NOTE: As announced in Budget 2019-20, the Equity Tax Credit is ending as of December 31, 2019 for private corporations and co-operatives. All applications for a Certificate of Registration must be received on or before this date for investments to qualify for the Equity Tax Credit. The Innovation Equity Tax Credit is now available for eligible private corporations.
The Equity Tax Credit for CEDIFs (Community Economic Development Investment Funds) will continue to be available after December 31, 2019.
NOTE: A corporation cannot get both an Equity Tax Credit and an Innovation Equity Tax Credit at the same time. Corporations that apply for and receive a Certificate of Registration under the Equity Tax Credit program on or after January 1st, 2019 are NOT eligible corporations in the new Innovation Equity Tax Credit program.
Eligible Investments
For corporations- Must be newly issued common voting shares of the corporation that are non-redeemable, non-convertible and are not restricted in profit sharing or participation upon dissolution
- The shares cannot be eligible for any other tax credit or deduction allowed under the Income Tax Act, except as a deduction for RRSP purposes.
For co-operatives- Must allow the investor to be a member in the co-operative
- Must allow the member to participate in the affairs of the co-operative
- Shares are not eligible if the investor disposed of any shares of the eligible business at any time after September 30, 1993 and before the specified issue of shares.
- “Specified issue of shares”: the shares that are specified in the application of the eligible business to which a Certificate of Registration applies.
Eligible BusinessesCorporations and co-operatives incorporated pursuant to the laws of Canada, including CED corporations and co-operatives.
CED corporations and co-operatives are those organizations created to assist or develop local businesses within the community.
Eligible businesses must meet the following criteria:- Involved in active business or investing in other eligible businesses
- Less than $25 million in assets and/or revenues, including associated companies
- At least 25% of salaries and wages paid in Nova Scotia
- Corporations must have authorized capital consisting of common voting shares
- Co-operatives must be marketing, producing or employee co-operatives
- Corporations must have at least 3 eligible investors taking part in the specified issue
Prohibited Uses of FundsFunds raised by the eligible business must be used in an active business and cannot be used for any of the following purposes:
- For lending, except under prescribed circumstances
- For acquiring securities, other than eligible investments in a corporation or association that meets the criteria set out in Section 4
- For making payments with respect to the payment of dividends to or the repayment of shareholder debt to a director, officer or shareholder of the eligible business or an associate of the director, officer or shareholder of the eligible business
- For purchasing services or assets provided by Her Majesty in right of the Province or an agency or corporation of Her Majesty, where
- Those services or assets are to be used in all or in part in a business or activity that is the same or similar to the activity previously carried on by Her Majesty in right of the Province or the agency or corporation of Her Majesty, and
- The corporation has received, either directly or indirectly, any financial assistance from any government, municipality or public authority with respect to the acquisition of those services or assets
- As part of a transaction or series or transactions directly or indirectly involving
- The redemption or purchase of previously issued shares of the eligible business or an affiliate of the eligible business
- The retirement of any part of a liability of a shareholder of the eligible business or one of its affiliates
- The payment of dividends, or
- The funding of all or part of the purchase by the eligible business of all or substantially all of the assets of an existing proprietorship, partnership, joint venture, trust or company, except a proprietorship, partnership, joint venture, trust or company that is in receivership or in bankruptcy where an eligible investor or group of investors did not own at any time more than 10 per cent of the voting shares of the proprietorship, partnership, joint venture, trust or company that is in receivership or in bankruptcy
- For the funding of all or part of the purchase by the eligible business of any services or assets at a price that is greater than the fair market value of the services or assets purchased.