the decision of owners or management

The CRA specifically concluded that emergency government assistance directly related to COVID-19, including provincial and municipal assistance, would generally be an “extraordinary item” and thus not constitute qualifying revenue for purposes of the CEWS.