Government of New Brunswick

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.

 

 

Table of Contents

Program Description and Objective

Program Description

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 per individual investor) to eligible individual investors who invest in eligible small businesses and/or community economic development corporations (CEDC) or associations (co-op) in the province.

Effective January 1, 2014, the Small Business Investor Tax Credit legislation enables. New Brunswick corporations and trusts to be eligible for a 15% non-refundable corporate income tax credit on eligible investments up to $500,000.  This translates into a tax credit of $75,000 for New Brunswick corporate and trust 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

  • Provide an important source of capital by increasing access to equity financing for New Brunswick small businesses, community economic development corporations and associations .
  • Encourage investment by New Brunswick residents in New Brunswick small businesses, community economic development corporations and associations. 
Program Process

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 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 90 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.

Disclaimer: The Province of New Brunswick does not guarantee the value of any shares issued by a corporation, community economic development corporation or association registered under the Small Business Investor Tax Credit Act and does not express any opinions as to the financial condition of such corporations, community economic development corporation or association or the merits of investing in the shares of such corporations, community economic development corporations or associations.

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 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% (for investments made after April 1, 2015) of the investment up to the maximum annual tax credit per individual investor of $125,000.

The tax credit for a corporation and trust investor is 15% of the investment up to the maximum annual tax credit  per corporation and/or trust investor of $75,000.

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

 

Eligibility Requirement

Eligible Business Sectors

All business sectors in New Brunswick will be 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 $40 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 will not be purchased by investors who have disposed of shares 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.

Applicant Community Economic Development Corporation or Association Eligibility Criteria

To register in the Small Business Investor Tax Credit proram, the applicant community economic development corporation or association must meet the following criteria:

  • the community economic development corporation or association is incorporated or registered to carry on business in New Brunswick
  • the community economic development corporation or association has a constitution that restricts their business to
    • operating an active business or evaluating and making investments in one or more active businesses based on criteria defined by the community economic development corporation or association
    • providing information to and educating investors in the defined community as the role of capital in business, the value of equity investments to the defined community and the rights and obligations of community economic development corporation and shareholders;
    • investing the capital raised in a specified issue in businesses located within the defined community ar per their community economic development plan
    • exercising ownership rights for the investments made
    • providing the administrative support
  • the community economic development corporation or association has a constitution that describes their defined community and that provides for annual general meetings of the shareholders.
  • the community economic development corporation or association has a Board of Directors, elected by the shareholders at a general meeting, consisting of not less than six individuals who are residents of  their defined community;
  • the community economic development corporation or association is not a non-profit, charitable or non-taxable community economic development corporation or association
  • for a community economic development corporation, it has authorized capital consisting of at least one class of voting equity shares without par values; for an association, it has authorized capital consisting of at least one class of voting equity shares with par value where the purchase price of the share is not less than its par value and the redemption price does not exceed par value or book value per share, whichever is less;
  • the community economic development corporation or association  must have net tangible assets less than $40 million (including associated corporations and associations)
  • all, or substantially all, of the community economic development corporation and or association’s assets and income must be used to generate active business income in New Brunswick;
  • the community economic development corporation or association 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 business 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 community economic development corporation or association 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 will not be purchased by investors who have disposed of shares of the community economic development corporation or association after February 4, 2014, and before the proposed share issuance
  • the shares to be issued are newly issued, fully paid shares of the capital stock of a community economic development corporation or association that is registered under the Small Business Investor Tax Credit Act and will not include a replacement share. 

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 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

Community Economic Development Corporation or Association Application Requirements

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

  • a community economic development plan
  • the income tax return from the previous taxation year (including those of associated corporations/associations)
  • a copy of the most recent financial statements of the community economic development corporation or association (including those of associated corporations/associations) 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 community economic development corporation or association
  • a copy of the share registry certified by an officer of the community economic development corporation or association
  • a copy of the instrument of incorporation (constitution) certified by an officer of the community economic development corporation or association
  • a statement signed by each investor certifying that he or she understands the holding requirements for the shares and has read the community economic development plan.
  • For each corporation and trust investor, the director of the applicant community economic development corporation or association 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 community economic development corporation or association 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 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 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 such period of time as permitted by the Minister of Finance, 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.

Community Economic Development Plan for applicant community economic development corporation or association

As outlined in the Regulations 2003-39 under the Small Business Investor Tax Credit Act, the community economic development plan must include the following information:

  • a mission statement outlining the economic development strategy and the defined community it intends to serve
  • 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.  The maximum amount of capital to be raised is $3,000,000 in a 12-month period)
  • proposed use of fundsl 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 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 of the applicant community economic development corporation or association held at any time by each eligible investor
  • a statement signed by each eligible investor  that he or she has read the community economic development plan
  • summary of the community economic development corporation or association’s major business activities and revenue sources indicating the percentage of business assets used in each activity
  • provision that, immediately after registration, or within such period of time as permitted by the Minister of Finance, the community economic development corporation or association 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 community economic development corporation or association
  • 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 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 and for a corporation and trust investor, it is $500,000.

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 purchased by an investor who disposed of any other share 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 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 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 of the corporation or an associated corporation
  • retirement of any part of a liability of a shareholder 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.

Share Certificates

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

Shares purchased from the applicant corporation, community economic development corporation or association 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 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 is subject to the provisions of the Small Business Investor Tax Credit Act.”

Holding Requirements of Shares

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

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.

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 48 months the investment was held. 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 Department of Justice and Attorney General any information, as may be required, to ensure compliance with the Small Business Investor Tax Credit Program.

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.

 

Contact Information

Telephone: (800) 669-7070
Fax:           (506) 444-5086
Internet: http://www.gnb.ca/Finance
E-mail:  wwwfin@gnb.ca

Mailing Address:
Small Business Investor Tax Credit Program
Department of Finance
Marysville Place, P. O. 3000
Fredericton, NB
E3B 5H1