The New Brunswick Small Business Investor Tax Credit encourages investments in local small businesses and provides a great way for small businesses to get funding and for investors to see a sizable reduction in their tax bills. If you’re operating a small business, this credit can have a significant impact on your appeal to potential shareholders.
Credits for Individuals, Corporations, and Trusts
New Brunswick offers the Small Business Investor Tax Credit for the purchase of newly issued shares of small businesses that operate primarily in the province. Individual investors can claim a credit on their personal income tax returns for 50% of investments up to $250,000, for a total credit of up to $125,000, as of April 1, 2015. For a corporation or trust, the province offers a credit of 15% on up to $500,000 in investments for a total credit of up to $75,000. To qualify for the credit, individuals must purchase a minimum of $1,000 in shares, and corporations must purchase at least $50,000.
Small Business Advantages
If you’re a small business owner pitching to investors, this credit is a powerful selling tool for attracting new investments. Investors often have many questions and concerns before making a significant investment in a small business, and chief among those is the anticipated return. By guaranteeing cash back on their tax returns, you can assure potential shareholders that investing in your New Brunswick small business is a bargain compared to investing outside the province.
Qualifying for the Program
To guarantee investors can take advantage of this tax credit, your business must apply for and qualify for the program, which includes paying a registration application fee. The credit only applies to newly issued shares, and you must raise at least $10,000 to qualify. The program is only available to small businesses, so you must demonstrate that your company and any associated corporations have less than $40 million in tangible assets according to the current fair market value, and you must submit your most recent income tax return and accountant-certified financial statements to verify this.
Benefiting New Brunswick Businesses
Because New Brunswick designed the tax credit to benefit local businesses, you must demonstrate that your investment income continues to primarily benefit your business operations in New Brunswick to stay eligible. After you register, you must make sure at least 75% of your payroll goes to residents of New Brunswick. If you are producing goods or services for export outside of the province, and at least 50% of your revenue comes from these sales, you can still qualify if at least 50% of your employee payroll is for residents of New Brunswick. To prove you meet the criteria, you must submit an annual return along with a thorough reporting of all issued stocks after a review by an independent certified auditor. As long as you continue to meet these requirements, investors can take advantage of these tax benefits. Understanding the requirements for issuing qualifying stocks and maintaining eligible levels of operations in New Brunswick is a great way to position your company as an attractive investment.