Saskatchewan Technology Startup Incentive (STSI)

 

 

Remaining Budget for 2021-22: $1,102,568

*As of July 21, 2021. Subject to change. 

*Fiscal Year ends March 31, 2022.

STSI is designed to encourage investment in early-stage technology startups that bring new products to market and create jobs in Saskatchewan. The program offers a non-refundable 45% tax credit to Saskatchewan-based investors who invest in Eligible Technology Startup Businesses (ESBs). Tax credits are allocated on a first-come, first-served basis.

An ESB can raise a maximum of $2 million under the program.  No more than $1 million of this investment can have occurred prior to April 1, 2021. 

An investor can earn up to $225,000 in tax credits per annual investment in an ESB and claim a maximum of $140,000 per tax year. The credits for investments made between April 1, 2018, and December 31, 2020, can be claimed over a 4-year period. The credits for investments made after January 1, 2021, can be claimed over a 7-year period 

Startups and investors interested in applying to the program are required to do so through the Online Application Portal.

All applicants are strongly advised to review the STSI Program Guide before submitting an application.

Eligible Startup Businesses (ESBs)

In order to register as an ESB, a company must:

  • Have fewer than 50 employees, including full-time, part-time, and contract workers. At least 50% of these employees must be based in Saskatchewan;
  • Have its head office in Saskatchewan and be registered to carry on business in the province;
  • Have not previously raised more than $5 million in equity capital; and,
  • Be a technology-based startup with a novel technology for sale or applying existing technologies in a novel way to create a new product, service, or process. The technology must be digitally based - electronic systems, devices, and tools (hardware/software).
  • A startup is not eligible if its principal line of business is in the following areas:
    • Biotechnology and life sciences
    • Food processing and value-added manufacturing (see here for related incentives)

Individual or Corporate Investors:

Both individuals and corporations may apply to become an Eligible Investor. In order to be eligible, they must:

  • Be based in Saskatchewan (paying taxes in Saskatchewan);
  • Be an accredited investor:
    • The criteria for an accredited investor can be found here on pages 1-3; or
  • Meet the exemption requirements outlined in the National Instrument 45-106, Prospectus Exemptions:
    • The exemption requirements can be found here on pages 26-27.

Limited Partnerships:

In order to be eligible, a Limited Partnership must:

  • Have a mechanism to track the ownership interests of each limited partner (be able to determine each partner's proportionate share of an eligible investment);
  • File a Declaration of Limited Partnership in accordance with the Business Names Registration Act;
  • Not be benefitting from another provincial tax incentive program;
  • Have limited partners who are:
    • Based in Saskatchewan (paying taxes in Saskatchewan);
    • An individual or corporation;
    • Accredited investors or meet the exemption requirements outlined in the National Instrument 45-106, Prospectus Exemptions. 

Venture Capital Corporations (VCCs):

In order to be eligible, a VCC must:

  • Be based in Saskatchewan (paying taxes in Saskatchewan);
  • Have a mechanism to track each shareholder's contribution to an invested ESB;
  • Have equity capital of at least $25,000 at the time of registration; and
  • Have a share structure consisting of one or both of the following:
    • Common shares having no special rights or restrictions 
    • Common shares having special rights relating only to the redemption of shares by the corporation.

Additional information regarding eligibility can be found in the Program Guide.

 

Step 1:

Startups and investors (Individuals, Corporations, Limited Partnerships) must create a user account through the Online Application Portal.

Step 2:

Once you have created an account, you will be directed to the STSI Forms Page. Select the application best suited for you.

Step 3:

Fill out and submit the application. If the application was successfully submitted, you will receive an email confirmation. If you do not receive an email confirmation, please contact stsi@innovationsask.ca

After Submitting an Application

Each application will be thoroughly evaluated to ensure it meets the eligibility criteria of the program. Processing times can range from 3 to 4 weeks for startup applications and 1 to 2 weeks for investor applications.

Applicants who meet all the program requirements will receive a Certificate/Notification of Eligibility from Innovation Saskatchewan. Eligible Startup Businesses can then seek investment from Eligible Investors.

 

 

Disclaimer: Applicants applying to both STSI and the Saskatchewan Advantage Innovation Fund (SAIF) or the Agtech Growth Fund are limited to a lifetime cap of $900,000 combined between these programs.

Eligible Investment Requirements

To be eligible, an investment must meet the following criteria:

  • The investment must be fully paid for in cash and come directly from the Eligible Investor.
  • The investor must acquire shares/convertible rights directly from the Eligible Startup Business (ESB) through a Share Subscription Agreement, Convertible Note, or Simple Agreement for Future Equity.
  • The investor cannot require the ESB to repay the investment, repurchase the investor's shares/convertible rights, or pay any interest associated with the investment within three years of the investment date.
  • The investor cannot have previously disposed of shares in the ESB.
  • No tax credit can have previously been issued for the shares/convertible rights.
  • An investment is not eligible if it allows an investor to own shares, either directly or in conjunction with a related person, carrying 50 percent or more of the ESB's voting rights.
  • Founders cannot recieve a tax redit for investing in their own company, either directly or indirectly.

Proof of Investment

Proof of investment documentation must be submitted for each investment made under the program. Startups and investors have a joint responsibility to ensure their investments align with the program requirements.

Proof must come in the following forms:

  1. A copy of the investor’s cheque:
    • The cheque must come directly from the investor and be addressed directly to the startup. Investors who use an intermediary to make their investment (another person or organization) may not be eligible for a credit.
    • The cheque must clearly state the name of the investor, the ESB, and the amount invested.
    • The investor's name on the cheque must match the name on the investment agreement.
    • In the case of a wire transfer:
      • Documentation must be submitted showing the funds originated from the investor and that the ESB was the recipient (incoming payment document, outgoing wire transfer request, customer reciept).
  2. A bank statement showing the investment was deposited into the ESB’s account:
    • The bank statement must show that the ESB owns the account in which the funds were deposited.
    • It must be clear which deposit corresponds to which cheque. A lump sum deposit is not sufficient proof.
    • In the case of a wire transfer:
      • The bank statement must demonstrate that the ESB recieved the wire transfer.

Failing to comply with the requirements above will slow the approval process or result in the investment being denied. Please see here for a complete overview of the Proof of Investment Requirements.

Once an Eligible Startup Business has finalized an investment with an Eligible investor, the following actions must occur: 

  • Eligible Startup Businesses: Must submit a Tax Credit Certificate Application on behalf of their investors. 
  • Limited Partnerships: Must submit a Tax Credit Certificate Application on behalf of their partners. 
  • Venture Capital Corporations: Must submit a Tax Credit Certificate Application on behalf of their shareholders.

Tax Credit Certificate Applications can be accessed here:

Tax Credit Certificate Applications                   

Tax Credit Certificate Applications and the required attachments must be submitted by email to stsi@innovationsask.ca. 

Holding Period

An investment in an Eligible Startup Business must be held for a minimum of 3 years. All applicants are subject to this holding period. Failing to comply may result in the following consequences:

Eligible Startup Businesses (ESBs):

  • An ESB is liable for repaying the tax credits issued to an investor, if it redeems, acquires, or cancels the investor's equity shares/convertible rights within 3 years of the investment date.

Investors (Individuals, Corporations, VCCs, Limited Partnerships):

  • An investor may have their tax credit revoked or be liable to repay their credit, if they:
    • Dispose of their shares/convertible rights within 3 years of the investment date.
    • Require an ESB to repay the investment amount or repurchase the issued shares/convertible rights within 3 years of the investment date.
    • Require an ESB to pay any interest associated with the investment within 3 years of the investment date.

Convertible Instruments Under the Holding Period

Simple Agreements for Future Equity (SAFEs) and Convertible Notes may be converted into shares during the 3-year holding period. However, the investor must hold the newly issued shares until the holding period expires.

Please see here for a complete overview of the Holding Period Requirements.

Step 1

Receive a tax credit certificate from Innovation Saskatchewan.

Step 2:

File your personal or corporate income tax return for the tax year in which the investment was made.

Step 3:

Once you have received a Notice of Assessment from the Canada Revenue Agency, complete an STSI Claim Form. This form can be accessed below:  

STSI Claim Form

Step 4:

Submit the following documents to the Ministry of Finance:

  • Tax Credit Certificate(s) as issued by Innovation Saskatchewan;
  • STSI Claim Form; and,
  • Notice of Assessment from the Canada Revenue Agency

STSI Claim Forms and supporting documentation must be submitted by email to STSI.claim@gov.sk.ca

Step 5:

The Ministry of Finance will verify the claim and provide a rebate calculation in accordance with the program legislation.

 

Processing Time for STSI Claim Forms:

The Ministry of Finance is committed to processing STSI claims according to the Taxpayer Service Commitments and Standards Code. To obtain a refund, an investor is required to provide complete and accurate information regarding their claim.

Once a refund amount has been established, it will be processed within 21 business days. If your refund is not processed within 21 business days, please contact the Program Manager at stsi@innovationsask.ca.

If your refund claim is denied, you will be notified of the reason by letter.

Claiming Period

Unused credits may be carried forward. The length of the claiming period is dependent on when the investment was made:

  • The credits for investments made between April 1, 2018, and December 31, 2020, can be claimed over a 4 year period:
    • Year one is the Applicable Taxation Year stated on the certificate (i.e., the tax year in which the investment was made). Investors will have another 3 years after that to claim their credit.
  • The credits for investments made after January 1, 2021, can be claimed over a 7-year period:
    • Year one is the Applicable Taxation Year stated on the certificate (i.e., the tax year in which the investment was made). Investors will have another 6 years after that to claim their credit.

 

Eligible Startup Businesses, Limited Partnerships, and Venture Capital Corporations are required to submit an Annual Return after raising/making an investment under the program.

The Annual Return must be submitted within 6 months of the applicant's fiscal year end.

30 days prior to the submission deadline, applicants will be sent a reminder to complete the form. Failing to submit an Annual Return may result in the suspension of an applicant's eligibility or the revocation of tax credits from their investors.

The Annual Return for each respective applicant can be accessed below: (Ensure you download the PDF prior to filling it out)

Annual Returns must be submitted by email to stsi@innovationsask.ca