4- Canadian entrepreneurs’ incentive

Starting in 2025, the Canadian Entrepreneurs’ Incentive will be gradually phased in and the limit will increase by $400,000 each year, until it reaches $2M in 2029.

This incentive will effectively reduce the applicable inclusion rate for eligible capital gains by half (1/3 instead of 2/3), up to the applicable limit which will ultimately reach a lifetime maximum of $2M. This incentive will apply in addition to the capital gains deduction so that once it is fully implemented, entrepreneurs may benefit from a cumulative total and partial exemption of over $3.25M on their eligible capital gains.

This incentive is essentially intended for gains realized following the disposition of qualified small business corporation shares (see section 3 of this section) or of eligible farming or fishing property (see Section  VI) that meets certain conditions. Therefore, the incentive will be available to investors in certain sectors who hold at least 5% of shares in their business and have had the business as their principal employment on a regular and continuous basis for at least three years. Shares of professional corporations are not eligible and neither are those of corporations in sectors such as financial, insurance, real estate, food and accommodation, arts, recreation and entertainment, along with consulting or personal care services.