11 Mar Federal Apprenticeship Job Creation Tax Credit and the BC Training Tax Credit
Federal Apprenticeship Job Creation Tax Credit (“AJCTC”)
The AJCTC is a non-refundable investment tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices in respect of employment after May 1, 2006. The maximum that an employer can claim is a credit of $2,000 per year for each eligible apprentice.
An eligible apprentice is someone who is working in a prescribed trade, which for the federal tax credit is a trade listed as a Red Seal Trade (see red-seal.ca/trades/tr.1d.2s_l.3st-eng.html for a list of Red Seal trades), in the first two years of their apprenticeship contract. This contract must be registered with a federal, provincial or territorial government under an apprenticeship program designed to certify or license individuals in the trade.
The eligible salaries and wages are those paid to an eligible apprentice for their employment in Canada in the tax year and during the first 24 months of the apprenticeship. Please note that this does not include remuneration based on profits, bonuses, and taxable benefits including stock options, and certain unpaid remuneration.
The AJCTC is claimed in Parts 19, 20 and 21 of T2SCH31, Investment Tax Credit — Corporations. Any unused credit can be carried back 3 years to tax years ending after May 1, 2006 and may be carried forward 20 years.
BC Training Tax Credit (“TTC”)
The BC TTC is similar to the AJCTC, except that it provides refundable income tax credits for employers who employ apprentices enrolled in apprenticeship programs administered through the Industry Training Authority, beginning after December 31, 2006.
There are 3 main elements to the training tax credits:
- Basic credits for non-Red Seal training programs;
- Completion credits for both Red Seal and non-Red Seal training programs; and
- Enhanced credits for First Nations individuals and persons with disabilities.
The Basic TTC is equal to 20% of the eligible salaries and wages paid in the first 24 months of a non-Red Seal apprenticeship program. There is no Basic TTC for apprentices registered in a Red Seal training program as they would qualify under the federal AJCTC.
The Completion TTC is a tax credit based on the salary and wages paid to an employee, registered in a Red Seal or non-Red Seal training program, who has completed level 3 or higher of an eligible training program. The tax credit is equal to 15% of the eligible salaries and wages to a maximum of $2,500 for level 3 and to a maximum of $3,000 for level 4 or higher. The eligible salaries and wages include those paid 12 months before the completion of the level.
Enhanced Tax Credits are available to First Nations persons or persons with a disability, where:
- The employee is entitled to a Disability Tax Credit under the federal Income Tax Act, or
- The employee is registered as an Indian under the Indian Act (Canada).
These enhanced tax credits increase the regular tax credits to the following amounts:
- For the first 24 months of a Red Seal program – 5.5% of the eligible salary up to a maximum of $1,000 per employee (in addition to the amounts claimed for the AJCTC);
- For the first 24 months of a non-Red Seal program – 30% of the eligible salary up to a maximum of $6,000 per employee;
- For level three or four of a Red Seal or non-Red Seal program – 22.5% of the eligible salary up to $3,750 (level three) or up to $4,500 (level four).
For purposes of the BC TTC, eligible salary and wages are the amounts paid to an eligible employee in a taxation year, excluding profits, bonuses, employee benefits, stock options, unpaid amounts or government and non-government assistance.
Please keep in mind that the AJCTC and BC TTC is required to be included in the following year’s income.