Small Business Investor Tax Credit Program
Highlights
This program is designed for you. It offers a 50% non-refundable personal income tax credit for individual investors and a 15% non-refundable corporate income tax credit for corporations and trusts. This means you can receive up to $125,000 per year as an individual investor or $75,000 per year as a corporate or trust investor.
Why should you apply?
- Access to Capital: This program provides an important source of capital, increasing your access to equity financing.
- Tax Benefits: The tax credits can be carried forward for seven years or back three years, offering flexibility in managing your finances.
- Support for Growth: The funds raised can be used for various business needs, from expanding operations to investing in new projects.
What’s in it for you?
- Significant Tax Savings: Reduce your provincial income tax payable.
- Easy Qualification: The program is designed to be accessible, with straightforward application requirements.
- Long-term Benefits: Holding the investment for a minimum of four years ensures stability and growth for your business.
Applying for this program can provide the financial boost your business needs to thrive and expand.
Financing Details
Type of Financing: Tax Credit
Repayment Terms and Interest Rates:
- This is a non-refundable tax credit. There are no repayment terms or interest rates.
Eligible Expenses:
- Investments in eligible small businesses.
- Investments in community economic development corporations (CEDC) or associations (co-op).
Prohibited Use of Funds:
- Lending money.
- Purchasing shares of any other person.
- Investment outside the Province of New Brunswick.
- Investment in land, except land that is secondary to the active business.
- Purchasing services or assets at a price greater than their fair market value.
- Purchasing services or assets from the Province, or a provincial agency or corporation, if financial assistance has been received for those services or assets.
- Redemption or purchase of previously issued shares.
- Retirement of any part of a liability of a shareholder.
- Payment of dividends.
Fees:
- $100 application fee for registration.
- $25 fee for each investor tax credit certificate requested.
Qualifications
- Must be a private company.
- Must be incorporated or registered to carry on business in New Brunswick.
- Must have authorized capital consisting of shares without par value.
- Must have net tangible assets less than $40 million (including associated corporations).
- All, or substantially all, assets and income must be used to generate active business income in New Brunswick.
- Must pay at least 75% of wages and salaries to New Brunswick residents for four years after registration, or 50% if exporting more than 50% of goods and services outside New Brunswick.
- Must not lend money, provide loan guarantees, or other financial assistance for the purchase of shares under the program.
- Shares issued must be newly issued, fully paid shares and not replacement shares.
- Must have a minimum of three investors.
- Individual investors must be at least 19 years old and New Brunswick residents.
- Corporation and trust investors must have a permanent establishment in New Brunswick.
- Minimum investment by an individual investor is $1,000.
- Minimum investment by a corporation or trust investor is $50,000.
- Must raise a minimum of $10,000 in capital if all investors are individuals.
Must raise a minimum of $50,000 in capital if any investors are corporations or trusts.
Disqualifications:
- Businesses that lend money, provide loan guarantees, or other financial assistance for share purchases.
- Businesses issuing replacement shares.
- Businesses where investors have disposed of shares after Dec. 10, 2002, and before the proposed share issuance.
- Businesses using funds raised for lending, purchasing shares of others, investing outside New Brunswick, or purchasing land not secondary to their active business.
- Businesses using funds to purchase services or assets at above fair market value, from the Province, or with government financial assistance.
- Businesses using funds for redemption of previously issued shares, retiring shareholder liabilities, paying dividends, or purchasing assets from entities not in receivership or bankruptcy.
Description
This program offers your business a 50% tax credit on investments made into eligible small businesses or community economic development corporations in New Brunswick. This means if you invest up to $250,000, you can get up to $125,000 back as a tax credit each year.
For corporations and trusts, there’s a 15% tax credit on investments up to $500,000, translating to a tax credit of $75,000. If you can't use the entire tax credit in one year, you can carry it forward for seven years or back for three years.
The main goal of this program is to increase access to capital for small businesses in New Brunswick. By participating, you can attract more investments, which can help grow your business. This program encourages local investments, ensuring that funds stay within the province, benefiting the local economy.
Program Steps
Gather Required Documentation:
- Investment plan
- Previous year's income tax return
- Most recent financial statements reviewed by a licensed accountant
- Corporate share registry and share transfer registry, certified by an officer
- Instrument of incorporation, certified by an officer
- Statement signed by each investor certifying understanding of holding requirements and having read the investment plan
- Declaration signed by the director for each corporation or trust investor
- Certificate signed by the directors certifying the completeness and accuracy of the application
Complete the Application for a Certificate of Registration:
- Fill out the application form provided by the New Brunswick Department of Finance
- Submit the required documentation along with the application form
- Pay the $100 application fee
Submit the Application:
- Send the completed application form and required documentation to the New Brunswick Department of Finance
Receive Certificate of Registration:
- Upon approval, you will receive a Certificate of Registration, allowing you to issue eligible shares up to a specified value by a specified date
Finalize Sale of Shares:
- Complete the sale of shares to the investors included in the investment plan within 90 days of approval
Apply for a Tax Credit Certificate:
- Within 30 days of selling eligible shares, provide proof of sale and required investor information to the New Brunswick Department of Finance
- Pay the $25 fee for each investor tax credit certificate requested
Receive Tax Credit Certificates:
- The Minister of Finance will issue Tax Credit Certificates to eligible investors on approved purchases of shares
Attach Tax Credit Certificates to Tax Returns:
- Investors will attach the Tax Credit Certificates to their personal or corporate income tax returns to obtain the reduction in provincial income tax payable