Julie Robinson
Julie Robinson, Lawyer, McInnes Cooper

Tax time is coming. Have you considered investing in a NS small business as a tax tool? Maybe you should: it’s a win for NS small businesses and for their investors. Here are the 5 most frequently-asked questions about the NS Equity Tax Credit Program:

  1. What do I get? Non-refundable provincial income tax credits. “Eligible investors” may qualify for a 35% credit (to a maximum of $17,500/year) for investments (to a maximum of $50,000/year). If the investment is in a community economic-development corporation (CEDC), the eligible investor may qualify for further provincial income tax credits of 20% after 5 years and 10% after 10 years if the CEDC meets certain conditions.
  1. Who’s an “eligible investor”? An individual (or his RRSP) can qualify as an “eligible investor” if he is at least 19 years old and a NS resident. The investment can’t be eligible for any other tax credit or deduction allowed under the NS or the federal Income Tax Acts, except as a deduction for RRSP purposes, and the eligible investor must hold the investment for at least 5 years (or up to 15 years in the case of a CEDC, depending on the tax credit the investor received – see FAQ 1 above).
  1. Can I invest in any small business? No; only investments in a small business “registered” under the NS Equity Tax Credit Program qualify for the tax credit. A small business must meet certain requirements to register. Registered small businesses receive a certificate of registration to issue shares under the Program. The NS law requires the NS Minister of Finance to maintain a list to be “open for public inspection during normal business hours”, but investors should satisfy themselves that the small business is indeed registered before investing by obtaining the official Certificate of Registration from the small business.
  1. Do I have to use the tax credit immediately? No. The NS income tax laws may allow eligible investors to carry an unused tax credit balance forward 7 years or back 3 years.
  1. Can I only invest in certain business sectors? Effectively, yes. Professional corporations for certain services (for example, accountants or doctors), and businesses that don’t use their property in an active business or for investment in another eligible business organization won’t meet the Program’s registration criteria – so investments in them won’t qualify under the NS Program. The key for the investor is to look for the registration certificate under the Program.

McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.

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About the Author:

Julie Robinson is a lawyer with McInnes Cooper and a member of its Corporate and Business, Corporate Securities and Finance, and Entrepreneurial Services Teams. Julie acts for companies in relation to private placements and public offerings of securities, mergers and acquisitions and securities regulatory compliance matters. She also regularly works with start-ups and investors on venture capital financings. You can reach Julie at julie.robinson@mcinnescooper.com.