NLIS 23
March 27, 2003
(Finance)
 

Enhancements to the Direct Equity Tax Credit Program

Finance Minister Joan Marie Aylward today announced that effective April 1, 2003, the Direct Equity Tax Credit Program will be expanded to include investments from arm�s length corporations. These corporations will be permitted to invest in eligible businesses and avail of the tax credit, as individuals do. This will help provide greater access to capital for eligible businesses.

"The Direct Equity Tax Credit Program is designed to encourage investment in new or expanding eligible businesses, create new jobs and diversify the economy," said Minister Aylward. "The program has already been successful in raising new capital from individuals, and the new program enhancement will build upon that success by making additional capital available from corporate investors."

Under the Direct Equity Tax Credit Program, an eligible investor who purchases new shares in a qualifying business is entitled to a tax credit of 35 per cent of investment for qualifying activities that take place outside the Northeast Avalon, and a rate of 20 per cent for qualifying activities that take place inside the Northeast Avalon. Qualifying activities are associated with growth areas of the economy.

Media contact: Josephine Cheeseman, Communications, (709) 729-0329.

Effective April 1, 2003, the Direct Equity Tax Credit Program will be expanded to include investments by arm�s length corporations. Currently, individuals are eligible for an investment credit, in the form of a provincial personal income tax credit, if they invest as shareholders in eligible businesses and keep their investments in those businesses for at least five years. Eligible activities would be associated with designated growth sectors.

Designated growth sectors are:

• technology
• aquaculture
• manufacturing
• export
• tourism
• research and development
• forestry and agrifoods
• processing
• import replacement
• cultural industries

Business activities that are not eligible include:

• incorporation of an existing business
• wholesale and retail trade
• food and liquor establishments
• personal services, business services,professional practices and trades
• real estate marketing and development
• oil and gas development and production
• mineral resource exploration
• financial services
• fish harvesting and primary fish
• processing, except the processing of
• underutilized species

There are two tax credit rates. For qualifying activities undertaken in the province outside the Northeast Avalon, a 35 per cent rate applies. For qualifying activities undertaken within the Northeast Avalon, a 20 per cent rate applies. In cases where qualifying activities are undertaken in both areas, a reasonable proration applies.

Under the enhanced program, corporations would be eligible for the tax credit respecting the purchase of newly issued common voting shares of an eligible business with which it deals at arm�s length. For the purpose of this program, arm�s length has the same meaning as section 251 of the federal Income Tax Act.

Further information on the program can be found at //www.gov.nl.ca/fin/direquity.html

2003 03 27                                       3:45 p.m.