Various jurisdictions offer tax credits for specified venture capital investments.  For example, British Columbia has 30% income tax credit for eligible investments.

Combining this advantage with SR&ED and RRSPs can be cash positive.  For example, let’s say an investor puts $10,000 into his RRSP and receives (in round figures) a $4,000 income tax refund.  So far he is out $6,000, but if he then receives a $3,000 refund from his provincial government because he has used the RRSP’s $10,000 to buy eligible shares of a tech company, he is now only out of pocket $3,000.

The tech company has received the $10,000 investment and if that money is spent on internal SR&ED employee SRED-eligible labour, in Alberta and BC that company can recover $6,800 in SR&ED rebates using the proxy method of filing.   So now, for $3,000 the investor has provided the company with $16,800!  That’s very cash positive.

If you need help in implementing these or similar strategies, feel free to contact us.

Your SRED claim has to answer quite a number of questions on a project by project basis, but the three big ones have to do with what technological advancement(s) were sought through your project (maximum of 350 words), what technological obstacles were faced (maximum of 350 words), and what work was done to reduce the technological uncertainties and achieve the technological advancement (maximum of 700 words).

It is important to focus on technological implications in the answers and not on business strategy issues.