Labour-Sponsored Venture-Capital Tax Credit
NS, Canada
Tax credit to support Nova Scotia SMEs
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- grant_single|timelineUnspecified
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Tax Credits
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- Government of Nova Scotia
- Finance and Treasury Board (NB)
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Get a non-refundable personal tax credit of up to $2,000 when you invest in registered, labour-sponsored venture capital corporations.
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The Labour-Sponsored Venture-Capital Tax Credit supports the investment in eligible businesses by allowing individuals to invest in registered labour-sponsored venture capital corporations (LSVCCs).
- Creating and maintaining employment within eligible businesses
- Raising venture capital through the issuance of shares to the public
- Investing in eligible businesses via equity financing
- Investing through subordinate debt obligations in certain cases
grant_single|admissibleProjectsExample
$2,000
Toronto
Creation of a local artists' marketplace in Toronto.
$2,000
Calgary
Initiative to support indigenous artisans in Calgary.
$2,000
Winnipeg
Acquisition of cutting-edge machinery for manufacturing purposes in Winnipeg.
$2,000
Vancouver
Expansion of a local organic farming cooperative in Vancouver.
$2,000
Montreal
Development of a community tech hub in Montreal.
$2,000
Halifax
Enhancement of sustainable fishing practices in Halifax.
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The Labour-Sponsored Venture-Capital Tax Credit is available to residents of Nova Scotia who invest in registered labour-sponsored venture capital corporations. Eligible investments must meet specific criteria, and investors need to hold the investment for a minimum of 8 years.
- Must be a resident of Nova Scotia.
- Must be over 19 years of age.
- Must have valid reasons for making the investment, other than simply obtaining the tax credit.
- Investment must be in newly issued common voting shares of the corporation that are non-redeemable, non-convertible, and not restricted in profit sharing or participation upon dissolution.
- Shares cannot be eligible for any other tax credit or deduction allowed under the Income Tax Act, except as a deduction for RRSP purposes or a federal LSVCC tax credit.
- Investors are required to hold the investment for at least 8 years.
- If the investment is disposed of within the 8-year period, the investor may be required to repay the tax credits earned.
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The eligible types of companies for the Labour-Sponsored Venture-Capital Tax Credit in Nova Scotia are those that aim to create and maintain employment by receiving equity financing from LSVCCs. These companies must meet specific criteria to qualify for investment from the raised venture capital.
- Small and medium-sized businesses
- Co-operatives
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The eligible geographic zone for this grant is Nova Scotia.
- Investors must be residents of Nova Scotia.
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- Step 1: Verify Eligibility
- Ensure you are a resident of Nova Scotia over the age of 19.
- Confirm that you have valid reasons for making the investment, other than just obtaining the tax credit.
- Step 2: Find a Registered LSVCC
- Identify a labour-sponsored venture capital corporation (LSVCC) that has been sponsored by a trade union and is eligible for the program.
- Step 3: Make the Investment
- Invest in newly issued common voting shares of the LSVCC that are non-redeemable, non-convertible, and unrestricted in profit-sharing or participation upon dissolution.
- Ensure the investment is not eligible for any other tax credit or deduction under the Income Tax Act, except for RRSP purposes or a federal LSVCC tax credit.
- Step 4: Hold the Investment
- Keep the investment for at least 8 years.
- Be aware that disposing of the investment within this period may require repayment of the tax credits earned.
- Step 5: Obtain Tax Credit
- Ensure the investment is made within the calendar year or within 60 days of the taxation year-end.
- Confirm that the maximum annual tax credit amount is $2,000.
- Make sure you have sufficient tax payable in the year to use the credit, as it is not refundable and cannot be carried forward.
Apply to this program
Labour-Sponsored Venture-Capital Tax Credit Summary
The Labour-Sponsored Venture-Capital Tax Credit is designed to help Nova Scotia small and medium-sized businesses access equity financing by offering a personal income tax credit to individuals investing in registered labour-sponsored venture capital corporations (LSVCCs). Investors can receive a maximum annual tax credit of $2,000 for their contributions, provided they comply with the investment and holding requirements.
Understanding the Labour-Sponsored Venture-Capital Tax Credit
The Labour-Sponsored Venture-Capital Tax Credit (LSVCC) represents an essential resource for economic growth in Nova Scotia. By incentivizing individual investments in small and medium-sized businesses, this tax credit stimulates job creation and business expansion. In essence, it serves a dual purpose: benefiting individual investors through tax reductions while providing much-needed equity financing to Nova Scotia businesses.
Objectives and Purpose
The primary goal of the LSVCC tax credit is to encourage individual investment in businesses that may otherwise struggle to secure necessary funding. By doing so, the tax credit aims to:
- Facilitate the growth and sustainability of small and medium-sized enterprises (SMEs) in Nova Scotia.
- Encourage employment creation within the province by providing businesses with the financial resources they need to expand and hire more staff.
- Boost the overall economic development of Nova Scotia by fostering a vibrant business ecosystem supported by local investors.
Eligibility Criteria for Investors
To qualify for the LSVCC tax credit, investors must meet specific criteria, including:
- Residency: Investors must be residents of Nova Scotia.
- Age: Investors must be at least 19 years old.
- Intent: The investment should be based on valid reasons beyond merely obtaining the tax credit.
Moreover, the tax credit is non-refundable and cannot be carried forward to future years. This stipulation emphasizes the need for investors to have sufficient tax payable in the year the investment is made. Failure to meet this requirement may result in the loss of the tax credit.Investment Holding Period
One crucial aspect of the LSVCC tax credit is the requirement for investors to hold their investments for at least eight years. If an investor disposes of their investment within this period, they may be required to repay the tax credits earned. This stipulation ensures a long-term commitment to supporting Nova Scotia businesses and contributes to their sustained growth and development.
Eligible Investments
For an investment to qualify for the LSVCC tax credit, it must meet specific criteria:
- The investment must be in newly issued common voting shares of the corporation.
- The shares should be non-redeemable, non-convertible, and unrestricted 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 for RRSP purposes or a federal LSVCC tax credit.
Complying with these conditions ensures that the investments go directly towards the growth and sustainability of eligible Nova Scotia businesses.Benefits for Investors
Investing through the Labour-Sponsored Venture-Capital Tax Credit program offers several benefits to individual investors:
- Tax Savings: Investors can receive a maximum annual tax credit of $2,000, reducing their overall tax payable.
- Economic Contribution: By investing in local businesses, investors contribute to the economic development and job creation efforts within Nova Scotia.
- Diversified Portfolio: This program allows investors to diversify their investment portfolio by including shares in Nova Scotia SMEs, which can potentially yield significant returns over time.
Impact on Nova Scotia Businesses
The Labour-Sponsored Venture-Capital Tax Credit has the potential to significantly impact small and medium-sized businesses in Nova Scotia by providing them with the capital necessary to:
- Expand Operations: Businesses can use the funds to upgrade facilities, purchase equipment, or enter new markets.
- Innovate: Additional capital can be directed towards research and development initiatives, fostering innovation and competitive advantage.
- Create Jobs: As businesses grow, they can hire more employees, contributing to the overall employment rates in the province.
- Stabilize Finances: Equity financing can help businesses manage cash flow more effectively and increase financial stability.
Approval Process
Before an investment can qualify for the LSVCC tax credit, the labour-sponsored venture capital corporation (LSVCC) must receive approval to issue shares under the program. While the provincial government grants this approval, it does not constitute an endorsement of the corporation or co-operative issuing the shares. Therefore, investors must perform their due diligence and assume all risks associated with their investments.
Steps to Participate
To take advantage of the Labour-Sponsored Venture-Capital Tax Credit, investors should follow these steps:
- Ensure Eligibility: Confirm that you meet the residency, age, and intent criteria outlined for investors.
- Identify LSVCCs: Research labour-sponsored venture capital corporations in Nova Scotia that meet the approval criteria for this program.
- Purchase Shares: Invest in newly issued common voting shares of the eligible corporation.
- Hold the Investment: Ensure the investment is held for at least eight years to avoid potential repayment of tax credits.
- Calculate Tax Credit: Apply for the tax credit when filing your personal income tax return to receive the benefit of up to $2,000 annually.
Conclusion
The Labour-Sponsored Venture-Capital Tax Credit is a vital initiative supporting economic development, business growth, and job creation in Nova Scotia. Investors who participate in this program benefit from tax savings while contributing to the prosperity of local businesses and the overall economy. By meeting the eligibility criteria and holding their investments long-term, investors can make a meaningful impact on the future of Nova Scotia's business landscape.
