The Alberta Investor Tax Credit (“AITC”) is a tax credit intended to encourage investment in non-traditional sectors with strong job-creation potential. The AITC offers a 30% tax credit to investors who provide equity capital to Alberta small businesses working on research, development or commercialization of new technology, new products or new processes. The tax credit is also provided to businesses engaged in interactive digital media development, video post-production, digital animation or tourism.
Tax credits are available on any eligible investment made after January 1, 2017 provided the business registers with the AITC program and the business and the investor meet the program requirements.
Applications for tax credits are made through an online portal and are considered on a first-come, first-serve basis. The AITC program remains open to accept applications for tax credits until the annual budget has been fully allocated. Once the annual AITC budget has been allocated, the online application portal will close and reopen at the beginning of the next fiscal year.
Eligible investors can either invest directly in an Eligible Business Corporation (“EBC”) or in an approved Venture Capital Corporation (“VCC”).
Eligible Business Corporation
To be eligible to register under the AITC as an EBC, a business must:
- have no more than 100 employees, including affiliates;
- be incorporated or continued under the Business Corporations Act of Alberta;
- if exporting, pay at least 50% of wages to employees who report to work in Alberta;
- if non-exporting, pay at least 75% of wages to employees who report to work in Alberta;
- have more than 80% of assets located in Alberta; and
- have at least $25,000 in equity capital.
Businesses must also be substantially engaged (at least 50% of the company’s activities) in at least one of the following:
- research, development, or commercialization of new technology, new products or new processes;
- interactive digital media and game products;
- post-production, visual effects and digital animation; or
- tourism activities, such as resorts, skiing facilities, amusement and recreation facilities, hunting and fishing camps, or scenic and sightseeing transportation.
Venture Capital Corporation
To register under the AITC as an VCC, a business must:
- be incorporated under the Business Corporations Act (Alberta);
- have not previously carried on business (cannot be a pre-existing VCC);
- have or will have equity capital of at least $25,000 at the time of registration;
- have a share structure consisting of only common shares that have no special rights or restrictions and/or common shares that have rights or restrictions relating only to the redemption of the shares by the corporation; and
- have articles of incorporation that restrict its business to assisting the development of eligible small businesses.
In order to be eligible under the AITC program, an investor must pay personal or corporate taxes in Alberta and invest in small businesses in Alberta. Both individuals and corporations are able to invest under the AITC program.
In addition, to receive a tax credit for an investment made in an EBC, eligible investors must not:
- have sold or otherwise disposed of shares in the EBC within the previous two years prior to the investment date for which tax credit is requested, or
- own more than 50% of voting shares in an EBC either alone, or in conjunction with, affiliates and/or associates.
Diversity and inclusion supplement
As of February 1, 2019, AITC will offer an additional 5% tax credit to investors who invest in registered EBCs that meet the required diversity and inclusion eligibility criteria, as follows:
- the EBC must have three or more directors;
- the majority of the directors must be under-represented individuals, including those who identify as a:
- member of a sexual or gender minority,
- person of Canadian Indigenous ancestry,
- person with a long-term or recurring physical or mental disability, or
- a person of visible minority;
- the EBC must have a diversity and inclusion policy that is approved by its directors; and
- the approved diversity and inclusion policy must be publicly accessible on the EBC’s website.
The additional tax credit will be available to Alberta investors who make eligible investments after February 1, 2019, in EBCs that are registered with the AITC program and meet all diversity eligibility criteria on the date the investment is made.
Deadline to request tax credit certificates
All tax credit requests are made by the EBC or VCC, as applicable, rather than the investor, and such requests regarding investments made in a calendar year must be submitted no later than 90 days following year end. Therefore, tax credit requests for all investments made into EBCs or VCCs in the 2019 calendar year must be requested by March 31, 2020. For subsequent years, the requests must also be made by March 31 of the following year. (Notwithstanding the foregoing, tax credit requests for all eligible investments made into EBCs or VCCs in the 2017 or 2018 calendar year can be requested until December 31, 2019.)
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