Direct Equity Tax Credit Program (DETC)

he Direct Equity Tax Credit Program (DETC) is designed to encourage private investment in new or expanding small businesses as a means of creating new jobs and diversifying the economy. An investment credit, in the form of a provincial income tax credit, is available to individuals and arm’s length corporations who invest as shareholders in eligible small business activities. There are two tax credit rates. Where the qualifying activities are undertaken in the Province outside the North East Avalon, a 35% rate applies. Where the qualifying activities are undertaken within the North East Avalon, a 20% rate applies. In cases where qualifying activities are undertaken in both areas, a reasonable proration applies. An official tax credit receipt must be submitted with the individual’s T1 Income tax return or the corporation’s T2 income tax return.

Grant Deadline

Deadline not available

Funding Amount

35% of expense

Type of Grant

Tax Credit

Sectors

Fintech, Artificial Intelligence, Arts & Culture, Biotechnology, Clean Tech, E-Commerce, Food Processing, Forestry, Manufacturing, Computer sciences, Technology, Tourism, research and discovery, Med Tech, Community

Demographics

Incorporation

For Profit

Perks

Region Restriction

This grant is restricted to whole of Canada

Keywords

Age Restriction

This grant is age restricted from 18 to 100

Eligibility and Requirements

Eligible Investors

The credit is available to individuals 19 years of age or older who are residents of Newfoundland and Labrador or otherwise paying income tax to the Province and corporations which operate at arm’s length from the eligible business.

The Province of Newfoundland and Labrador in no way guarantees the value of any shares issued by an eligible business. Nor does it in any way express an opinion as to the financial condition of the issuing company or the merits of an investment in shares of the issuing company.

Eligible Investments

Eligible investments are newly issued common voting shares of the corporation that are non-redeemable, non-convertible and not restricted in profit sharing or participation upon dissolution. The shares cannot be eligible for any other tax credit or deduction allowed under the Income Tax Act, except as a deduction for RRSP purposes. The shares must be fully paid for in cash.

In addition, shares are not eligible if the individual investor disposed of any shares of the eligible business at any time after March 22, 2000 and before the specified issue of shares. Shares purchased by a corporate investor are not eligible if that investor disposed of any shares of the eligible business at any time after March 27, 2003. The specified issue of shares refers to those shares that are specified in the business’ s application for a Certificate of Registration as an Eligible Business.

Eligible Businesses

In order to qualify as an eligible business, a corporation shall:

• be a Canadian controlled corporation and not a publicly traded corporation;
• have a permanent establishment in Newfoundland and Labrador;
• have less than $20 million in assets, including associated corporations;
• utilize in the province all of the capital raised from the specified issuance;
• have no more than 50 full time equivalent positions;
• have at least $25,000 of either or both of shareholder equity and shareholder loans before applying for certification; and
• must be engaged in, and will utilize funds for, qualifying activities.

Qualifying Activities

The program is targeted to small businesses engaged in growing areas of the economy, such as:

• technology;
• research and development;
• aquaculture;
• forestry and agrifoods;
• manufacturing and processing;
• export / import replacement businesses;
• tourism; and
• cultural industries.

But not companies whose primary business is, or who intend to use funds raised under this program for, the following:

• wholesale;
• retail;
• food and beverage services;
• personal services, business services, professional practices and trades;
• real estate marketing and development;
• oil and gas development and production;
• mineral resource exploration;
• financial services;
• fish harvesting and primary fish processing (except processing of underutilised species as designated by the Minister); and
• any other activity which in the opinion of the Minister is not in keeping with the spirit and intent of this program.

Grant Application website

https://www.gov.nl.ca/fin/tax-programs-incentives/business/directequitytaxcredit/

Contact

P.O. Box 8700

Main Floor, East Block Confederation Building

St. John’s, NL A1B 4J6

Tel: (709) 729-3166

Email: finance@gov.nl.ca