If your client is looking to secure funding, help it meet the requirements for the Prince Edward Island Share Purchase Tax Credit. By being an eligible business, your client can entice investors with a tax rebate based on the investor’s level of funding. As long as the potential investor is at least 19 years old and resides in Prince Edward Island, he may be eligible for a tax rebate on his personal income tax return.
Eligibility – Investee
To qualify for the Prince Edward Island Share Purchase Tax Credit, your client must meet a few criteria. In addition to issuing shares to investors, it must apply for a tax rebate certificate. Also, it can’t be a publicly traded company. Your client must be active in a strategic sector. This includes but isn’t necessarily limited to export-focused manufacturing and processing, information technology, communication technology, aerospace, life sciences, or renewable energy. Your client must also be permanently established in the Prince Edward Island province with three-fourths of the company’s payroll residing in the province.
Potential Tax Rebate
If your client meets the requirements above, investors are able to receive a tax rebate on their Prince Edward Island personal income tax. The amount is equal to 35 percent of the value invested in the eligible corporation. An individual can claim a maximum credit of $35,000 in any single tax year.
Process for Receiving Credit
The process for receiving a Share Purchase Tax Credit starts with your client. First, your client must apply to Innovation Prince Edward Island for a Share Purchase Tax Credit certificate. Your client must complete and submit the Business Development Application. If the application is approved by Innovation PEI, your client receives a certificate that outlines the cost of the qualified share along with other information.
Your client must provide a copy of the certificate to investors who then calculate their level of assistance and claim the rebate by submitting the certificate with the notice of assessment to Innovation PEI. Let your clients know they have to submit the application to Innovation PEI before any financial or legal commitment can be made with an investor.
Completing the Application
Innovation Prince Edward Island needs to receive certain information on your client’s application prior to issuing a certificate. Help your client prepare a business plan, marketing plan, and feasibility studies on its proposed market. Your client should also be prepared to provide a competitive analysis study, a professional resume, and a consultant’s study if applicable. Compile this information for presentation to potential investors as well; if your clients are looking for funding, let potential investors know the appropriate studies have been performed and all relevant information is ready to be provided to Innovation PEI. Other information that should be included on the application includes a historical background of your client’s business, financial statements for the previous two years, and future business expansion plans. Have your client list all shareholders, the economic benefits your client provides to Prince Edward Island, and the capacity of your client’s current facilities.
If your client is looking for ways to increase equity in its company, assist it with the requirements of the Share Purchase Tax Credit. Although your client won’t receive any direct tax rebate, creating the opportunity for outside parties may entice outside investment. Start by compiling a stellar application for a Share Purchase Tax Credit, and encourage your client to communicate the benefit investors can receive upon investing in your client’s business.