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Department of
Finance |
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Small Business
Investor Tax Credit Program |
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Small
Business Investor Tax Credit Program Disclaimer: This Internet site
is intended to provide information respecting application under the Province
of New Brunswick Small Business Investor Tax Credit Act and should not
be regarded as a replacement of the laws, regulations or administrative
documents to which it refers. Program
Description
( Back to top ) The New
Brunswick Small Business Investor Tax Credit provides a 30% non-refundable
personal income tax credit of up to $75,000 per year (for investments of up
to $250,000 per investor) to eligible investors who invest in eligible small
businesses in the province. In the
event that an investor cannot use the entire Small Business Investor Tax
Credit amount in a given year, the tax credit can be carried forward seven
years or back three years. Program
Objective
( Back to top )
Program
Process
( Back to top ) The
program has a two-stage process: application for a Certificate of
Registration, followed by application for a Tax Credit Certificate. Certificate
of Registration
( Back to top ) Corporations
that want to take advantage of the program and are approved to sell
shares in New Brunswick will file an application with the New Brunswick
Department of Finance on a form
provided by the provincial Minister of Finance. One of the
requirements will be the submission of an investment plan that outlines the
proposed use of the capital. The application will be approved if the Minister
of Finance is satisfied that specific conditions are met, including:
The
Department of Finance will issue a Certificate of Registration to a business
approved to take part in the program. The certificate will permit the
business to issue eligible shares up to a specified value on or before a
specified date. Under the
program, approved businesses have 90 days, from their approval date,
to finalize the sale of the shares to the investors included in the
investment plan. Disclaimer: The Province of
New Brunswick does not guarantee the value of any shares issued by a
corporation registered under the Small
Business Investor Tax Credit Act and does not express any opinions as
to the financial condition of such corporations or the merits of investing in
the shares of such corporations. Tax Credit Certificate (
Back to top ) Within 30
days of when eligible shares are sold, the business must provide proof of
sale, along with required information on each investor, to the New Brunswick
Department of Finance on a form
provided by the provincial Minister of Finance. The Minister of Finance will
issue a Tax Credit Certificate to eligible investors on approved purchases of
shares. Individual
investors will attach these certificates to their personal income tax returns
to obtain the reduction in provincial income tax payable. An
investment may be made within the first 60 days of a calendar year and may be
claimed as a tax credit in the prior taxation year. The tax
credit is 30% of the investment up to the maximum annual tax credit per
investor of $75,000. The credit
is not refundable but may be carried forward for seven years or carried back
three years. Eligible
Business Sectors ( Back to top ) All business sectors
in New Brunswick will be eligible to participate. Corporation
Eligibility Criteria ( Back to top ) To
register in the Small Business Investor Tax Credit program, the corporation
must meet the following criteria:
Corporation
Application Requirements ( Back to top ) As
outlined in the Small Business Investor Tax Credit Act, a corporation
that wants to register under the Small Business Investor Tax Credit program
will be required to provide:
Investment
Plan
( Back to top ) As
outlined in the Small Business Investor Tax Credit Act, the
investment plan must include the following information:
Investor Eligibility (
Back to top ) The total
investment by an investor shall be not less than $1,000. To receive
a Small Business Investor Tax Credit, a person must be 19 years of age or
older. Shares may
be purchased, held or disposed of by a qualifying trust for an investor. An
investor is required to hold the investment for a minimum of four years. An
investor may not use financial assistance from any government, municipality
or public authority in the acquisition of these shares. The
maximum annual investment for which a tax credit certificate will be issued
to an investor under this program is $250,000. Investment Eligibility (
Back to top ) The
corporation will raise capital of not less than $10,000. The
minimum number of investors is three. An investment
may be made within the first 60 days of a calendar year and may be claimed as
a tax credit in the prior taxation year. A
replacement share is not eligible. A replacement share is a share purchased
by an investor who disposed of any other share of the corporation at any time
after Dec. 10, 2002, and before the date of the investment. Eligible
investments do not include shares that, in the opinion of the Minister of
Finance, were or will be issued with the main purpose to claim the tax
credit. Prohibited
Use of Capital Raised (
Back to top ) Funds
raised, by the proposed share offering, will not be used for any of the
following purposes:
Share
Certificates
( Back to top ) Shares
will only be issued by the corporation on being fully paid. Shares
purchased from the corporation will be registered in the name of the
shareholder who purchases them or in the name of a trustee, if the shares are
purchased by a qualifying trust. The
corporation will issue an investment confirmation to each eligible investor
within 30 days of the investment. The corporation
shall put the following endorsement on the share certificates: “The right to
redeem or transfer this class of shares is subject to the provisions of the Small
Business Investor Tax Credit Act.” Holding
Requirements of Shares ( Back to top ) The
investor must hold the shares for four years after the purchase or the tax
credit will have to be repaid. An
investor who, before the expiry of the four-year holding period, redeems,
cancels or disposes of an eligible share or receives a tax credit that he/she
was not entitled to, shall repay the amount of the tax credit received,
including interest. No recovery of the tax credit will be required in the
event of the death of the shareholder. The
corporation shall not redeem an eligible share unless the redemption occurs
after four years from the date of issue or due to a transfer involving an RRSP
of which the shareholder is the annuitant or because of the death of the
shareholder. If the
corporation redeems, acquires, cancels or transfers eligible shares within
the four-year holding period, it is required to withhold, from the amount
otherwise payable to the shareholder, the amount of the tax credit received.
The withheld amount must be paid to the Minister of Finance within 30 days.
No recovery of the tax credit will be required in the event of the death of
the shareholder. If, before
the expiry of the four-year holding period, a corporation's registration is
revoked or surrendered, or if the corporation winds up or dissolves, the
corporation will immediately pay, to the Minister of Finance, all monies
equal to all of the allowed tax credits issued within the preceding four
years. As
required by the Minister of Finance, during the four-year holding period for
specified share issuances, the corporation shall file an annual return, a
detailed status report of its shareholdings, financial statements and other
information required to confirm the use or disposition of the raised capital
and to ensure compliance with other Small Business Investor Tax Credit
Program requirements. During the
four-year holding period for the specified share issuances, the investors
will provide the eligible corporation and the Department of Finance and
Department of Justice and Attorney General any information, as may be
required, to ensure compliance with the Small Business Investor Tax Credit
Program. Contact
Information
( Back to top ) Telephone: (506) 453-2404 Frequently
Asked Questions
( Back to top )
The
New Brunswick Small Business Investor Tax Credit is a 30% non-refundable
personal income tax credit of up to $75,000 per year (for investments of up
to $250,000 per investor) to eligible investors who invest in eligible small
businesses in the province. The New Brunswick Small Business Investor Tax
Credit Program started August 1st, 2003.
A
non-refundable tax credit reduces the amount of provincial income tax
otherwise payable by a taxpayer up to the amount of provincial income taxes
owing.
The
tax credit can be carried forward seven years or back three years.
A
tax credit is normally applied against the same taxation year as when the
investment is made. However, when an investment is made within 60 days of the
end of the calendar year, the tax credit can be claimed in the previous
taxation year.
An
individual who is at least 19 years of age.
The
minimum number of investors required is three.
Each
investor must invest a minimum of $1,000. Each investment plan must raise a
minimum of $10,000 in capital (among all investors).
The
Small Business Investor Tax Credit Program will follow the Canada Revenue
Agency rules on eligibility for RRSP deductions. For
inquiries on the eligibility of your investment, contact Canada Revenue
Agency at: Individual
Inquiries: 1-800-959-8281 or visit http://www.ccra-adrc.gc.ca.
You
must buy shares in a small business registered under the Small Business Investor
Tax Credit program.
The
Government of New Brunswick cannot disclose which businesses/corporations are
registered under the Small Business Investor Tax Credit program.
The
Government of New Brunswick issues a Certificate of Registration to all
corporations registered under the Small Business Investor Tax Credit program.
In order for a potential investor to determine if a corporation is
registered, the potential investor must ask the corporation to see the
official Certificate of Registration.
No.
The Province of New Brunswick does not guarantee the value of any shares
issued by an eligible corporation, nor does it express an opinion as to the
financial condition of the eligible corporation. Investors invest entirely
at their own risk. Prior to investing, you may want to seek business advice
from your accountant, lawyer, or business advisor.
All business sectors are eligible to participate. None is
excluded.
The
business must submit an application to the Minister of Finance to obtain
approval to make a specified issue of shares under the Small Business
Investor Tax Credit program.
An
eligible share is a newly issued share of the capital stock of a corporation
that is registered under the Small Busines Investor
Tax Credit Act, but does not include a replacement share. Eligible
investments do not include shares that, in the opinion of the Minister of
Finance, were or will be issued with the main purpose to claim the tax credit
under the Small Business Investor Tax Credit program.
If
an investor:
then
the newly purchased share is considered to be a “replacement share” and the
investment is not eligible for the tax credit.
To
register in the Small Business Investor Tax Credit program, a corporation
must:
The
Small Business Investor Tax Credit Program will follow the Canada Revenue
Agency rules on active business income. For further information call 1-800-959-5525
or visit http://www.ccra-adrc.gc.ca.
In
order to be eligible under the program, corporations must be private companies.
It is
anticipated that companies would bring in individuals that they know and
trust. Because we anticipate that many small businesses will be interested in
the program, in order for government to be administratively more effective
and responsive, companies must identify in their investment plan that they,
indeed, have serious potential individuals interested in investing in their
business.
The
investor must hold the shares for four years after the purchase or the tax
credit will have to be repaid with interest.
The
capital raised can be used for anything except:
This
would only occur upon the death of the shareholder.
Telephone: (506) 453-2404 |
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Department of Finance |