The Small Business Venture Capital Tax Credit Program (SBVCTC) will assist eligible small corporations to issue new equity to primarily new investors.
The Small Business Venture Capital Tax Credit Program (SBVCTC) will assist eligible small corporations to issue new equity to primarily new investors. The small corporation will be able to issue from $100,000 up to a limit of $10,000,000 of new equity that will be eligible investments for the SBVCTC. Eligible investors who purchase eligible investments are able to earn a 45 percent tax credit against Manitoba taxes payable. The SBVCTC is not a tax benefit for the eligible corporation.
Eligible investors must invest a minimum of $20,000 during an approval period to be eligible for a non-refundable provincial tax credit. The maximum tax credit that can be earned is $202,500 in provincial tax credits based on a maximum tax credit eligible investment of $450,000. From the $202,500 of earned provincial tax credits, the investor can claim on his or her income tax return an annual limit of $67,500 in provincial tax credits; unused credits can be carried back three years and forward for 10 years.
Terms and Conditions
Eligible small corporations wishing to issue eligible investments must apply, in a form approved by Manitoba Growth, Enterprise and Trade (GET), and receive GET approval to issue shares as eligible investments. Small corporations approved to issue eligible investments will be required to complete an annual return of information for three fiscal years following the issuance of the eligible investments.
The criteria to be considered an eligible small business corporation are as follows:
- must be a Canadian-controlled private corporation
- all, or substantially all, of the carrying value of assets must be used principally in an active business
- business revenue must principally be derived from one or more active businesses that are not ineligible activities
- the small corporation has at least $25,000 in stated capital and also has either:
- 100 or fewer full-time equivalent employees or less than $15 million in gross revenue
- 25 percent of employees are Manitoba residents
- the corporation cannot be a reporting issuer as defined in The Securities Act
- the total equity raised under the SBVCTC program by the corporation and its affiliates is not more than $10 million
In brief, ineligible activities include:
- providing professional services
- providing management, administrative, financial or other similar services
- leasing, developing or selling real property
- exploring for, developing or processing mineral, oil and gas resources
- farming, except for commercial crop production in a climate controlled environment, fishing, hunting or similar activity
- 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 services
If approved to issue shares that are eligible for the SBVCTC, the corporation cannot use the share proceeds for the following purposes:
- invest outside of Manitoba
- lend money
- pay for a business reorganization or merger
- acquire an interest in land
- pay a dividend
- pay an amount owing to a shareholder, or an affiliate or related person of a shareholder
- purchase is at the fair market value in the ordinary course of the seller's business
- support an ineligible activity or repay indebtedness related to an ineligible activity
- purchase, develop or maintain land or equipment used in playing or practicing a sport
- support an activity if, in the opinion of the Minister of Manitoba Growth, Enterprise and Trade, it is contrary to public policy or does not support economic development
Eligible corporations and eligible investors are encouraged to seek legal and tax advice before participating in the SBVCTC program.
The SBVCTC legislation, program guide, regulations and application form are available at www.manitoba.ca.
Manitoba Growth, Enterprise and Trade
Financial Services Branch
1040 - 259 Portage Avenue
Winnipeg, Manitoba R3B 3P4