New Small Business Tax Deduction
NS, Canada
Tax credit for newly incorporated Nova Scotia businesses
grant_single_labels|summary
grant_single|eligibleFinancing
- grant_single|noCondition
grant_single|deadlines
- grant_single|closingDateMay 17, 2024
grant_single|financingType
Tax Credits
grant_single|eligibleIndustries
- grant_single|allIndustries
grant_single|grantors
- Government of Nova Scotia
- Finance and Treasury Board (NB)
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grant_card_status|closed
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This deduction eliminates the Nova Scotia corporate income tax for the first three taxation years of an eligible new small business after incorporation.
grant_single_labels|projects
grant_single|admissibleProjectsExample
$15,000
Truro
Launching a community arts program for underprivileged youth
$35,000
Sydney
Setting up a mobile farmers market to serve rural communities around Sydney
$40,000
New Glasgow
Creating a coworking space for social enterprises
$50,000
Dartmouth
Developing an app to connect freelance creatives with businesses
$30,000
Bridgewater
Launching an eco-friendly clothing line using sustainable materials
grant_single_labels|admissibility
Eligible new small businesses in Nova Scotia can apply for the New Small Business Tax Deduction, which eliminates provincial corporate income tax for the first 3 taxation years after incorporation.
- Qualifies for the federal small business deduction for the applicable tax year and maintained a permanent establishment in Nova Scotia at any time during that year
- Has at least 2 employees (1 employee needs to be unrelated to any shareholder of the corporation)
- Is not in a partnership or joint venture with an ineligible corporation
- Is not a beneficiary of a trust where any beneficiary is ineligible
- Is not a previous active business with essentially the same owners or related owners
- Is not a professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian, or chiropractor
- Is not a business carrying on the same, or substantially the same, business activity that it carried on as a sole proprietorship, partnership, or corporation
grant_eligibility_criteria|who_can_apply
Eligible types of companies for the New Small Business Tax Deduction include new Nova Scotia businesses that meet specific criteria. These businesses must maintain a permanent establishment in Nova Scotia and adhere to certain employee and operational requirements.
- Has at least two employees (one must be unrelated to any shareholder of the corporation)
- Is not in a partnership or joint venture with an ineligible corporation
- Is not a beneficiary of a trust where any beneficiary is ineligible
- Is not a previous active business with essentially the same owners or related owners
- Is not a professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian, or chiropractor
- Is not carrying on the same or substantially the same business activity as a sole proprietorship, partnership, or corporation
grant_eligibility_criteria|who_cannot_apply
Yes, there are specific types of companies that are not eligible for the New Small Business Tax Deduction. These types of companies include professional practices and businesses with certain relationships or structures.
- Businesses in a partnership or joint venture with an ineligible corporation
- Businesses that are beneficiaries of a trust where any beneficiary is ineligible
- Previous active businesses with essentially the same owners or related owners
- Professional practices of an accountant, dentist, lawyer, medical doctor, veterinarian, or chiropractor
- Businesses carrying on the same, or substantially the same, business activity as a previous sole proprietorship, partnership, or corporation
grant_eligibility_criteria|zone
The eligible geographic zone for this grant is Nova Scotia.
- Nova Scotia
grant_single_labels|criteria
Eligibility and selection for the New Small Business Tax Deduction are based on specific criteria related to the business status, employee requirements, and nature of the business. Below are the key evaluation and selection criteria:
- The business must qualify for the federal small business deduction for the applicable tax year.
- The business must have maintained a permanent establishment in Nova Scotia at any time during that tax year.
- The new business must have at least 2 employees, with at least 1 employee being unrelated to any shareholder of the corporation.
- The business cannot be in a partnership or joint venture with an ineligible corporation.
- The business cannot be a beneficiary of a trust where any beneficiary is ineligible.
- The business cannot be a previous active business with essentially the same owners or related owners.
- The business cannot be a professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor.
- The business cannot carry on the same or substantially the same business activity that it carried on as a sole proprietorship, partnership or corporation.
grant_single_labels|register
- Step 1: Ensure Eligibility
- Verify that your business qualifies for the federal small business deduction for the applicable tax year.
- Confirm that your business has a permanent establishment in Nova Scotia during the tax year.
- Step 2: Prepare Required Information
- Gather your CRA Business Number.
- Record your incorporation date.
- List all shareholders and their individual percentage of shares.
- Calculate total hours worked in the tax year by each employee unrelated to any shareholders.
- Determine the percentage of total wages and salaries paid by the corporation in the tax year to employees who are Nova Scotia residents.
- Secure the signature of the authorized signing officer.
- Obtain the corporate income tax return for the relevant taxation year (including Schedule 341).
- Step 3: File Corporate Income Tax Return
- Submit your corporate income tax return and Schedule 341 with the Canada Revenue Agency (CRA).
- Step 4: Complete the Application Form
- Access and download the application form.
- Complete the application form with the required information.
- Step 5: Submit Application
- Submit your completed application and supporting documents by email to the New Small Business Tax Deduction Administrator.
- Step 6: Await Processing
- Wait for approximately 5 weeks for your application to be processed. Note that it can take longer if more information is needed or if the form is not filled in correctly.
- Step 7: Receive Eligibility Certificate
- After receiving your Eligibility Certificate, adjust your corporate income tax return to claim the New Small Business Tax Deduction.
grant_single_labels|otherInfo
This grant provides a corporate tax holiday for the first three years for eligible new small businesses, under specific conditions.
- You can apply for the grant at the end of each of your corporation's first 3 tax years or up to 3 years after your corporation's year end for the specified tax years.
- Applications will be processed sequentially, meaning you can't apply for the 2nd or 3rd year without submitting the previous years' applications.
- It takes about 5 weeks to process your application, but it can take longer if more information is needed or if forms are filled in incorrectly.
- Key documents needed include CRA Business Number, incorporation date, list of shareholders with their share percentages, and corporate income tax return including Schedule 341.
- The grant application must be submitted via email; paper applications are not accepted.
grant_single_labels|contact
Samantha.Thomson@novascotia.ca
902-424-5388
Apply to this program
New Small Business Tax Deduction
The New Small Business Tax Deduction, also known as the Corporate Tax Holiday, offers eligible new small businesses in Nova Scotia an exemption from provincial corporate income tax for their first three taxation years. To qualify, businesses must meet specific criteria, including having at least two employees and maintaining a permanent establishment in Nova Scotia.
Understanding the New Small Business Tax Deduction: A Detailed Guide
Starting a new business involves navigating a plethora of regulatory requirements, including taxation. For entrepreneurs in Nova Scotia, the New Small Business Tax Deduction, also referred to as the Corporate Tax Holiday, can provide significant financial relief during the initial stages of business development. This detailed guide aims to elucidate the eligibility criteria, application process, required documentation, and other pertinent details related to this tax benefit.
Eligibility Criteria
The New Small Business Tax Deduction is designed to support new businesses by easing their tax burden. However, not all new businesses are eligible. To qualify, your business must:
- Be a new Nova Scotia business.
- Have at least two employees, one of whom is unrelated to any shareholder of the corporation.
- Not be in a partnership or joint venture with an ineligible corporation.
- Not be a beneficiary of a trust where any beneficiary is ineligible.
- Not be a previous active business with essentially the same owners or related owners.
- Not be a professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian, or chiropractor.
- Not be carrying on the same, or substantially the same, business activity that it carried on as a sole proprietorship, partnership, or corporation.
Additionally, to be eligible, your business must also qualify for the federal small business deduction for the applicable tax year and maintain a permanent establishment in Nova Scotia at any time during that year.
Application Process
Applying for the New Small Business Tax Deduction involves several steps:
- File your corporate income tax return and Schedule 341 with the Canada Revenue Agency (CRA).
- Complete the application form, which can be downloaded from the official website.
- Include your company's corporate income tax return for the relevant taxation year, which must include Schedule 341.
- Send your completed application and supporting documents by email to the New Small Business Tax Deduction Administrator. Note that paper applications will not be accepted.
It's important to apply at the end of each of your corporation's first three tax years. Alternatively, you can apply for up to three years after your corporation's year-end for the specified tax years. Keep in mind that applications for your second or third year will not be processed until you submit applications for your previous tax years, even if your company was ineligible for those tax years.
Once you receive your Eligibility Certificate, you can then adjust your corporate income tax return to claim the New Small Business Tax Deduction.
Documentation and Information Required
Before you begin the application process, ensure you have gathered the following information and documentation:
- CRA Business Number
- Incorporation date
- List of shareholders and their individual percentage of shares
- Total hours worked in the tax year by each employee unrelated to any shareholders
- Percentage of total wages and salaries paid by the corporation in the tax year to employees who are Nova Scotia residents
- Signature of an authorized signing officer
- Corporate income tax return for the relevant taxation year (including Schedule 341)
Processing Time
The application processing time is approximately five weeks. However, it can take longer if additional information is needed or if the application form has not been filled out correctly. Ensuring that all required information and documentation are complete and accurate will help speed up the approval process.
Contact Information and Support
If you have any questions or need further assistance, you can contact Samantha Thomson, the New Small Business Tax Deduction Administrator, at 902-424-5388 or via email at Samantha.Thomson@novascotia.ca.
Related Legislation and Regulations
The New Small Business Tax Deduction is governed by Section 42 of the Income Tax Act and the New Small Business Regulations. Familiarizing yourself with these regulations will help you understand the finer details of the tax deduction and ensure compliance.
Benefits of the New Small Business Tax Deduction
The New Small Business Tax Deduction offers several benefits to eligible businesses:
- Tax Relief: By eliminating provincial corporate income tax for the first three taxation years, the deduction provides significant financial relief, allowing businesses to reinvest savings into growth and development.
- Encourages Entrepreneurship: The deduction incentivizes new business creation in Nova Scotia, fostering a more vibrant and diverse economic landscape.
- Job Creation: With the requirement of at least two employees, the deduction encourages businesses to hire, thereby contributing to job creation and economic growth in the province.
Common Pitfalls and How to Avoid Them
While the New Small Business Tax Deduction offers valuable benefits, there are some common pitfalls that applicants should be aware of:
- Incomplete Applications: Ensure that all sections of the application form are fully completed and that all required documentation is included to avoid delays in processing.
- Missing Deadlines: Be mindful of the application deadlines and ensure timely submission to avoid missing out on the tax deduction.
- Ineligibility Issues: Review the eligibility criteria carefully to ensure your business qualifies. If you're unsure, consult with a tax advisor or the New Small Business Tax Deduction Administrator for clarity.
Conclusion
The New Small Business Tax Deduction is a valuable opportunity for new businesses in Nova Scotia to receive provincial corporate tax relief during their critical early years. By understanding the eligibility criteria, gathering the necessary documentation, and following the correct application process, businesses can significantly benefit from this program. For any further information or assistance, contacting the New Small Business Tax Deduction Administrator can provide the support needed to navigate this beneficial tax incentive.