New Small Business Tax Deduction

By mmuise

Nova Scotia corporate tax reduction for new small businesses is a tax reduction that applies to the first three tax years of an eligible corporation.

Comments on Funding:

New small businesses have their first three years income tax reduced. The tax reduction is based on the portion of an eligible corporation's taxable income earned in the year in Nova Scotia.

Deadline: Rolling deadline

Applicants must:

  • be a Canadian-controlled private corporation incorporated in Nova Scotia, or be a corporation incorporated outside the province, but inside of Canada, that:
    a) pays at least 25% of its wages to employees who are resident in the province, b) has its head office in the province,
  • be eligible for the federal small business deduction for the tax year,
  • have at least two employees, one of whom must not have less than 1,300 total paid hours of employment in a 12-month period, or an equivalent amount prorated for a short tax year,
  • not be in a partnership or a joint venture with an ineligible corporation(s),
  • not be a beneficiary of a trust where any beneficiary is ineligible,
  • not be a previous active business with essentially the same owner(s) or related owner(s),
  • not be a professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor,
  • not be a business carrying on the same, or substantially the same, business activity as was carried on as a sole proprietorship, partnership or corporation.
Application Steps:

Applicants must:

1. File their corporate income tax return and Schedule 341 with the Canada Revenue Agency (CRA). 2. Complete the application form (applicants can apply annually for up to 3 years). 3. Include their company's corporate income tax return for the relevant taxation year (including Schedule 341). 4. Send the completed application and supporting documents by email to the New Small Business Tax Deduction Administrator. 5. Adjust their corporate income tax return to claim the New Small Business Tax Deduction after they get their Eligibility Certificate.

Applicants can apply at the end of each of their corporation's first 3 tax years or they can apply for up to 3 years after their corporation's year end for the specified tax years.

Documentation Needed:

The applicant must submit:
1. the corporate income tax return and Schedule 341;
2. the completed application form;
3. the eligibility certificate.

Other Things to Note:

Page last updated 2019-08-13
Application Form: Last Updated on August 2023.

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