What is the Canadian Entrepreneur’s Incentive (CEI)?

Contained in the 2024 Federal Budget is new Canadian Entrepreneur’s Incentive, which gives certain entrepreneurs in a very limited number of industries access to reduced capital gains inclusion rate when they sell their business.

The 2024 budget also announced a general increase of the capital gains inclusion rate from 50% to 67%, the new CEI is, presumably, meant to reduce the impacts of this increase on the sale of shares of small businesses in Canada after the phase in period which, for some reason, is a staggering 10-years.

How does the Canadian Entrepreneur’s Incentive work?

Eligible individuals will get a reduced gains inclusion rate of 1/3 (down from 2/3) on capital gains up to $2 million on the disposition qualifying small businesses shares.

This reduced inclusion rate is applied to gains that exceed the individual’s lifetime capital gains exemption.

Individuals are still eligible to claim their reduced capital gains inclusion rate of 50% on the next $250,000 of capital gains, making it possible to claim the CEI, the LCGE and the new $250,000 exemption on the same share sale.

When does the Canadian Entrepreneur’s Incentive come into effect?

The CEI will be Phased in over 10 years, at $200,000/year, starting on January 1, 2025 and will be fully phased in in 2034.

Which industries are eligible for the Canadian Entrepreneur’s Incentive?

It is easier to identify the industries that are not eligible for the CEI. The CEI is not available to the following industries:

• Professional corporations.
• Reputation or skill of employees (i.e., goodwill business).
• Financial industry.
• Insurance industry.
• Real Estate industry.
• Food and accommodation industry
• Arts industry.
• Recreation industry.
• Entertainment industry.
• Consulting industry.
• Personal care services industry.

This leaves very few industries that are eligible for the CEI, including:

• Construction industry.
• Tech industry.
• Manufacturing industry.
• Any others not listed above.

How do I get more information about the Canadian Entrepreneur’s Incentive

You can visit the government’s website The New Canadian Entrepreneurs’ Incentive or call us, we’d be happy to discuss your business and your tax saving opportunities.