Nova Scotia innovation equity tax credit

• Individual investors may receive a non-refundable income tax credit of 35% or 45% of their eligible investment, depending on the business sector, with a maximum annual eligible investment of $250,000 and a corresponding maximum annual tax credit of $87,500 (35%) or $112,500 (45%).
• Corporate investors may receive a non-refundable income tax credit of 15% on eligible investments, with a maximum annual eligible investment of $500,000 and a corresponding maximum annual tax credit of $75,000.
• Each eligible investment must be a minimum of $1,000 for individuals and $50,000 for corporate investors.
• The tax credit is non-refundable; unused portions may be carried forward for up to 7 years or carried back for 3 years (specific to tax year start dates).
• Funds raised by an approved corporation through all specified issues must not exceed a total of $5 million.

• The applicant must be a Canadian Controlled Private Corporation carrying on business in Nova Scotia and registered in Nova Scotia.
• The company must have been incorporated less than 10 years ago and have its head office in Nova Scotia.
• The company must have fewer than 100 employees and less than $15 million in assets (including associated corporations).
• The company must be developing or implementing new technologies, or applying existing technologies in a new way to create new products, services, or processes.
• At least 50% of the company’s remuneration must be paid to employees or full-time contractors who are residents of Nova Scotia and report to or deal with a permanent establishment in Nova Scotia.

Who is eligible?

• Small and medium-sized corporations engaged in innovative activities
• Companies developing or implementing new technologies
• Businesses applying existing technologies in new ways to create new products, services, or processes
• Enterprises in the oceans technology sector
• Enterprises in the life sciences sector

Who is not eligible

• Companies whose main activities are construction, real estate development, leasing or selling property, or hotel ownership and management.
• Businesses primarily engaged in retail (including food and beverage services).
• Firms involved in oil or gas exploration, development, or production.
• Companies active in the film industry or those receiving Film Industry, Digital Media, Digital Animation, or Capital Investment Tax Credits.
• Professional practices such as accountants, lawyers, dentists, doctors, veterinarians, and chiropractors, incorporated for self-regulated activities.

Eligible expenses

• Business activities of the approved corporation in Nova Scotia.
• Hiring expertise or purchasing materials and equipment that cannot be sourced in Nova Scotia (if necessary to obtain outside the province).
• Purchase of land required for the corporation's active business.

Eligible geographic areas

• Companies carrying on business in Nova Scotia and registered in Nova Scotia.
• Companies with their head office in Nova Scotia.

• Step 1: Application for Approval (Certificate of Registration)Download and complete the application form from the Nova Scotia Department of Finance and Treasury Board website.
• Obtain signatures from an authorized officer of the applicant corporation (electronic signatures are accepted).
• Prepare and attach the following documents:Financial statements (for the previous tax year), with review engagement report or auditor’s report for the applicant corporation and all associated corporations (not required if recently incorporated).
• T2 Corporate Income Tax Returns for the applicant corporation and all associated corporations (not required if recently incorporated or in first tax year).
• Up-to-date and notarized shareholder register with complete share transaction history.
• Corporate chart/structure (if applicable).
• Shareholder agreements (if any).
• Debenture agreements (if any).
• Proposed investor forms for all eligible investors (available on the Department’s website).
• A brief business plan (2-3 pages max), including business activities, technology development/application, funding use plan and timeline, directors’ list, and total amount raised to date.
• Certificate of incorporation, constitution/articles of incorporation, and memorandum of association (unless previously submitted and unchanged).
• Submit the complete application package by email to the IETC administrator (paper copies are not accepted).
• Step 2: Issuance of Eligible InvestmentsUpon approval, receive a certificate of registration specifying the eligible period for raising funds.
• Issue eligible investments (common voting shares, eligible preferred shares, or eligible convertible debentures) to eligible investors within the certificate’s timeframe.
• Step 3: Application for Tax Credit CertificatesAfter the specified issue is complete, compile required documents:
• Signed statement from an authorized officer (form available on Department’s website).
• Updated and notarized shareholder register.
• Investor Data Report (Excel format, available on Department’s website), listing all eligible investors and investments made during the certificate period.
• Copies of each share certificate or convertible debenture issued to eligible investors, showing terms.
• Signed statements from each eligible investor (form available on Department’s website).
• Proof of payment from each eligible investor (amount and date of investment).
• Send the application for tax credit certificates by email to the IETC administrator (no paper copies accepted), as soon as possible and within 6 months after the expiry date on the certificate of registration.
• Step 4: Submission of Annual ReturnsFor each of the 4 years after expiry of the certificate of registration, submit an annual return within 6 months of the approved corporation’s tax year end.
• Annual return should include:
• Annual Report (signed by an authorized officer; form available on Department’s website).
• Up-to-date and notarized shareholder register.
• Financial statements for the previous tax year, with review engagement report or auditor’s report.
• T2 Corporate Income Tax Return for the previous tax year (with forms and schedules).
• Send the annual return via email to the IETC administrator (paper copies not accepted).

• Investors must hold their eligible investment for a minimum of 4 years to avoid tax credit repayment, with specific exceptions such as investor death or amalgamation.
• Funds raised through the IETC cannot be used for prohibited purposes such as lending, acquiring securities, or paying dividends, among others.
• If a corporation’s approval is cancelled, penalties can be imposed up to the total tax credits issued to all eligible investors across all specified issues.
• All application documents must be submitted via email; paper copies are not accepted.