Yukon Small Business Investment Tax Credit (YSBITC)

The Yukon Small Business Investment Tax Credit (YSBITC) is a personal income tax credit that reduces Yukon income tax for eligible investors who invest in eligible business corporations making qualified investments.

Eligibility Criteria

Eligible Investors
In order to claim the YSBITC an investors must:

• be a Yukon resident on December 31st of the year in which they claim their YSBITC; and
• be 19 years of age or older.

Eligible Small Business Corporations
Investors must invest in an eligible small business corporation in order to claim the credit. In order to be considered an eligible small business corporation a company must:

• be incorporated;
• be a private corporation (note Registrar's Order 99/38 exempts a SBITC corporation from some registration & filing requirements of the Securities Act . This exemption essentially allows the corporation to publicly advertise for investors. To view and download a copy of the Registrar' Exemption (Adobe Reader required), visit the Web site http://www.economicdevelopment.gov.yk.ca/documents/sbitc-registrar-exemption.pdf
• maintain a permanent establishment in Yukon; have at least 50 percent of it assets (plant, property, and equipment) located in Yukon;
• pay at least 50 percent of its salaries and wages to Yukon residents; and
• not exceed $25 million in total capitalization.

Qualified Investments
The funds raised by an eligible small business corporation must be through one of the following:

• a common share or shares in a corporation (equity) which carry voting privileges;
• a share of a cooperative corporation; or
• debt of a corporation that is:
  1. Subordinated;
  2. does not limit the corporation from additional borrowing;
  3. equal to or less than the equity held by the same investor; and
  4. secured by not more than a floating charge.

In addition an investment will only be qualified if:

• it is bought for cash;
• it is not financed by the corporation;
• the corporation does not redeem shares from shareholders only to resell those shares to the same shareholders so they can claim the credit retroactively;
• investors are at arms length from the corporation (according to the definitions of the Income Tax Act of Canada); and
• cash raised under the YSBITC program is not used to pay dividends; redeem stock; settle an account owed by the corporation to a shareholder or another corporation; make loans; or make payments to persons not at arms length from the corporation.

Active Business Requirement
Corporations applying for a YSBITC certificate on behalf of investors must be active businesses. That is to say they must earn business income. The credit is not available for real estate investment or to earn passive income. For example a business whose principal purpose is to derive rental income would be ineligible. Professional practices of an accountant, chiropractor, dentist, lawyer, medical doctor or veterinarian are also excluded.

Summary

The YSBITC permits eligible investors to claim 25 percent of their investment in an eligible Yukon company as a credit on their individual income tax returns. For example a Yukon taxpayer that invests $1000 in an eligible corporation will be able to claim a credit of $250 on their income tax return. The result is a $250 reduction in the Yukon portion of that investor's personal income tax. The credit is calculated at 25 percent of the value of an investment. Investors are permitted to claim a credit to a maximum of $25 000 per year. In addition, they may carry forward unused credits for seven (7) years, or carry them back 3 years. The credit became available to Yukon investors on July 1, 1999. Credits cannot be claimed nor carried back prior to the 1999 taxation year. The Minister of Economic Development can issue a total of $1 million in credits per year. Credits are issued on a first come first served basis.

Application Packages
To view and download a copy of the YSBITC Application Form (Adobe Reader required), visit the Web site http://www.economicdevelopment.gov.yk.ca/documents/sbitc-application.pdf

Application packages are also available from the Department of Economic Development (see contact information below).

Additional Information
For more information, please visit the Web site http://www.economicdevelopment.gov.yk.ca/general/sbitc.html

Yukon Contact(s):
Mr. Bob Snyder
Business Facilitator
Business and Trade Branch
Department of Economic Development
Government of Yukon
P.O. Box 2703
Whitehorse, Yukon  Y1A 2C6
Telephone: (867) 667-3014
Fax: (867) 393-6252
Toll-free (information): (In Yukon) 1-800-661-0408, local 3014
E-mail: bob.snyder@gov.yk.ca