Canada’s investment tax credit (ITC) can be a valuable credit if your business qualifies, and there are several different ways to qualify for this credit. These can include investing in apprentices, buildings and equipment, and research and development.
Apprenticeship With the Investment Tax Credit
Hire eligible apprentices from certain trades to earn up to 10% of the apprentice’s salary, up to $2,000, as an investment tax credit per apprentice. An eligible apprentice comes from a prescribed trade and is in the first two years of an apprenticeship contract. Apprentices must register with the CRA.
New Buildings, Machinery, or Equipment in the Atlantic Region
You may also qualify for the investment tax credit if you invest in new buildings or machinery for use in farming, fishing, logging, or manufacturing in the Atlantic region of Canada. Your investment must be a qualified property, which means these are new assets available to companies in these industries and in the Atlantic region. You can claim 10% of your investment for this deduction.
Scientific Research and ITC
You can also qualify if you have spent money on certain types of scientific research and development. Your business can claim up to 35% of the expenditures, capping at $3 million, so long as your investment goes towards research that either has a specific application in mind or generally advances the knowledge and tools you have at your company’s disposal.
Claiming the Investment Tax Credit
As a small business owner, use Form T2SCH31 to claim the investment tax credit. You should file this form with your T2 corporate return. If you forget to apply for the investment tax credit, you can file this form retroactively within 12 months of submitting your return. After that point, you need to go through the process of amending your return. If you don’t want to use all of the credit in the tax year you incurred the expenses, you may roll the credit back three years or forward 20 years. For example, if you earn a $2,000 credit but you don’t owe any tax this year, you may want to save the credit and use it in the future.
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