This program has been reviewed as part of Budget 2019: A plan for jobs and the economy and is not accepting applications. More information for previous applicants and program participants will be shared soon.

Overview

The Alberta Investor Tax Credit (AITC) offers a 30% tax credit to investors who provide equity capital to Alberta small businesses doing research, development or commercialization of new technology, new products or new processes. It is also applicable to businesses engaged in interactive digital media development, video post-production, digital animation or tourism.

Businesses interested in registering with the AITC program are required to do so through the online application portal.

Tax credits are available on any eligible investment made after January 1, 2017 provided the business registers with the program and both the business and the investor meet the program requirements.

Starting February 1, 2019, important program changes will come into effect. Learn more about the new:

Eligibility

An investor can either invest directly in an Eligible Business Corporation (EBC), or invest in an Approved Venture Capital Corporation (VCC).

A flowchart detailing how the Alberta Investor Tax Credit works.

Eligible Business Corporations (EBCs)

In order 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
  • 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.

Additional information on eligibility criteria as well as eligible business activities are outlined in the program guidelines.

Publically Traded Companies

The functionality of the program for publically traded companies is currently under review. Publically traded companies interested in the AITC are encouraged to contact AITC program staff to discuss their situation and options prior to registering with the program.

All EBCs registered with the program must be able to provide a complete shareholder register (and/or other information) to demonstrate that:

  • the investor seeking a tax credit has not sold shares in the EBC in the previous 2 years
  • the investor seeking a tax credit does not control more than 50% of the voting rights to the EBC either directly or indirectly through associates and affiliates
  • the investor who receives the tax credit holds their shares for the required 5-year period

Measures to enable publically traded companies to meet these requirements may include:

  • creating and issuing a special class of shares for investors who will be requesting tax credit that cannot be sold for period of 5 years
  • holding shares in escrow or with a broker
  • providing assurance that investors who have received a tax credit still hold their shares
  • providing the AITC program with certifications to confirm that the investor(s) is eligible to receive and hold the tax credit

To be eligible for a tax credit, the equity must be newly issued shares from the small business. Traded shares bought on an exchange are not eligible for the tax credit.

Venture Capital Corporations (VCCs)

In order to be eligible to register under the AITC as a VCC, a business must:

  • be incorporated under the Alberta Business Corporations Act
  • 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
  • have articles of incorporation that restrict its business to assisting the development of eligible small businesses, as directed in the AITC Regulation

View a current list of Approved Venture Capital Corporations.

Investors

Eligibility for investors is limited to investors who 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.

In order to invest into an EBC or VCC, an investor must be considered an “eligible investor” as per:

For an investor to be eligible for a tax credit under the AITC program, the business they are investing in must also be substantially engaged (at least 50% of the company’s activities) in any of the activities described in the program overview above.

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 2 years prior to the investment date for which tax credit is requested
  • own more than 50% of voting shares in an EBC either alone, or in conjunction with, affiliates and/or associates

Diversity and inclusion

Starting February 1, 2019, the AITC program will offer an additional 5% tax credit to investors who invest in registered EBCs that meet the following diversity and inclusion (D and I) eligibility criteria:

  • the EBC must have 3 or more directors (i.e. Board of Directors) as defined by the Business Corporations Act. If the Chief Executive Officer is not a director, they will be counted as such for the purposes of the supplement
  • the majority of the directors (greater than 50%) must be under-represented individuals. This includes the those who identify as a:
    • female
    • member of a sexual or gender minority
    • person of Canadian Indigenous ancestry
    • person with a long-term or recurring physical or mental disability, or
    • person of visible minority
  • the EBC must have a diversity and inclusion policy that is approved by its directors
  • the approved diversity and inclusion policy must be publicly accessible on the EBC’s website

This 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 D and I eligibility criteria on the date the investment is made.

Additional information on the diversity and inclusion supplement, including eligibility and process, is outlined in the program guidelines.

How to apply

The AITC program is a first-come, first-served process. Applicants can fill out and submit their applications through the online application portal. Once the annual AITC budget has been allocated, the online application portal will close and reopen at the beginning of the next fiscal year with a new budget.

For more details on the type of information applicants are required to provide as part of their application for EBC and VCC registration, please refer to:

Step 1. Create a user account and log in through the online application portal

Online application portal

Step 2. Register as an EBC or VCC

Business applicants are required to register with the AITC program through one of the following streams:

  • EBC
  • VCC

To register as an EBC or VCC, the corporation must complete and submit a registration form through the online application portal.

If eligibility requirements are met, a certificate of registration will be provided to the corporation within 30 days of the date of registration.

EBCs and VCCs cannot request tax credits on behalf of their investors until they have successfully registered with the AITC program.

Step 3. Apply for approval to raise additional equity capital

After successful registration with the AITC program, EBCs and VCCs are required to submit applications to raise additional equity capital. Approval will be granted subject to conditions set out in the Investing in a Diversified Alberta Economy Act.

Venture Capital Corporations

Registered VCCs are automatically approved to raise equity capital up to $50,000 (inclusive of the original $25,000 in equity capital).

In order to raise additional equity capital above $50,000, the corporation must apply for approval.

Step 4. Raise equity capital

EBCs and VCCs can solicit investments based on their individual needs. The sooner an EBC or VCC raises equity capital, the sooner they can apply to receive approval for Tax Credit Certificates and ensure allocation from the annual program budget.

The program supports 2 channels of investment. An investor can either:

  • invest directly in an EBC
  • invest indirectly in a small business through the purchase of equity in a VCC

When raising equity capital:

  • an investor is required to purchase shares an EBC or VCC in exchange for Canadian currency
  • any investor (including affiliates) must own less than 50% of the voting shares in the corporation

Equity capital raised under the program by an EBC, or an eligible business receiving an investment from a VCC, can be used to establish, operate and/or expand the business. Equity capital raised under the program cannot be used for:

Eligible Business Corporations

Debt financing and/or in-kind transactions are not eligible for a tax credit; however, shares issued upon the conversion of debt may be eligible if converted at the principal amount remaining. Accrued interest is not eligible for a tax credit.

Venture Capital Corporations

VCCs are permitted to use debt to make an investment into an eligible small business if the debt instrument meets the requirements outlined in Section 1(4) of the Regulation.

Registered VCCs are required to pay an amount of money equal to 30% of all amounts received as equity capital into an Investment Protection Account (IPA).

Once the VCC has made an investment into an eligible small business or plans to use the money to make an eligible investment, the Government of Alberta will authorize a proportionate payment out of the IPA.

VCCs must make timely investments into an eligible business and are required to invest the capital raised within a prescribed period of time. Please see the program guidelines for additional details.

Step 5. Apply for Tax Credit Certificates

Tax Credit Certificates are approved on a first-come, first-served basis until the annual budget is fully allocated.

Registered EBCs and VCCs are required to request Tax Credit Certificates on behalf of their investors for eligible investments.

To request a Tax Credit Certificate, EBCs and VCCs must collect information from their investors to complete the Share Purchase Report, which is accessible through the online application portal.

Once the report is complete, the EBC or VCC will submit it through the online application portal for the issuance of Tax Credit Certificates.

Deadline to request tax credit certificates

As of February 1, 2019, all tax credit requests for eligible investments made in a calendar year must be submitted no later than 90 days following the end of that calendar year. This means that:

  • tax credit requests for all investments made into EBCs or VCCs in the 2019 calendar year must be requested by March 31, 2020
  • tax credit requests for investments made into EBCs and VCCs in subsequent years must be made by March 31 of the following calendar year

To ensure investments made prior to the introduction of this new deadline are not disrupted, tax credit requests for all eligible investments made into EBCs or VCCs in the 2017 or 2018 calendar years must be requested no later than December 31, 2019.

As Tax Credit Certificates are issued on a first-come first-served basis, EBCs and VCCs cannot guarantee that their investors will receive a tax credit. The sooner the EBC or VCC raises equity capital, the sooner they can apply for Tax Credit Certificates on behalf of their investor.

Step 6. Delivery of Tax Credit Certificates

Once a tax credit has been approved, the Tax Credit Certificate will be provided to the EBC or VCC, who will then be responsible for distributing it to their investor.

Registered EBCs and VCCs will be able to access and download their investors’ Tax Credit Certificates through their online application portal user account.

After you apply

How applications will be evaluated

AITC program staff will thoroughly evaluate applications to ensure they meet the eligibility requirements outlined in the Investing in a Diversified Alberta Economy ActRegulation and program guidelines.

Holding requirements

Eligible Business Corporations

Shares issued by the EBC for which a tax credit was approved must be held (not sold, transferred or redeemed) by the investor for 5 years from the date of issuance.

If the shares are disposed of (sold or transferred) by the investor or redeemed by the EBC prior to this date, the tax credit will be revoked and the tax credit must be re-payed.

Venture Capital Corporations

Shares issued by a VCC must not be redeemed by the VCC for 5 years from the date of share issuance.

If the shares are redeemed prior to this date, the tax credit may be revoked and the tax credit must be re-payed.

VCCs must also maintain investments in eligible businesses for a minimum of 5 years from the date of share issuance, and they must invest the capital raised within a specified period of time, as outlined in Section 4(1) of the Regulation and in Step 4 in the program guidelines.

Reporting requirements

Registered EBCs and VCCs must prepare and file an annual report with the Minister of Economic Development, Trade and Tourism within 6 months following their fiscal year end.

The annual report form will be available through the online application portal starting early 2017 and must include the prescribed information as outlined in the program guidelines.

An EBC must comply with this reporting in each of the 5 consecutive fiscal years following the date of its most recent issue of shares as part of the raising of additional equity capital.

VCCs must submit an annual report for each year they are registered with the program.

Additional program details

For more information on the AITC please refer to the:

AITC Forms:

Contact

AITC.program@gov.ab.ca