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The new Canadian Entrepreneurs Incentive - how can I benefit?

As part of the changes enacted to capital gains inclusion rates, the Canadian government has introduced a new tax incentive for entrepreneurs who sell their businesses. 

But wait - it starts becoming available on January 1, 2025.

What is the Canadian Entrepreneurs Incentive?

The incentive introduces a tax break for entrepreneurs who sell their businesses and realize a gain when doing so. On a lifetime maximum of $2,000,000 in gains, the inclusion rate will be reduced to 33.3%. This will be available to founding investors in specific sectors (these sectors including manufacturing, technology, and construction), who own at least 10% of the shares of the company being sold, where the founding investor has been principally employed by the company being sold for at least 5 years prior to the date of the sale.

When is the Canadian Entrepreneurs Incentive being introduced?

This incentive is set to start in 2025, starting at $200,000. Every year, until 2034, it will increase by $200,000, until it reaches a maximum of $2,000,000.   

Combination of Incentives

When the Canadian Entrepreneurs Incentive is fully introduced, along with the increased capital gains exemption available on the sale of Qualified Small Business Corporation shares, Canadians selling their small business may be eligible to benefit from $3,250,000 of gain that is  partially or fully exempt from income tax. 

Would you like to discuss how this may apply to you? Or how you can plan to ensure that it DOES apply to you?

Book a free consult here.

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