Labour-sponsored Venture Capital Corporation - Tax Credits

Tax Credits

To encourage Canadian retail investors to invest in LSVCCs, the federal government and some provincial governments offer tax credits. Currently, the federal government offers investors in LSVCCs a 15% tax credit on a maximum investment amount of $5,000 per year – worth up to $750. Some provinces offer a further 15% tax credit on top of that. Together that can add up to $1,500 in tax breaks. In total, a $5,000 investment would cost $3,500 when you take the tax credit into account.

An additional 5% tax credit is available to Ontario investors who purchase certain research-oriented LSVCC – a kind of specialty LSVCC dealing mostly in research-oriented small companies.

The Ontario government had announced plans to gradually discontinue its 15% tax credit. It was to remain in place through the 2008 tax year, and would then be phased out over the subsequent three years.

However, the Ontario Government’s recent decision to extend the retail venture capital tax credit program for an additional year is a positive development for LSVCCs in Ontario. This improvement will now allow tax credits for investors in retail venture capital funds to March 1, 2012. In addition, the Ontario provincial government is proposing to increase the maximum investment eligible for an Ontario tax credit from $5,000 to $7,500.

If an investor chooses to buy an LSVCC in their RRSP, they would obtain the LSVCC tax credits as well as the tax deduction they receive each time they contribute to their RRSP.