Tax credits are issued to investors only if the VCC raised the equity capital under a pre-approved authorization from the Investment Capital Branch and is in compliance with the Small Business Venture Capital Act (the “Act”).
Applying for Tax Credits
The VCC is required to report investments received from its investors to our office using the Electronic Tax Credit Application (eTCA) system to be eligible for receipt of tax credits.
Please ensure that all VCC investors complete and sign a Share Purchase Report at the time they purchase shares, and that these reports be retained on file for a period of seven years for audit purposes.
Tax credit certificates will be available on the eTCA system in PDF file format by the end of March of the year following when the investment was made. The VCC will receive an email indicating when the tax credit certificates are available for download from the eTCA system.
The VCC is responsible for distributing the tax credit certificates to its investors.
Share Purchase Report (PDF 89 KB)
Claiming the Tax Credits
A shareholder attaches the tax credit certificate to his/her income tax return filed with Canada Revenue Agency for the taxation year stated on the certificate. A maximum annual tax credit claim differs for corporate shareholders and individual shareholders. However, both may carry forward an unclaimed tax credit amount for four subsequent taxation years.
An individual, referred to in section 2 (1) of the Income Tax Act (British Columbia), who is resident in British Columbia may claim up to $60,000 in tax credits in one year. An individual investor also has the option of claiming a tax credit for the prior taxation year if the shares were purchased in the first 60 days of the year. The amount claimed is applied toward payment of all income tax amounts due to Canada Revenue Agency with any excess refunded directly to the individual.
A corporation, referred to in section 2 (2) of the Income Tax Act (British Columbia), that has a permanent establishment in British Columbia may claim the tax credit to offset British Columbia income tax otherwise payable in a year. The tax credit issued to a corporate investor is not refundable.
If an individual shareholder resides in British Columbia at the date of the subscription for shares and yet resides outside the province at year-end, this may affect the individual's ability to claim the tax credit certificate. Individual shareholders who have moved outside British Columbia or who are planning to move before year-end are urged to consult with their financial advisors about their eligibility to claim the tax credit certificate.
Tax Credit Liability
If the VCC or its investors engage in an ineligible transaction or is in non-compliance with the Small Business Venture Capital Act (the “Act”), the investor may be required to repay the tax credits. Under section 20 (1) of the Act, the VCC and its investors must comply with the following:
no tax credit has been previously allowed or paid for the shares;
the shares, for which the VCC applies for tax credits, are not a type of security that entitles its holders to claim a tax credit against tax payable under the Income Tax Act (Canada) for the purchase of the security; and
the eligible investor shareholders acquire the shares directly from the VCC.
A tax credit certificate issued under the Venture Capital Programs may be revoked by the Administrator of the Act if the Administrator determines that, at the time the tax credit certificate was issued or at a subsequent time, the VCC was in contravention of the Act or the Regulations. A tax credit certificate that is revoked by the administrator is deemed never to have been issued.
Since the consequences of non-compliance can be serious, program users are urged to consult with your legal and financial advisors.
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