Canada: The Alberta Investor Tax Credit

Last Updated: April 12 2017
Article by Rhea Solis and Robyn Enslen

Introduction

On January 1, 2017, the Investing in a Diversified Alberta Economy Act (the "Act") came into force. The Act is part of the Alberta Jobs Plan, and its objectives are to boost investment in Alberta's small and medium-sized businesses, drive innovation, diversify the economy and create new jobs. The Act pursues these objectives by way of three tax credit initiatives: the Alberta Investor Tax Credit (the "AITC"), the Capital Investment Tax Credit, and the Community Economic Development Corporation Tax Credit. The Act is a first for Alberta and is modeled on similar legislation that has been successful in generating investments for several years in other provinces, such as British Columbia and Ontario.

The following discussion focuses on the AITC. It contains an explanation of the tax credit based on the content of the Act, the AITC Regulations (the "Regulations"), the AITC program guidelines and the legislative debate in relation to the Act.

The AITC is intended to bring Alberta investors and small businesses together. The AITC offers a 30% tax credit for investments made in eligible Alberta businesses by individuals or corporations. The credit is available retroactively starting April 14, 2016.1 It has been estimated that this credit will support up to 4,400 new jobs over three years and contribute up to $500 million to Alberta's GDP.2

The AITC is available for investments in "non-traditional" sectors of Alberta's economy. In particular, it is aimed at small Alberta businesses substantially engaged (at least 50% of the business activities) in eligible business activities (the "Eligible Business Activities"), namely:

  • tourism activities;
  • research, development and commercialization of proprietary technologies;
  • development of interactive digital media in Alberta; and
  • post-production, visual effects and digital animation.

The AITC has an aggregate budget over three years of $90 million and is offered on a first-come, first-served basis. Once the budget is allocated, the program will no longer be offered.

Eligible Investors

Eligibility for investors is limited to individual and corporate investors who pay personal or corporate taxes in Alberta. In addition, the investor must meet the definition of "eligible investor" in section 35.01 of the Alberta Personal Income Tax Act ("Section 35.01") for an individual or Section 5 of the Alberta Corporate Tax Act ("Section 5") for a corporation.

a) Individuals

Under Section 35.01, the term "individual" does not include an estate or a trust. In addition, Section 35.01 specifies that the maximum tax credit that an individual investor may receive under the AITC is $60,000 per taxation year (derived from a $200,000 investment). The tax credit is refundable and may be carried forward for up to four years.

b) Corporations

A corporation is eligible under Section 5 if it has a permanent establishment in Alberta. There are many ways to demonstrate a permanent establishment in Alberta, including, but not limited to: having a fixed place of business, including an office, a branch, a mine, an oil well, a farm, a timber land, a factory, a workshop or a warehouse in Alberta. There is no maximum credit for a corporation, however, the maximum a corporation is able to directly invest in a single company is $5 million. The tax credit is non-refundable and may be carried forward for up to four years.

Eligible Investments

Individual and corporate investors have the option of investing directly into an Eligible Business Corporation ("EBC") or investing indirectly into an EBC by purchasing equity in a Venture Capital Corporation ("VCC"). The investment into the EBC or VCC must be held for at least five years from the date of share issuance, otherwise the tax credit may be revoked. This holding period is intended to ensure the business has the capital for an appropriate length of time so that it may be used for operations and growth.

a) Eligible Business Corporation

There are several requirements for a corporation to register as an EBC, some of which are:

  • carry out an Eligible Business Activity;
  • be incorporated or continued under the Business Corporations Act (Alberta);
  • be a "small business", which is a corporation that has no more than 100 employees and affiliates;
  • have equity capital of at least $25,000;
  • have more than 80% of its assets located in Alberta; and
  • make payment of wages to employees who report to work in Alberta,
    1. if the small business is engaged in the export of goods from Alberta or the provision of services outside of Alberta, at least 50% of the wages, or
    2. for all other small businesses, at least 75% of the wages.

b) Venture Capital Corporations

VCCs may invest in small businesses that conduct business in any of the Eligible Business Activities, but are not registered as EBCs. There are several requirements that a VCC must meet in order to be registered, some of which are:

  • be incorporated under the Business Corporations Act (Alberta);
  • not have previously carried on business;
  • 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
  • have articles of incorporation that restrict the VCC's business to assisting the development of eligible small businesses.

Businesses who wish to benefit from investments made under the AITC initiative must apply for the AITC as either an EBC or a VCC. Businesses wanting to qualify as an EBC or VCC should apply for the AITC as soon as possible so they may begin raising capital before the maximum budget is reached. Once registered, the Minister will issue a certificate of registration, which will allow the corporation to raise capital under an available exemption from the prospectus requirement set out in the Securities Act (Alberta).

Capital Raising

There is no minimum investment required by the AITC program, and both individuals and corporations are able to invest under the AITC. Eligible investors include:

  1. 'accredited investors' as defined in National Instrument 45-106 Prospectus Exemptions ("NI 45-106");
  2. a 'family, friend and business associate' of a director, executive officer or control person of the corporation, or of an affiliate of the corporation;
  3. corporate investors that invest not less than $150,000 paid in cash; and
  4. individuals that are not 'accredited investors' or a 'family, friend and business associate', provided the corporation meets the requirements for a prospectus exempt investment as set out in NI 45-106.

Footnotes

1 Investments may be retroactively eligible for the AITC, however, the business that has received the investment must register with the program in 2017 and must meet all program terms and criteria.

2 Hansard, November 23 p 1993.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Rhea Solis
Robyn Enslen
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.