Labour-Sponsored Venture-Capital Tax Credit

Overview of the Labour-Sponsored Venture-Capital Tax Credit program:

The Labour-Sponsored Venture Capital Tax Credit (LSVC Tax Credit) is a provincial tax incentive aimed at encouraging individual residents of Nova Scotia to invest in designated labour-sponsored venture capital corporations (LSVCCs). These investment entities are structured to support small and early-stage businesses in Nova Scotia through equity financing. When a Nova Scotia resident invests in an eligible LSVCC, they receive a non-refundable personal income tax credit equal to 35% of the investment amount, which can be applied against their provincial income tax owing. The maximum annual investment that qualifies for the credit is $5,000, allowing for a maximum tax credit of $1,750 per year. To qualify, investors must purchase the shares directly from a designated LSVCC and must hold the shares for a minimum period of five years to avoid repayment of the tax credit. The program is intended to stimulate the provincial economy by increasing capital available to local startups and small businesses while offering Nova Scotians a tax incentive to take part in this growth. Designated LSVCCs must be approved under the Equity Tax Credit Act and are typically managed by labour organizations or groups that represent employee or community interests. The government maintains oversight to ensure compliance with investment rules and timelines. This credit is in addition to any federal Labour-Sponsored Funds Tax Credit (where applicable), enhancing the value of long-term investments in local economic development.

Benefits of the Labour-Sponsored Venture-Capital Tax Credit program:

• 35% provincial income tax credit, incentivizing local investment
• Opportunity to support early-stage and growing businesses in Nova Scotia
• Can be combined with federal tax credits for greater tax savings
• Designed to stimulate economic development and job creation
• Encourages long-term investment with a five-year holding requirement
• May serve as part of a diversified investment strategy

Eligibility criteria of the Labour-Sponsored Venture-Capital Tax Credit program:

• For Investors:
• Must be a resident of Nova Scotia
• Must invest in a designated LSVCC under the program
• Investment must be newly issued shares, purchased directly from the LSVCC
• Maximum of $5,000 per year is eligible for the credit
• Shares must be held for a minimum of five years to retain the tax credit
• The credit is non-refundableyou must have tax owing to benefit
• For Corporations (to become a designated LSVCC):
• Must apply for designation under the Equity Tax Credit Act
• Must comply with investment rules (e.g., investing in small or growing Nova Scotia businesses)