Manitoba Small Business Venture Capital Tax Credit Program
Winnipeg, MN, Canada
New-investment small business tax credit in Manitoba
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Tax Credits
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- Government of Manitoba
- Department of Growth, Enterprise and Trade (MN)
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Through this program, small businesses can offset the costs of issuing new equity investments of $100,000 to $10 million.
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The Small Business Venture Capital Tax Credit program is designed to assist eligible small business corporations in Manitoba to issue new equity for various business purposes. Here are the eligible projects and activities:
- Investing in active business assets
- Generating revenue from active business
- Raising new equity investments
- Expanding business operations
- Promoting economic development
grant_single|admissibleProjectsExample
$150,000
Winnipeg
Install energy-efficient systems in a local community center to reduce operating costs
$150,000
Winnipeg
Equip a start-up farm with advanced irrigation systems and renewable energy sources
$250,000
Winnipeg
Expand an artisanal brewery to increase production and distribution capabilities
$200,000
Winnipeg
Develop an eco-friendly packaging line for an organic food products company
$300,000
Winnipeg
Modernize a local health clinic's medical equipment to improve patient care
$200,000
Winnipeg
Create a co-working space for local freelancers and small businesses
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The Small Business Venture Capital Tax Credit program provides a non-refundable Manitoba tax credit to individuals and corporations who invest in eligible small business corporations in Manitoba. To qualify, businesses must meet specific criteria regarding their structure, operations, and location.
- A Canadian Controlled Private Corporation (CCPC) with a permanent establishment in Manitoba
- All, or substantially all, of the corporation's assets are used in active business
- All, or substantially all, of the corporation's revenue is derived from active business
- The corporation's stated capital is at least $25,000 prior to the issue of eligible shares
- The corporation has either 100 or less full-time equivalent employees or less than $15 million in gross revenue
- 25% of the corporation's employees are resident in Manitoba
- It is not a Reporting Issuer as defined in The Securities Act (Manitoba)
- It has previously issued less than $10,000,000 in eligible shares under the SBVC tax credit program either on its own or combined with an affiliated company
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Yes, there are eligible types of companies for the Small Business Venture Capital Tax Credit. Eligible companies must be Canadian Controlled Private Corporations (CCPC) with a permanent establishment in Manitoba, meeting several financial and operational criteria.
- A Canadian Controlled Private Corporation (CCPC) with a permanent establishment in Manitoba
- All or substantially all assets used in active business
- All or substantially all revenue derived from active business
- A stated capital of at least $25,000 prior to issuing eligible shares
- 100 or less full-time equivalent employees or less than $15 million in gross revenue
- At least 25% of employees are resident in Manitoba
- Not a Reporting Issuer under The Securities Act (Manitoba)
- Has previously issued less than $10,000,000 in eligible shares under the program
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Yes, certain types of companies are not eligible for this grant.
An applicant whose principal business activity falls into any one of specific activities will not be considered eligible to participate in the SBVC program:
- Professional services that are regulated by a governing body which is established under an Act of the Legislature
- Providing management, administrative, financial or other similar services
- Leasing, developing or selling real property
- Exploring for, developing or processing mineral, oil or gas resources
- Farming, except for commercial crop production in a climate controlled environment, fishing, hunting, or similar activity but NOT processing products from these activities
- Holding, operating or granting franchises
- Operating a restaurant, lounge, bar or similar establishment, except for brewpubs
- Performing arts, amusement or gaming activities
- Providing educational, health care, social or other similar service
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The SBVC share proceeds must be used within the holding period (three years from the date shares issued) for the purposes approved in the application. The SBVC share proceeds cannot be used for any of the following purposes:
- To invest outside Manitoba
- To lend to others
- To pay for a business re-organization
- To pay a dividend or return capital to a shareholder
- To pay an amount owing to a shareholder, an affiliate, or a person related to a shareholder or affiliate
- To purchase, develop or maintain land or equipment for sports
- To support an ineligible activity
- To support an activity that does not promote economic development or is contrary to public policy
grant_eligibility_criteria|zone
The eligible geographic zone for this grant is Manitoba, Canada. The eligible companies must have a permanent establishment within the province.
- Must be a Canadian Controlled Private Corporation (CCPC) with a permanent establishment in Manitoba
- At least 25% of the company's employees must reside in Manitoba
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There are no explicit evaluation and selection criteria outlined for the Small Business Venture Capital Tax Credit program. However, applicants must meet several eligibility requirements to issue shares under the program.
- A Canadian Controlled Private Corporation (CCPC) with a permanent establishment in Manitoba;
- All or substantially all assets used in active business;
- All or substantially all revenue generated from active business;
- At least $25,000 cash equity already invested;
- An annual revenue of less than $15 million or less than 100 full-time equivalent employees;
- At least 25% of employees reside in Manitoba;
- Not a Reporting Issuer as defined in The Securities Act (Manitoba);
- Previously issued less than $10 million in eligible shares either on its own or combined with an affiliated company.
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- Step 1: Visit the application form link: www.gov.mb.ca/jec/busdev/financial/sbvctc/index.html
- Step 2: Download and complete the application form.
- Step 3: Gather the following additional information and documents:
- A copy of the applicant's most recent annual financial statements
- A copy of the applicant's most recent income tax return and notice of assessment issued by Canada Revenue Agency (CRA)
- A copy of the terms and conditions that will apply to the shares being issued, including any ownership restrictions
- A description of the proposed use of the SBVC share proceeds
- For start-ups, a letter from the applicant’s Legal Counsel or Accountant in a form acceptable to the Department
- Step 4: Submit the completed application form and additional documents to the following address or email:
- Address: SBVC Tax Credit Program, Economic Programs Branch, Suite 1010 – 259 Portage Avenue, Winnipeg, Manitoba R3B 3P4
- Email: ecdevprograms@gov.mb.ca
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The program's information includes details about required submissions, eligibility criteria, and penalties for non-compliance.
- Applications for the SBVC tax credit program can be submitted online or via email.
- An application must include recent annual financial statements, income tax return, notice of assessment, terms and conditions for shares, and a description of proposed use of proceeds.
- The program requires a minimum investment of $10,000 per investor while the maximum investment eligible for the tax credit is $500,000 per company.
- The tax credit is non-refundable and can be carried forward for up to ten years or back for three years.
- Shares must be held for a minimum of three years, during which prohibited uses include investing outside Manitoba or paying dividends to shareholders.
- Certain business activities such as professional services, leasing, and farming are ineligible for the program.
- Approved applicants must file an annual information return including financial statements and a questionnaire for program effectiveness evaluation.
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ecdevprograms@gov.mb.ca
204-945-2475
Apply to this program
Small Business Venture Capital Tax Credit
The Small Business Venture Capital Tax Credit (SBVCTC) offers a non-refundable Manitoba tax credit of up to 45% for individuals and corporations investing in eligible Manitoba enterprises. This program aims to help Manitoba-based companies raise equity from high-net-worth individuals with a minimum investment threshold of $10,000 per investor.
Detailed Explanation of the Small Business Venture Capital Tax Credit (SBVCTC)
The Small Business Venture Capital Tax Credit (SBVCTC) program is a vital initiative designed to support economic growth and development in Manitoba by providing financial incentives to investors. This program encourages investment in small businesses, which are often the backbone of the local economy, by offering a significant tax credit of up to 45% to individuals and corporations who acquire equity capital in eligible Manitoba enterprises.
Eligibility Criteria for Corporations
To be considered eligible under the SBVCTC program, the corporation must meet several stringent criteria to ensure genuine economic activities and substantial local impact:
- Canadian Controlled Private Corporation (CCPC): The business must be a CCPC with a permanent establishment in Manitoba.
- Active Business Assets and Revenue: All or substantially all of the corporation's assets must be employed in active business, and a similar proportion of the corporation's revenue must come from active business.
- Initial Cash Equity: The corporation must have at least $25,000 in stated capital prior to issuing eligible shares.
- Size of the Business: The corporation should either have 100 or fewer full-time equivalent (FTE) employees or annual revenues of less than $15 million.
- Local Employment: At least 25% of the corporation's employees must reside in Manitoba.
- Non-Reporting Issuer: The corporation should not be a Reporting Issuer as defined under The Securities Act (Manitoba).
- Issuance Limit: The corporation must have issued less than $10 million in eligible shares under the program within its lifetime, considering all affiliates.
Investment Details and Investor Eligibility
Investors, whether individuals or corporations, have specific eligibility criteria and investment limits under the SBVCTC program:
- Minimum Investment: Investors must invest a minimum of $10,000 to be eligible for the tax credit.
- Maximum Investment and Tax Benefits: The maximum investment eligible for tax credits per investor per company is $500,000, which translates to a maximum potential tax credit of $225,000. Investors can claim up to $120,000 in tax credits in a single tax year, with the ability to carry forward unused tax credits for up to ten years or carry back for three years.
- Eligible Investors: Investors must not have been a specified shareholder (owning 35% or more of any class of shares either directly or indirectly) of the corporation in the past 24 months.
- Accreditation or Risk Acknowledgement: Investors must be accredited or provide a signed Acknowledgement of Risk Form.
- Share Restrictions: The shares must be new general or preferred shares, and they should not be redeemable, sellable, or transferable for three years to qualify for the tax credit.
Application and Approval Process
Corporations seeking to benefit from the SBVCTC program must follow a thorough application process:
- Pre-Approval Requirement: Approval must be obtained before issuing any shares or receiving any cash investments.
- Application Documentation: The application must include the most recent annual financial statements, latest income tax return and notice of assessment from the CRA, detailed terms and conditions of the shares being issued, and a proposed use of SBVC share proceeds. Start-ups must include a letter from legal counsel or an accountant.
- Submission: Applications can be sent to the Economic Programs Branch located at Suite 1010, 259 Portage Avenue, Winnipeg, Manitoba. The detailed application form can be found on the official Manitoba Economic Development website.
Use and Prohibited Use of SBVC Share Proceeds
The proceeds from SBVC shares must be used in ways that align with economic development goals and the program’s regulations:
- Approved Uses: Proceeds should be directed towards initiatives that are intended and approved as per the application, such as business expansion, research and development, or other business activities generating active revenue.
- Prohibited Uses: The proceeds cannot be used for purposes such as investing outside of Manitoba, lending to others, paying dividends or returning capital to shareholders, settling debts with related parties, or activities that do not promote economic development or contravene public policy.
Annual Reporting and Compliance
During the three-year holding period, approved corporations are required to submit annual reports to ensure compliance and continued eligibility:
- Financial Statements: The annual report must include financial statements prepared, reviewed, or audited by a professional accountant who is not employed by the issuer.
- Information Returns: Issuers must submit an information return including a questionnaire that evaluates the program’s effectiveness.
Penalties and Share Transfers
Non-compliance with the SBVCTC program’s rules and misuse of share proceeds can result in substantial penalties:
- Transfer Restrictions: Eligible shares cannot be transferred during the three-year holding period, except under specific conditions such as the investor’s death or comprehensive share purchase agreement, otherwise a penalty of up to 45% of the share proceeds may be imposed.
- Penalties for Misuse: If the approved corporation fails to use the proceeds in compliance with the regulatory requirements, a penalty equivalent to 45% of the proceeds will be assessed by the Administrator.
By fostering capital investment in small businesses, the SBVCTC program plays a crucial role in stimulating the Manitoba economy, driving job creation, and supporting the growth of local enterprises. Interested corporations and investors are encouraged to thoroughly review the program guidelines, seek professional advice, and carefully prepare their applications to maximize the benefits offered by this generous tax credit initiative.