Facilitating Local Investment – New Brunswick’s Small Business Investor Tax Credit

June 3, 2019

Introduction

New Brunswick’s Small Business Investor Tax Credit Act (the “Act”) was created to help New Brunswick businesses attract investors and encourage New Brunswick residents to invest in local businesses.

Under the Act, the small business investor tax credit program (the “SBITC Program”) provides eligible investors a non-refundable provincial tax credit when they invest in eligible businesses.

Individual investors are eligible to receive a credit of up to $125,000 per year (representing 50% of the amount invested, to a maximum investment of $250,000 per year). Investors that are corporations or trusts are eligible to receive a credit of up to $75,000 per year (representing 15% of the amount invested, to a maximum investment of $500,000 per year).

As a non-refundable tax credit, the credit reduces the amount of provincial income tax otherwise payable by a New Brunswick taxpayer. If an investor is not able to use the full credit in a given tax year, the credit can be carried forward 7 years or back 3 years.

4-Year Holding Period

An investor who receives a tax credit under the Act must not, for a period of 4 years following the date of investment, transfer or redeem the shares. Every share certificate for a class of shares registered under the SBITC Program must include a legend referring to this restriction.

An investor whose shares are transferred or redeemed before the end of the holding period must repay the amount of their credit, with interest, to the Department of Finance.

In certain cases, a company may be required to repay the tax credits received by its investors. This could apply where a company’s investors sell their shares or the company goes public within 4 years after credits were issued under the SBITC Program.

Receiving a Tax Credit

Within 30 days of closing each investment, the Applicant must apply for a tax credit certificate on behalf of its investors. This application costs $25 per investor. The Department of Finance delivers tax credit certificates directly to the investors.

Small Business Investor Tax Credit – An Overview

Conclusion

The SBITC Program offers significant benefits for New Brunswick companies and New Brunswick investors alike. Eligible companies can take advantage of the SBITC Program to make themselves more attractive to potential investors, including those who may already be considering investments. More importantly, the benefits of the SBITC Program may solidify the decision of eligible investors who might not otherwise invest.

Whether you own a company and are looking to bolster your offering to potential investors or are considering making an investment in a New Brunswick business, it would be our pleasure to work with you to ensure you maximize the potential benefits of participation in the SBITC Program.

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Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.