Tax Alert – Alberta

New Tax Credits for a Competitive Alberta

Alberta Minister of Economic Development and Trade Deron Bilous introduced

legislation on Tuesday, November 8, 2016, to create two new provincial tax

credits worth a total of $165 million over three years.

The Capital Investment Tax Credit (CITC) is intended to ensure Alberta is

competitive for large capital investments, and the Alberta Investor Tax Credit

(AITC) is meant to bring Alberta investors and small businesses together.

The CITC offers a non-refundable tax credit of up to $5 million to Alberta

companies involved in manufacturing, processing and tourism infrastructure. The

budget for the CITC is $70 million over two years, with the credit provided on a

competitive basis to companies making eligible capital investments in qualified

property of $1 million or more.

The maximum amount of a corporation’s tax credit is equal to 10% of the capital

cost of each item of qualified property acquired in respect of an approved

investment plan. The approved investment plan will be a document that is

submitted to the Alberta government and must include an economic impact

assessment. Approval of the investment plan will be a prerequisite to receiving

the tax credit.

The amount of the tax credit is calculated as follows:

(The lesser of A or B) multiplied by C; where

A is 10%,

B is 30% minus the percentage of the capital cost of the propertyreceived by the corporation as government assistance, and

C is the capital cost of the eligible capital property

TAX ALERT - ALBERTA

The AITC has three components: Venture Capital Corporation Tax Credits;

Community Economic Development Corporation Tax Credits; and Eligible Business

Corporation Investor Tax Credits.

An eligible business corporation that in any calendar year has raised additional

equity capital can apply to the Minister for a tax credit certificate. This certificate

will entitle each eligible investor to an investor tax credit equal to 30% of the

amount received by the eligible business corporation for the shares that were

part of the additional equity capital and issued to the eligible investor. There will

be no tax credit entitlement where control of the eligible business corporation is

acquired by the eligible investor. Where there is a disposition of a share within 5

years in which a tax credit certificate was issued, the person may have to pay to

the Finance Minister an amount equal to any tax credit received.

The Venture Capital Corporation Tax Credits entitle shareholders to an investor

tax credit equal to 30% of the amount received by the venture capital corporation

from each of those shareholders. The Community Economic Development

Corporation Tax Credits has the same entitlement as that for venture capital

corporations.

Regulations will be introduced that will set out the types of business activities

that will qualify for the credit, but the government has indicated that eligible

businesses will include:

Proprietary technology research, development and commercialization;

Interactive digital media development;

Video game post production;

Digital animation; and

Tourism.

For more details relating to these new tax credits, please contact an MNP tax

specialist in your region.