Small Business Investor Tax Credit

The New Brunswick Small Business Investor Tax Credit provides a 50% (for investments made after April 1, 2015) non-refundable personal income tax credit of up to $125,000 per year (for investments of up to $250,000 in non-strategic sectors) to eligible individual investors who invest in eligible small businesses and/or community economic development corporations (CEDC) or associations (co-op) in the province. Individual investors who invest in strategic sectors (for investments made after March 17, 2026) can receive up to a maximum non-refundable personal income tax credit of $500,000 per year (for investments of up to $1,000,000).

For a corporation and trust eligible investor, the New Brunswick Small Business Investor Tax Credit provides a 25% (for investments made after March 17, 2026) non-refundable corporate income tax credit of up to $125,000 per year (for investments of up to $500,000 in non-strategic sectors). Corporation and trust eligible investors who invest in strategic sectors can receive up to a maximum non-refundable corporate tax credit of $250,000 per year (for investments of up to $1,000,000).

If 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.

Strategic sectors are select industries prescribed in regulation using North American Industry Classification System (NAICS) codes as published by Statistics Canada chosen to encourage investment that will help drive productivity and growth in New Brunswick.

For more information on the North American Industry Classification System (NAICS) Canada, visit North American Industry Classification System (NAICS) Canada .

The program has a two-stage process:

• application for a Certificate of Registration
• followed by application for a Tax Credit Certificate

Certificate of Registration

A fee of $100 applies to each application for registration under the program.

Applicant 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 (PDF 251 KB) provided by the provincial Minister of Finance.

Applicant community economic development corporations and associations that want to take advantage of the program and are approved by the Financial and Consumer Services Commission (FCNB) 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.  It should be noted that an exemption, under the Securities Act Local Rule 45-509, from registration and prospectus requirements, subject to certain conditions, is mandatory to sell the shares of a Community Economic Development Corporations and Associations.

For an applicant corporation, 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, but not limited to:

• the applicant corporation meets Corporation Eligibility Criteria outlined below
• the proposed investment plan complies with the spirit and intent of the Small Business Investor Tax Credit Act and the Regulations
• the proposed use of the capital to be raised, as set out in the investment plan, would benefit the operations of the applicant corporation located in New Brunswick
• For each corporation or trust investor, the director of the applicant corporation must sign a separate declaration stipulating that this eligible investor is in compliance with the Small Business Investor Tax Credit Act Section 14.1(2)

For an applicant Community Economic Development Corporation or Association, one of the requirement will be the submission of a community economic development 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 but not limited to:

• the applicant community economic development corporation or association meets Community Economic Development Corporation or Association Eligibility Criteria outlined below
• the proposed community economic development plan complies with the spirit and intent of the Small Business Investor Tax Credit Act and the Regulations
• the proposed use of the capital to be raised, as set out in the community economic development plan, would benefit the operations of the applicant corporation/association located in New Brunswick
• For each corporation or trust investor, the director of the applicant community economic development corporation or association must sign a separate declaration stipulating that this eligible investor is in compliance with the Small Business Investor Tax Credit Act Section 14.1(2)

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.  Please note that for a community economic development corporation and/or association, the maximum amount of capital to be raised is $3,000,000 within a 12-month period.

Under the program, approved businesses have 120 days, from their approval date, to finalize the sale of the shares to the investors included in the investment plan or the community economic development plan.On written application by a business, the minister may in writing extend the period one time only by 60 days.

Tax credit certificate

A fee of $25 applies to each investor tax credit certificate requested.

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 (PDF 231 KB) 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, corporation and trust investors will attach these certificates to their personal or corporate income tax returns to obtain the reduction in provincial income tax payable.

Tax credit

For individual investor only, 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 for an individual investor is 50% of investments up to the maximum annual tax credit per individual investor of $125,000 (for investments of up to $250,000 in non-strategic sectors). Individuals who invest in strategic sectors may invest up to $1,000,000 per year for a maximum annual credit of up to $500,000 (for investments made after March 17, 2026).

The tax credit for a corporation and trust investor is 25% (for investments made after March 17, 2026) for investments up to the maximum annual tax credit per corporation and/or trust investor of $125,000 (for investments of up to $500,000 in non-strategic sectors). Corporation or trust investors who invest in strategic sectors may invest up to $1,000,000 for a maximum annual credit of $250,000.

The credit is not refundable but may be carried forward for seven years or carried back three years.

Eligible business sectors

All business sectors in New Brunswick are eligible to participate.

Applicant corporation eligibility criteria

To register in the Small Business Investor Tax Credit program, the applicant corporation must meet the following criteria:

• the corporation must be a private company
• the corporation is incorporated or registered to carry on business in New Brunswick
• the corporation must have authorized capital consisting of shares without par value
• the corporation must have net tangible assets less than $50 million (including associated corporations)
• all, or substantially all, of the corporation’s assets and income must be used to generate active business income in New Brunswick
• the corporation must pay, in each of the four years after the date of registration, at least 75% of its wages and salaries to individuals who are residents of New Brunswick unless the corporation exports outside of N.B. more than 50% of their goods and services, then, the requirement is for 50% of its wages and salaries to individuals who are resident of New Brunswick
• the corporation is not lending money, providing a loan guarantee or any other financial assistance, to a person for the purchase of shares included in a specified issue under the Small Business Investor Tax Credit Program
• that the issued shares or convertible debentures will not be purchased by investors who have disposed of shares or convertible debentures of the corporation after Dec. 10, 2002, and before the proposed share issuance
• the shares to be issued are newly issued, fully paid shares of the capital stock of a corporation that is registered under the Small Business Investor Tax Credit Act and will not include a replacement share, and includes a convertible debenture if the convertible debenture is newly issued as part of a specified issue

Corporation application requirements

As outlined in the Small Business Investor Tax Credit Act, an applicant corporation that wants to register under the Small Business Investor Tax Credit program will be required to provide:

• an investment plan
• the income tax return from the previous taxation year (including those of associated corporations)
• a copy of the most recent financial statements of the corporation (including those of associated corporations) which have been reviewed by a person who is a licensed or registered member of an accounting association regulated by the Province or proforma financial statements for any start up corporation
• a copy of the corporate share registry and share transfer registry certified by an officer of the company
• a copy of the instrument of incorporation certified by an officer of the company
• a statement signed by each investor certifying that he or she understands the holding requirements for the shares and has read the investment plan.
• For each corporation and trust investor, the director of the applicant corporation must sign a separate declaration stipulating that his eligible investor is in compliance with Small Business Investor Tax Credit Act Section 14.1(2)
• a certificate signed by the directors of the corporation to certify that the information contained in the application is complete and accurate

Investment plan for applicant corporation

As outlined in the Small Business Investor Tax Credit Act, the investment plan must include the following information:

• amount of capital to be raised under the plan (minimum amount of capital to be raised is $10,000 if all investors are individuals.  The minimum investment for any corporation and trust investor is $50,000)
• proposed use of capital raised
• full name of each eligible individual investor, who must be at least 19 years of age and a New Brunswick resident, including the investor’s social insurance number and residential address.  For each eligible corporation and trust investor which must have a permanent establishment in New Brunswick, the legal name of the corporation or trust and the business number have to be provided (minimum number of investors required is three)
• number of shares or convertible debentures subscribed for and the amount to be paid by each eligible investor (minimum amount to be invested by each individual investor is $1,000 and by corporation and trust investor is $50,000)
• number of shares or convertible debentures of the applicant corporation held at any time by each eligible investor
• a statement signed by each eligible investor that he or she has read the investment plan
• summary of the corporation’s major business activities and revenue sources indicating the percentage of company assets used in each activity
• provision that, immediately after registration, or within or within 120 days following registration, the corporation will raise capital by issuing eligible shares
• total of wages and salaries paid, in the previous taxation year, indicating the portion paid to New Brunswick residents
• number of employees currently employed by the applicant corporation
• total amount of revenue and dollar value of goods and services exported out of N.B at the time of application

Investor eligibility

The total investment by an individual investor shall be not less than $1,000, and by a corporation and trust investor not less than $50,000.

To receive a Small Business Investor Tax Credit, an individual investor must be 19 years of age or older and be a New Brunswick resident. For a corporation and trust investor, the corporation or the trust must have a permanent establishment in New Brunswick.

Shares or convertible debentures 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 individual investor under this program is $250,000 for non-strategic sectors or $1,000,000 for investors who invest in strategic sectors and for a corporation or trust investor; it is $500,000 for non-strategic sectors and $1,000,000 for investors who invests in strategic sectors.

Investment eligibility

The applicant corporation, community economic development corporation or association 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 for an individual investor.

A replacement share is not eligible. A replacement share is a share or convertible debenture purchased by an investor who disposed of any other share or convertible debenture of the corporation at any time after December 10, 2002 for a corporation and after February 4, 2014 for a community economic development corporation or association, and before the date of the investment.

Eligible investments do not include shares or convertible debentures 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

Funds raised, by the proposed share offering, will not be used for any of the following purposes:

• lending
• purchasing the shares or convertible debentures of any other person
• investment outside the Province of New Brunswick
• investment in land, except land that is secondary to the active business in which the corporation is primarily engaged
• purchasing all or part of any 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, to be used in the same or similar business activity, and the corporation has received financial assistance from any government, municipality or public authority to purchase those services or assets
• redemption or purchase of previously issued shares or convertible debentures of the corporation or an associated corporation
• retirement of any part of a liability of a shareholder or of a convertible debenture holder of the corporation or an associated corporation
• payment of dividends
• funding the purchase of any assets of an existing proprietorship, partnership, joint venture, trust or company, except where that entity is in receivership or in bankruptcy and an eligible investor or group of investors did not, at any time, own more than 10 per cent of the voting shares of the entity

For an applicant community economic development corporation or association

Shares or convertible debentures will only be issued by the applicant corporation, community economic development corporation or association on being fully paid.

Shares or convertible debentures purchased from the applicant corporation, community economic development corporation or association will be registered in the name of the shareholder or convertible debenture holder who purchases them or in the name of a trustee, if the shares or convertible debentures are purchased by a qualifying trust.

The applicant corporation, community economic development corporation or association will issue an investment confirmation to each eligible investor within 30 days of the investment.

The applicant corporation, community economic development corporation or association shall put the following endorsement on the share certificates: “The right to redeem or transfer this class of shares or class of convertible debentures is subject to the provisions of the Small Business Investor Tax Credit Act.” 

The investor must hold the shares or convertible debentures for four years after the purchase or the tax credit will have to be repaid.

Reporting

As required by the Minister of Finance, during the four-year holding period for specified share issuances, the applicant corporation, community economic development corporation or association shall file an annual return, a detailed status report of its shareholdings, financial statements(including those of associated corporations) for which an independent review engagement have been conducted or have been independently audited by a  chartered professional accountant 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, community economic development corporation or association and the Department of Finance and Treasury Board and Department of Justice and Attorney General any information, as may be required, to ensure compliance with the Small Business Investor Tax Credit Program.

Enforcement

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/it 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 or convertible debenture holder.

The applicant corporation, community economic development corporation or association 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 applicant corporation, community economic development corporation or association 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, community economic development corporation or association 's registration is revoked or surrendered, the corporation, community economic development corporation or association will immediately pay, to the Minister of Finance, all monies equal to all of the allowed tax credits issued within the preceding four years.

If, before the expiry of the four-year holding period, a corporation, community economic development corporation or association goes in receivership or in bankruptcy, the corporation, community economic development corporation or association will immediately pay, to the Minister of Finance, an amount equal to the percentage  of the total amount of all tax credits for which tax certificates were issued or may be issued, in respect of all eligible shares of the corporation of that were issued as part of its specified issue within that period of time:  where n is the number of months that the eligible shares were held.

Instead of recovering the amount provided for in this formula from the corporation, the Minister may recover from each eligible investor named in the investment plan of that corporation the amount equal or greater than the amount found in the aforementioned formula.

For a community economic development corporation or association, if its investment requirements (40% in first 12 months after the closing date of the specified issue, 60 % after 24 months and 80% after 36 months with a maximum of 20% for administration) are not met a penalty of 1/6 of the amount of the shortfall will be imposed.

Administrative penalties

If the Commissioner believes, on reasonable grounds, that an eligible business has violated or failed to comply with a provision listed in column 1 of Schedule B of the Small Business Investor Tax Credit Act, the Commissioner may issue a notice of non-compliance to the eligible business

• by registered mail to the eligible business’s latest known address or
• in the manner in which personal service may be made under the Rules of Court

Service by registered mail is deemed to have been effected five days after the date the notice of non-compliance is deposited in the mail.

The notice of non-compliance shall contain the following information:

• the name of the eligible business that has violated or failed to comply with a provision listed in Column 1 of Schedule B
• the provision listed in Column 1 of Schedule B and the date on which the violation or failure to comply occurred
• the amount of the administrative penalty that may be imposed
• information with respect to the right to make written submissions under section 45.2

The amount of an administrative penalty is as follows:

• for a first violation or failure to comply with the provision listed in Column 1 of Schedule B, the minimum amount listed beside it in Column 2 of Schedule B
• for a second violation or failure to comply with the provision listed in Column 1 of Schedule B, an amount equal to twice the minimum amount listed beside it in Column 2 of Schedule B
• for a third or subsequent violation or failure to comply with the provision listed in Column 1 of Schedule B, the maximum amount listed beside it in Column 2 of Schedule B

If an eligible business that is required to pay an administrative penalty fails to do so, the Minister may revoke the registration of the eligible business

Objections and Appeals

Notice of Objection

An eligible business that is the subject of a notice of administrative penalty may request that the Minister review the Commissioner’s decision to issue the notice by applying to the Minister on the form provided by the Minister within 15 days after being served with the notice.

After receiving a request for a review, the Minister shall conduct the review of the decision by holding a hearing to consider the matter as soon as the circumstances permit.

The Minister shall not make a determination with respect to a review unless the Minister has given the eligible business that is the subject of the notice of administrative penalty an opportunity to make representations in writing or orally.

Notice of Appeal

If the eligible investor, corporation or cooperative is dissatisfied with the decision of the Commissioner, the eligible investor, corporation or cooperative may within 30 days after receiving notice of the decision, appeal from the decision to the Minister.

Appeal to The Court of King’s Bench

Appellants who are dissatisfied with the decision of the Minister may, within 30 days after the date of service or mailing of the notice explaining the Minister’s decision, appeal from such decision to a judge of The Court of King’s Bench of New Brunswick.

Active business income

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 https://www.canada.ca/en/revenue-agency.html 

Convertible debenture

A financial instrument that starts as a loan but can be converted into equity, such as shares of the issuing company's stock, at a future date.

Non-refundable tax credit

A non-refundable tax credit reduces the amount of provincial income tax otherwise payable by a taxpayer, a corporation or a trust up to the amount of provincial income taxes owing.

Private Company

Private company means a company that meets the following requirements:

• the company is exempt from filing a preliminary prospectus and prospectus under the Securities Act in relation to a specified issue of eligible shares
• the company’s securities are not listed on an exchange or quoted on a quotation and trade reporting system as defined in the Securities Act.

Replacement share

If an investor has disposed, at any time after December 10, 2002, of a share or convertible debenture of any class of shares or convertible debentures of a corporation that is registered under the Small Business Investor Tax Credit Program and purchases a share or convertible debenture in the corporation under the Small Business Investor Tax Credit program; then, the newly purchased share is considered to be a “replacement share” and the investment is not eligible for the tax credit. For a community economic development corporation or association, shares or convertible debentures disposed after February 4, 2014 are considered replacement shares.