Employee Share Purchase Tax Credit

Overview of the Employee Share Purchase Tax Credit program:

The Employee Share Purchase Tax Credit offers employees (including directors and officers of an eligible corporation) the opportunity to buy into and own a portion of a business under an Employee Share Ownership Plan (ESOP). The aim of the program is to support business growth, facilitate succession planning for family businesses and promote employee participation in business success. Those who buy shares from a registered ESOP will qualify for a partially refundable 45 percent tax credit.

Benefits of the Employee Share Purchase Tax Credit program:

• Employee investments involving succession planning, business takeovers, or buyouts are eligible for a tax credit of up to $202,500 annually (the equivalent of purchasing $450,000 in shares). The first $27,000 of the tax credit is fully refundable to the employee. The remaining amount of the tax credit can be applied to the employees Manitoba personal income tax incurred in the year, in the three years prior to the share purchase year or in the following 10 years, up to a maximum $67,500 annually (less the refundable tax credit).

Eligibility criteria of the Employee Share Purchase Tax Credit program:

• To qualify for this program, the following eligibility must be met:
• The corporation is a Canadian-controlled private corporation
• The corporation has a permanent establishment in Manitoba
• Substantially all of the carrying value of its assets or its affiliates assets are used in an active business,
• The revenue of the corporation and its affiliates is derived principally from active business and not principally from property,
• The carrying value of its assets (including affiliates) is less than $25 million,
• The carrying value of its assets (including affiliates) less its total indebtedness is not more than $10 million.
• At least 25% of total wages and salaries of the corporation are paid to Manitoba residents