Direct Equity Tax Credit

📋 Eligible Entities - Individuals investing as shareholders in Newfoundland and Labrador small businesses - Corporations investing as shareholders in Newfoundland and Labrador small businesses - Target investee companies: Small businesses in Newfoundland and Labrador engaged in start-up, modernization, or growth activities - Investee companies must be Canadian-controlled private corporations (CCPCs) or meet provincial small business criteria ### 💰 Funding Details - Tax Credit Rate (North East Avalon region): 20% of eligible investment - Tax Credit Rate (Other regions): 35% of eligible investment - Structure: Non-refundable tax credit applied against provincial income tax liability - Investment basis: Credit is calculated on the amount of capital invested as equity (share purchase) - Repayability: Not a loan; tax credit reduces investor's tax burden only (no repayment required) - Maximum per investment: Varies by program year; verify current limits with provincial authorities ### 🛠️ Approved Expenses The tax credit applies to equity investments in small businesses undertaking: - Start-up activities: Launch of new business ventures - Modernization: Equipment upgrades, facility improvements, technology adoption, process improvements - Growth initiatives: Expansion of operations, market development, capacity increases - Working capital: For businesses supporting operational scaling Note: The credit applies to the equity investment itself, not specific expense categories within the investee business. ### ⚠️ Conditions & Milestones - Investment holding period: Shares must typically be held for a minimum period (commonly 2 years) to qualify; early sale may disqualify the credit - Business location: Investee company must operate and conduct business in Newfoundland and Labrador - Documentation required: Share purchase agreements, corporate records, business plan demonstrating start-up/modernization/growth - Regional classification: Investment must be properly classified as North East Avalon or other region to claim correct credit percentage - Compliance: Investee company must meet employment and operational requirements throughout holding period - Tax filing: Credit claimed on investor's provincial tax