Company: VCC Tax Credits
Website: NA
Stock Symbol: NA
Date Published: Sep 11, 2014
Transcript: Available

Video Transcript:

I’m Samantha Deutscher for InvestmentPitch Media

With most investors looking for ways to save taxes, today we are going to look at Venture Capital Corporations, and the significant tax advantages they offer investors living in British Columbia.

The B.C. Government recognizes that creating new small businesses and expanding existing ones adds new jobs and contributes to a growing economy.

To help small businesses access early-stage venture capital, the government has established venture capital programs, which register and regulate Venture Capital Corporations or VCCs as they commonly known.

The sole purpose of a VCC is to invest in one or more eligible start-up, emerging or expanding small businesses, providing an individual or corporation who invests in the VCC a 30% tax credit.

An individual, who is resident in British Columbia, may invest up to $200,000 in one or more VCCs in one year, and claim up to $60,000 in tax credits.

If the shares were purchased in the first 60 days of the year, an investor has the option of allocating the tax credits over both years.

The good news for individual investors is that after they apply the tax credit to cover any taxes payable, any excess amount is refunded directly to the individual.

Unfortunately for corporate investors, the tax credit can only be used to reduce taxes and is not refundable.

However, both individual and corporate investors have the option to carry forward any unclaimed tax credit for 4 subsequent years.

An individual investor can also deposit the VCC shares into an RRSP or spousal RRSP.

The investor can also have an RRSP buy the shares directly, in which case the 30% tax credit is received personally, tax-free, outside of the RRSP.

This means that a B.C. taxpayer, in the top marginal tax bracket, who invests $100,000 in a VCC receives both a $30,000 tax credit and approximately $45,000 for the RRSP deduction, reducing the after tax cost to about 25%.

There is also very little paper work involved to claim the tax credit.

An investor must complete a simple “Share Purchase Report” and attach it to his or her tax return.

Individual investors fill in line 15 or 16 on their T1 Income Tax Return, with corporate investors filling in line 656 on schedule 5 of the corporate T2 Return.

The B.C. Investment Tax Credit Program also covers an Eligible Small Business, or ESB, which has identical tax credits.

Investments in ESBs have a 5 year hold period, whereas VCCs have certain exemptions from this rule.

Please consider this information as only a guideline, and consult your financial advisor or accountant for specific advice.

I’m Samantha Deutscher for InvestmentPitch Media