2012 Manitoba Budget

Memo No. 2012-20

Tax Highlights

Download the budget highlights as a PDF file.


This Tax memo discusses these and other tax measures introduced in the budget. Please contact your PricewaterhouseCoopers LLP (PwC) adviser or any of the individuals listed on our website at www.pwc.com/ca/taxcontacts for more information on how the budget will affect you or your corporation.

On Tuesday, April 17, 2012, Manitoba’s Minister of Finance, Stan Struthers, presented the province’s 2012 budget. The budget:

  • increases the financial institutions capital tax rate from 3% to 4%;
  • introduces a refundable tax credit for new property acquired for use in a data processing centre;
  • enhances the Film and Video Production Tax Credit and the Co-op Education and Apprenticeship Tax Credits; and
  • decreases the eligible dividend tax credit rate.

This Tax memo discusses these and other tax changes announced in the budget.

Business tax measures | Personal tax measures | Retail sales tax measures | Other tax measures

Business tax measures

Corporate income tax rates

Manitoba’s corporate income tax rates will remain as follows:

 

Rate

General  income1

12%

Small business income2

0%

  1. The rate also applies to manufacturing and processing (M&P) income. The budget does not provide the date for this rate to decline to 11%, as had been proposed in the 2008 budget.
  2. The small business threshold remains $400,000.

Combined corporate income tax rates

The following combined federal/Manitoba rates apply to December 31 year ends:

 

General and M&P income

Canadian-controlled private corporations (CCPCs)

Active business income

Investment income

to $400,000

$400,000 to $500,000

2011

28.5%

11%

23%

46.67%

2012

27%

Financial institutions capital tax

Manitoba’s financial institutions capital tax rate will increase from 3% to 4%, for fiscal years ending after

April 17, 2012. Banks and trust and loan corporations with taxable paid-up capital (on an associated basis) under $4 billion will continue to be exempt.

Research and Development Tax Credit

No changes have been made to the Manitoba Scientific Research and Experimental Development (SR&ED) tax credit. The investment tax credit (ITC) rate remains 20%; however the budget provides a reminder that starting 2012 the refundable portion of the ITC will be 10% (up from 5% in 2011).

Data Processing Investment Tax Credit

Eligible corporations that purchase or lease new qualified property for use in a data processing centre in Manitoba after April 17, 2012, and before 2016, can claim a new refundable income tax credit that will be based on the capital cost of the new qualified property. The credit will equal:

  • 4% for buildings; and
  • 7% for machinery and equipment.

The corporation must have a permanent establishment in Manitoba and its primary business activity, including the activities of its affiliates, must be data processing. New qualified property that is purchased or leased to replace or improve property that previously qualified for the credit will also be eligible.

The credit will effectively offset Manitoba sales tax on the qualified property.

Film and Video Production Tax Credit

Companies starting a film or video production after April 17, 2012, will be able to claim accommodation costs incurred and paid up to $250 per night per unit (excluding taxes) as eligible tangible property expenditures for purposes of calculating the cost-of-production tax credit.

Co-op Education and Apprenticeship Tax Credits

Three components of the Co-op Education and Apprenticeship Tax Credits are enhanced for employers of apprentices who complete a level after 2012 and employers of journeypersons newly certified after 2012, as follows:

  • Early-Level Apprentice Hiring Incentive –
  • will increase to 15% (from 10%) of wages and salaries up to a maximum credit of $3,000 (from $2,000) per year per apprentice;
  • will be expanded to cover employers eligible for the federal Apprenticeship Job Creation Tax Credit that will receive a top-up; and
  • an additional 5% tax credit will be available for employers hiring early-level apprentices who normally reside outside Winnipeg and normally report to an employer’s office in rural and northern Manitoba.
  • Advanced-Level Apprentice Hiring Incentive – is doubled to 10% (from 5%) of wages and salaries up to a maximum credit of $5,000 (from $2,500) per level per employee.
  • Journeypersons Hiring Incentive – is doubled to 10% (from 5%) of wages and salaries up to a maximum credit of $5,000 (from $2,500) per year per employee.

Nutrient Management Tax Credit

Agricultural producers will be eligible for a new, refundable income tax credit equal to 10% of the capital cost (net of government assistance received or receivable) of prescribed nutrient management equipment that:

  • meets new requirements for water quality protection under The Environment Act; and
  • is acquired and available for use after April 17, 2012 and before 2016.

Neighbourhoods Alive! Tax Credit

The 30% Neighbourhoods Alive! Tax Credit began to apply on April 13, 2011. Retroactive to that date, the criteria for eligible donations will be clarified to allow:

  • donations made over multiple tax years to accumulate to the $50,000 minimum threshold;
  • large up-front donations of up to $200,000 to be used to earn the $15,000 maximum tax credit in subsequent years if in-kind contributions are made in each of those subsequent years; and
  • limiting donations to:
  • the first four years of the new social enterprise; and
  • providing in-kind services to years two through five.

The charity must ensure that 25% of employees face multiple barriers to employment when they are hired by the social enterprise.

Personal tax measures

Eligible dividend tax rates

Manitoba’s eligible dividend tax credit rate will decrease in 2012. The following table shows the result of this change and federal changes.

 

Eligible dividends

2011

2012

Dividend gross-up

41%

38%

Dividend tax credit (on grossed-up dividend)

11%

8%

Top combined rate

26.74%

32.26%

Top personal tax rates

Top combined federal/Manitoba rates follow:

 

Ordinary income
& interest

Capital gains

Canadian dividends

Eligible

Non-eligible

2011

46.40%

23.20%

26.74%

39.15%

2012

32.26%

Mineral Exploration Tax Credit

Retroactive to 2009, amendments to the Mineral Exploration Tax Credit will ensure that a taxpayer who earns a tax credit in a higher tax credit year (at 20% or 30%) can:

  • carry back unused credits to a lower tax credit year (at 10% or 20%); and
  • claim the same maximum amount as if the credit was earned in the prior year.

Retail sales tax measures

The following retail sales tax changes will be made:

  • Reduced filing frequency – after the June 2012 filing period, the tax return filing frequency will be reduced.
  • Recycled asphalt – Effective May 1, 2012, the sales tax exemption for sand and gravel purchased by municipalities will be extended to recycled asphalt.
  • Insurance contracts – Starting July 1, 2012, sales tax will apply on:
  • property and casualty insurance;
  • group life insurance;
  • trip cancellation insurance;
  • baggage insurance; and
  • land titles insurance,

when the insured person is a resident of Manitoba or on the premiums paid in respect to property located in Manitoba.

  • Personal services – Starting July 1, 2012, sales tax will apply on:
  • spa treatments;
  • non-medical skin and nail services (e.g., pedicures, manicures, facials);
  • tattooing and piercing services; and
  • hair services (including haircuts costing over $50, hair removal and hair augmentation).
  • Dealer-use vehicles – Effective May 1, 2012, the simplified tax calculation of tax payable by motor vehicle dealers on temporary dealer-use vehicles will increase for:
  • new vehicles – from $30 to $40 per month; and
  • used vehicles – from $15 to $20 per month.

Other tax measures

Tax administration

The following measures apply to tax debts and payments for sales tax, fuel tax, tobacco tax, health and education levy, mining tax, corporation capital tax, credit unions and caisses populaires profits tax and emissions tax:

  • Interest rate – Starting July 1, 2012, the interest rate on tax debts will increase from prime

plus 4% to prime plus 6%.

  • Dishounoured payments – Starting May 1, 2012, the fee charged for dishonoured payments will increase by $5.

Community Revitalization Levy

The Community Revitalization Levy will be included as a “dwelling unit cost” for purposes of calculating the Education Property Tax Credit and qualifying for the Advance, as well as the Pensioners’ School Tax Assistance.

Tobacco tax

Effective midnight April 17, 2012, the tobacco tax rate will increase by 2.5¢ per cigarette, and per gram of fine-cut tobacco and raw leaf tobacco.

Fuel tax

On May 1, 2012, the tax rates on clear diesel and clear gasoline will increase by 2.5¢ per litre. Marked gasoline will be taxed at 3¢ per litre; it will no longer be exempt.