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Apr 35 min read

A List of Small Business Tax Credits & Grants in Canada





Do you know that 99.8% of Canadian businesses are small and medium enterprises (SMEs)? SMEs play a vital role in innovation and job creation, and are often considered the backbone of the economy.


These types of businesses can range from small solo projects, mom and pop shops, up to larger companies with up to 499 employees. Running a small business in Canada can be rewarding, but it also comes with its own set of challenges. Fortunately, a variety of tax incentives and funding opportunities are available to help you thrive.


This article will explore tax credits and grants for small businesses in Canada. When used wisely, they can maximize your savings and give your business a much-needed financial boost.


What Are Tax Credits & Tax Deductions?


Tax credits differ from tax deductions (also known as “write-offs”).  Tax credits directly reduce the amount of tax owed, whereas tax deductions reduce the amount of taxable income subject to taxation. 


Tax credits can be refundable or non-refundable:


  • Refundable tax credits can result in a tax refund if they exceed your tax liability. 

  • Non-refundable credits, on the other hand, will offset your tax bill with no refunds issued for the excess amount.


Some tax credits can even be carried forward or backward to previous or future tax years, providing additional financial flexibility for your business. Being tax-savvy is a huge asset for any business, and understanding both credits and grants could save you thousands of dollars.


Let's dive into our lists, where you'll be able to find the best credits for your business to take advantage of.


List of Small Business Tax Credits for Canadian Businesses


Here’s a list of federal tax credits applicable to businesses in Canada:


  • GST/HST Input Tax Credit allows you to recover a portion of the Goods and Services Tax/Harmonized Sales Tax that you paid on business purchases.

  • You may be able to claim an Investment Tax Credit (ITC) when you invest in capital property like buildings, machinery, and equipment used for qualified activities in certain areas of Canada.

  • The Scientific Research and Experimental Development (SR&ED) Tax Credit is an ITC that applies if you conduct scientific research and development activities in your business. The basic rate is 15% of expenditures and can go as high as 35% for Canadian-controlled private corporations (CCPCs).

  • For hiring and training, the non-refundable Apprenticeship Job Creation Tax Credit (AJCTC) allows you to claim 10% of wages up to $2,000 for each eligible apprentice. It incentivizes businesses to hire and train apprentices in designated trades.

  • If you do business internationally, the Federal Foreign Business Income Tax Credit prevents double taxation on income or profits earned from overseas operations that were already subjected to foreign tax.


In addition to the above, there are also tax credits that support specific industries, such as the Canadian Film or Video Production Tax Credit (CPTC), the Film or Video Production Services Tax Credit (PSTC), and the Canadian Journalism Labour Tax Credit.


You can visit the website of the Canada Revenue Agency for more information on federal tax credits and to check available provincial and territorial tax credits in your area of business.


What Are Small Business Grants?


Grants are essentially non-repayable funds provided by the government or other funding organizations. These funds are typically awarded for specific purposes, such as undertaking R&D projects, investing in new equipment, expanding, or increasing your business' capacity. 


While grants may come with specific eligibility criteria and reporting requirements, the biggest benefit is that you don't have to pay them back, unlike a loan or investment. In addition, they may provide  other forms of support like mentorship, access to new networks, and publicity.


List of Grants for Canadian Businesses


Canadian small businesses can apply for grants offered by the government and other institutions. Here are some of the options:



You can find more potential grants using Business Benefits Finder, which allows filtering according to industry, location, and other factors. This tool also shows territorial tax credits, and other opportunities for small business owners.


Applying For Small Business Grants In Canada


Many grants are highly competitive, so it's crucial to clearly communicate the value of your project. However, knowing about them is just the first step. Applications can take time and effort, and should be viewed as a valuable investment opportunity.


If you’re applying for a grant, here are a few tips on how to craft an effective application: 


  • First, ensure that you are applying for grants that fit your business’ short-term and long-term goals, and that align with the grant’s requirements.

  • Research the program so you can tailor your proposal and match funder priorities. Ensure that you are speaking to the goals of the grant organization and identifying the ways that your business is specifically suited to achieve them.

  • Follow application guidelines and complete all requirements thoroughly. Attention to detail is key, so sweating the little things is actually a good idea in this case!




Frequently Asked Questions


How Do I Know If My Small Business Is Eligible For A Tax Credit Or Grant?


Make sure to review the eligibility requirements listed by the government agency or organization. The criteria varies depending on the specific program—some target businesses within certain industries, while others may have requirements related to your business size, location, or innovation focus.


Are Grants Taxable Income To A Business In Canada?


Grants received by a business in Canada are generally considered taxable income. However, there are exceptions based on the nature of the grant and how it's utilized within the business. It's advisable to consult with a tax professional to understand the tax implications specific to your situation. Remember that proper record keeping is crucial when it comes to grant funding to ensure compliance with tax regulations.


What Is The $500,000 Small Business Limit?


The $500,000 small business limit refers to the maximum amount of income eligible for the small business tax rate in Canada. Businesses that fall under this threshold can benefit from a lower tax rate, providing them with a competitive edge and allowing for greater reinvestment in their operations.


Are There Small Business Grants In Ontario?


Yes, there are various small business grants available in Ontario to support entrepreneurs and small businesses. These grants can provide funding for specific projects, growth initiatives, innovation, and more. Some grants in Ontario include: Starter Company Plus Program and the Eastern Ontario Development Fund (EODF).


Are There Small Business Grants In Manitoba?


Yes, there are small business grants available in Manitoba to support local entrepreneurs and businesses. You can explore examples of grants in Manitoba here: Manitoba Sport, Culture, Heritage and Tourism Grants.


Does the CRA Offer Small Business Grants?


The Canada Revenue Agency (CRA) does not offer grants directly. However, they provide various tax credits and incentives for small businesses to support their growth, which are listed in our guide above.


Conclusion


Don't underestimate the power of tax planning and optimization, or the opportunities that grants have the potential to provide. The lists above provide a great starting point to find new resources for your business, and you can go a step further by searching for grants specific to your industry. 


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To streamline your business bookkeeping, consider using AI accounting software like ReInvestWealth. Start automating repetitive tasks, identifying eligible tax credits, saving time, and reducing your risk of error.


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