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What is an Apprentice Tax Credits?

November 19, 2013

Tax Question:

What is an Apprentice Tax Credit?

Facts:

There are two Apprentice Tax credits that a corporation can apply for:

  1. One Federal
  2. One Provincial
 

The purpose of the credits is to encourage employers to hire new apprentices, thereby creating jobs and addressing an anticipated skills shortage.

Discussion:

In 2006 the Federal Budget introduced the Apprenticeship Job Creation Tax Credit. An eligible apprenticeship is someone who is working in a “Red Seal” trade for the first two years of their apprenticeship contract. The credit provides a non-refundable tax credit equal to the lower of $2,000 or 10% of the apprentices’ salaries or wages.

A corporation must claim the credit within 18 months of the corporation’s year-end. A similar Training Tax Credit was introduced by the BC government effective January 1, 2007. Again the apprenticeship must be an eligible one. However, the trade is not restricted to Red Seal trades. An eligible training program is one administered by the BC Industry Training Authority. There are three main elements to the BC provincial credit:

  1. Basic credits –  for each of the first two years of a non-Red Seal program the corporation can claim the lower of $4,000 or 20% of eligible wages or salaries.
  2. Completion credits – Additional credits are available for those apprenticeships that have completed a third and fourth year of their Red Seal or non-Red Seal programs. The credit in year three is the lower of $2,500 or 15% of salary and wages. The credit in year four is the lower of $3,000 or 15% of salary and wages.
  3. Enhanced credits – these are available for apprenticeships that are First Nation individuals and hold Status Indian cards or those who are eligible for the disability amount on their personal tax return. These credits can be claimed in addition to the basic or completion credits and can range from $1,000 to $6,000 depending on whether the apprentice is a Red Seal or non-Red Seal program and what year of the program is being claimed.
 

The credit must be claimed by the corporation within 36 months of the corporation’s year-end.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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