Programs and Incentives

Small Business Venture Capital Tax Credit

What is the Small Business Venture Capital Tax Credit (SBVCTC)?

The SBVCTC assists Manitoba businesses raise up to $10 million in capital equity by offering their investors a 45 per cent non-refundable tax credit against their Manitoba taxes payable.

 

Benefits to Manitoba individual and corporate investors:

  • Earn a 45 per cent non-refundable tax credit against your Manitoba taxes payable on a minimum investment of $10,000 to a maximum $500,000 per company.
  • Earn a maximum tax credit of $225,000 in a calendar year; and claim a maximum of $120,000 in a tax year.
  • Carry forward any unused tax credits for up to 10 years or carried back for three years. 

Enhancements to the Small Business Venture Capital Tax Credit coming soon:
Manitoba is lowering the minimum qualifying investment level for a tax credit to $5,000 for eligible investors (down from the current $10,000 minimum amount). The SBVCTC will also soon permit investments to be made through limited partnerships, and the program is being expanded to allow eligible Simple Agreements for Future Equity (SAFEs) to qualify for the credit.

 

What type of companies can apply to issue SBVCTC shares?

Businesses that meet ALL of the following criteria can submit an application:

  • is a Canadian Controlled Private Corporation (CCPC) with a permanent establishment in Manitoba
  • does not fall under one of the ineligible activities listed in the SBVCTC regulations (see ineligible activities list below)
  • revenue is generated from an active business and company assets are used in an active business
  • at least $25,000 cash equity already invested in the company (e.g., via previous share purchase or company has stated capital of at least $25,000)
  • annual revenues are less than $15 million or there are less than 100 full-time equivalent employees with the applicant company, and its affiliates, combined
  • at least 25 per cent of employees of the applicant company, and its affiliates combined, reside in Manitoba
  • is not a Reporting Issuer as defined in the The Securities Act (Manitoba)

Note: Small businesses must be pre-approved through the application process before they are able to issue SBVCTC eligible shares. SBVCTC proceeds must be used for approved purposes within three years from the date of issuance.

 

Who can invest in an SBVCTC qualified company?

  • Manitoba taxpaying individuals, or Manitoba taxpaying corporations.
  • Cannot already be a Specified Shareholder; meaning the Investor does not currently, nor has within the past 24 months, directly or indirectly own more than 35 per cent of any specific class of share in the applicant company, and its related (affiliated) corporations, when combined. Please see Specified Shareholder section of the guidelines (page 4) for further details.
  • Cannot have disposed of any capital stock of the applicant company, its affiliates, or its predecessor companies within the past 24 months.
  • Must either be accredited, or sign an Acknowledgement of Risk Declaration.
  • Must not dispose of, or transfer, the SBVCTC investment out of the company for a minimum of three years.

 

How does a company apply to participate?

Companies must be pre-approved to participate in the SBVCTC program before they can qualify to issue a SBVC tax credit to their investors. Applicant companies are encouraged to contact SBVCTC program staff at ecdevprograms@gov.mb.ca should questions arise during application preparation.

Eligible businesses can submit an application, along with the following documents, to ecdevprograms@gov.mb.ca:

1. Collect and prepare the following documents.

  • an independently verified copy of the company’s most recent annual financial statements
  • year-to-date financial statements from within the past three months (can be in‑house statements)
  • a copy of the company’s most recent income tax return and Notice of Assessment issued by Canada Revenue Agency
  • a copy of the company’s Articles of Incorporation and any amendments
  • a summary of the business, including a short description of current business activities and a description of the proposed use of raised share proceeds
  • a copy of the company’s current share registry (including shareholder names, number of shares, class of shares and date acquired)
  • submit unanimous shareholder agreements, if applicable
  • start-up businesses that have not completed a full year of business can submit a start-up letter from legal counsel or an accountant in lieu of annual financial statements and income tax return. See Information on Start Up Letter for New Companies.

 

2. Prepare your application.

  • Fill out the application template.
  • Ensure all questions boxes are answered.
  • Enclose all supporting documents with the application.

 

3. Submit your application and all documents to ecdevprograms@gov.mb.ca.

 

4. If your application is approved, your lawyer or legal representative will continue to work with SBVCTC administrators to obtain the authorization to issue tax credit receipts for each share issuance round on behalf of the company during the company’s approval period. Instructions will be provided to the company and law firm at the time of approval.

 

The review and approval process for new applications takes between four to eight weeks. The program administrator will contact you via email if more information is needed to assess your application for the program.  

 

Before applying, please read the following:

 

Ineligible activities:

A business is ineligible for the tax credit program if its principal business activity falls within any one of the following categories:

  • offers professional services that are regulated by a governing body under Manitoba law
  • provides management, financial, administrative or other similar services
  • provides maintenance services, unless they are provided to persons at arm’s length
  • leases, develops, or sells real estate property
  • explores, develops, or processes oil, gas, or mineral resources
  • farming, fishing, hunting, and similar activities (however, the processing of products from those activities is an allowed activity and is considered eligible. Commercial crop production in a climate-controlled environment is also considered an eligible activity.)
  • owns, operates, or sells franchises
  • operates a restaurant, lounge, bar or similar establishment, unless it has a brew pub endorsement from Manitoba Liquor and Lotteries
  • is engaged in performing arts, amusement or gaming activities
  • offers education, health care, social or similar services

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