Stewart McKelvey

Newfoundland and Labrador does not offer a tax in- centive for digital media. New Brunswick is phasing out its Film Tax Credit. However, in 2011 the province announced consul- tations on the development of a Digital Media Tax Credit. To date no program has been announced. Prince Edward Island does not provide tax incen- tives for film or digital media but does offer a 30 per cent Video Game Labour Rebate for developers of video games. The Prince Edward Island Specialized Labour Tax Credit, discussed below, is also relevant to the digital media industry. EQUITY INVESTMENT TAX CREDITS Nova Scotia offers an Equity Tax Credit to Nova Scotia resident individuals who invest in eligible busi- nesses. The non-refundable credit is calculated as 35 per cent of the investment, to a maximum annual credit of $17,500. Credits can be carried forward seven years or back three years. Pre-approval of eli- gibility must be received from the government before the investment is made. The investor and the business must both meet eligibility criteria in order to qualify for the credit (as is the case in the other provinces). New Brunswick offers the Small Business Investor Tax Credit Program. The tax credit, which is non-re- fundable, is calculated as 30 per cent of investments of up to $250,000 per year (maximum $75,000 credit). Pre-approval of investment eligibility is required. As with Nova Scotia, the credit can be carried forward seven years or back three years. Newfoundland and Labrador calls its program the Direct Equity Tax Credit Program. The credit is non- refundable. A key difference is that the credit is calcu- lated as 20 per cent of the investment up to a maximum credit of $50,000 in the North East Avalon region, and as 35 per cent of the investment, to a maximum credit of $50,000, for investments elsewhere in the province. The credit can be carried forward seven years or back three years. Program pre-approval is required. The Prince Edward Island Share Purchase Tax Credit is a tax rebate of Prince Edward Island per- sonal income tax, calculated as 35 per cent of an eli- gible investment, to a maximum credit of $35,000. Program pre-approval is required. INVESTMENT TAX CREDITS To encourage investment in Atlantic Canada (and the Gaspé Peninsula), the federal Income Tax Act provides investment tax credits ("ITCs") for the pur- chase of new "qualified property" for use in Atlantic Canada. These ITCs are earned at a rate of 10 per cent of the capital cost of the qualified property. The ITCs are partially refundable, and can be carried back three years or forward 20 years. "Qualifed property" includes many types of buildings, machinery and equipment used in certain qualifying industries, in- cluding manufacturing, farming, fishing, logging, and natural resource extraction. Prince Edward Island offers its own 10 per cent ITC in addition to the federal ITCs discussed above. The Prince Edward Island ITC is a non-refundable credit against Prince Edward Island corporate income taxes. The credit is only available with respect to ma- chinery and equipment, not buildings, and can be car- ried forward seven years and back three years. Prince Edward Island also offers an Enriched In- vestment Tax Credit, administered outside of the tax system, that provides a 25 per cent rebate of prov- incial tax to corporations involved in manufacturing and processing that are engaged in "high-productivity applications with a strong export focus." Nova Scotia has a similar grant program outside of the tax system: through its Capital Investment Incentive Nova Scotia will contribute 20 per cent, up to a maximum of $1 million, toward the cost of certain technologically- advanced machinery, clean technology, equipment, software and hardware. SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT ("SR&ED") The SR&ED program is the federal government's key incentive for scientific research and experimental development. In brief, the SR&ED program pro- vides for the deductibility of allowable expenditures on SR&ED activities, and provides ITCs for certain SR&ED expenditures; these ITCs are refundable for small businesses. Nova Scotia, New Brunswick and Newfoundland and Labrador all offer a "top-up" to the federal ITCs for SR&ED. In these provinces the extra credit is a 15 per cent refundable ITC for qualified expenditures incurred in those provinces. Newfoundland and Labrador also offers ITCs to in- dividuals under certain circumstances (in Nova Scotia and New Brunswick the credits are only available to corporations). Prince Edward Island is the only province in Can- ada that does not currently offer ITCs in addition to those offered by the federal government in respect of SR&ED activities. However, Prince Edward Island of- DOING BUSINESS IN ATLANTIC CANADA SPRING 2012 5

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