Venture Capital concerns are heard
On October 20, 2017, the Department of Finance (“Finance”) responded to several concerns raised by the venture capital and angel investor sectors in respect of the proposed taxation of private corporation measures (see CBT’s summary here).
The Government recognized the important role played by venture capital and angel investor sectors in a developing economy and will continue to incentivize further investments in developing businesses.
Family and friends who invest in the early stages of a start-up company take on additional risk that may warrant a relatively high return under a reasonableness standard. Finance repeated its commitment to simplify the proposed income sprinkling measures for family members who contribute to a family business.
Start-up companies that receive venture capital and angel investor funding may build up cash reserves until such time that the funds are needed in the active business. Finance will look for ways to deal with the passive income earned on these reserves.
Finance will address the scope of the new rules with respect to capital gains on the sale of shares in active business companies as it refines the measures to limit the deferral benefits of passive income in private companies.
Information is current to October 20, 2017. The information contained in this release is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.