2014 Manitoba budget: Tax highlights

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In brief

On March 6, 2014, Manitoba’s Minister of Finance, Jennifer Howard, presented the province’s budget.The budget:

  • does not change corporate or personal tax rates
  • extends and enhances several corporate and personal tax incentives
This Tax Insights discusses these and other tax initiatives introduced in the budget.

In detail

Business tax measures

Corporate income tax rates

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

Income Rate
General1 12%
Small business2 0%
  1. The general income tax rate also applies to manufacturing and processing (M&P) income.
  2. The small business threshold increased from $400,000 to $425,000 on January 1, 2014.

Combined federal/Manitoba corporate rates are in the following table: 

  2013-2014
General and M&P income 27%
Canadian-controlled private corporations (CCPCs) active business income to $500,000 11%1 or 23%
investment income 46.67%
  1. The 11% rate applies to active business income up to:
    • $400,000 for years ending December 31, 2013
    • $425,000 for years ending December 31, 2014 and later

 

 

Tax credits extended

The following tax credits are extended three years to December 31, 2017:

  • Manufacturing Investment Tax Credit
  • Book Publishing Tax Credit
  • Odour Control Tax Credit

Cultural Industries Printing Tax Credit 

The definition of an eligible book will be amended as follows:

  • the maximum credit is capped at $30,000 per book title
  • at least 90% of a book must be new material that has not been previously published
  • if the book contains pictures and is not a children’s book, the ratio of text to pictures must be at least 65%
  • the printer must demonstrate that the book is for sale through an established distributor

Co-op Education and Apprenticeship Tax Credit

The Co-op Education and Apprenticeship Tax Credit was scheduled to expire on December 31, 2014, but will be extended indefinitely.

For employers with taxation years ending after 2014, the credit will be enhanced as follows:

  • Level 1 and 2 Apprentices:
    • Winnipeg – The credit rate remains 15%, but the maximum credit will increase from $3,000 to $5,000
    • Outside Winnipeg – The credit rate remains 20%, but the maximum credit will increase from $4,000 to $5,000
  • Level 3, 4 and 5 Apprentices – The credit rate will increase from 10% to 15%, but the maximum credit will remain $5,000
  • Newly Certified Journeypersons – The credit rate will increase from 10% to 15%, but the maximum credit will remain $5,000

In addition, a pre-approval process  will no longer be required.

Small Business Venture Capital Tax Credit

As a result of enhancements to the Small Business Venture Capital Tax Credit, for eligible shares issued after 2014:

  • the tax credit rate will increase  from 30% to 45%, causing the maximum total tax credit earned by an investor in a company to increase from $135,000 to $202,500 (the maximum investment remains $450,000)
  • the maximum annual tax credit an investor can claim will increase from $45,000 to $67,500
  • the lifetime limit in tax creditable shares a corporation can issue will increase from $5 million to $10 million
  • a shareholder who has less than 35% equity in a company (up from under 10%) will be eligible to purchase tax creditable shares

Personal tax measures

Personal income tax rates

As announced in Manitoba’s 2013 budget the non-eligible dividend tax credit rate decreased from 1.75% to 0.83%, starting 2014.

The following table takes this change into account, as well as an increase in the top federal rate on non-eligible dividends.

Top combined federal/Manitoba rates

  2013 2014
Ordinary income & interest

46.40%

Capital gains

23.20%

Canadian dividends eligible

32.26%

non-eligible 39.15% 40.77%


Mineral Exploration Tax Credit

The Mineral Exploration Tax Credit will be extended to flow-through share agreements entered into before April 1, 2018. It was to expire with respect to flow-through share agreements entered into after March 2015.

Community Enterprise Development Tax Credit

For eligible shares issued after 2014, the Community Enterprise Development Tax Credit is enhanced as follows:

  • the tax credit rate will increase  from 30% to 45%
  • the maximum annual shares an investor can acquire will increase from $30,000 to $60,000
  • the tax credit will be fully refundable
  • corporations with a permanent establishment in Manitoba and that pay at least 25% of their payroll to Manitoba residents will be eligible to acquire tax creditable shares
  • the maximum eligible shares a corporation can issue under the program will increase from $1 million to $3 million
  • the threshold of shares an investor can own to be eligible to acquire tax creditable shares will increase to 35%
  • the tax credit is extended to December 31, 2019

As a result of the changes in the first two bullets, the maximum annual tax credit that can be earned by an investor will increase from $9,000 to $27,000.

Seniors’ School Tax Rebate

The school division special levy paid by eligible senior homeowners on qualifying residential properties will be eliminated over three years, from 2014 to 2016.

A rebate (up to $235 in 2014) will be provided to individuals who are 65 years of age or older, or have a spouse or common-law partner 65 years of age or older, who own their principal residence in Manitoba, and who qualify as a Manitoba resident in the property tax year.

Other tax measures

Emissions Tax

Commencing January 1, 2014, petroleum coke used in Manitoba is subject to a new Emissions Tax equal to $10 per tonne of carbon-dioxide-equivalent emissions.

Technical and administrative amendments

The following technical and administrative amendments will be made:

  • Rental Housing Construction Tax Credit – amendments will clarify the affordable unit requirements and the certification process for projects and tenants
  • Tax discounters – authority will be provided to withhold or withdraw the licences of tax discounters who repeatedly file inaccurate tax credit claims
  • Tax application on utility charges for electricity and natural gas –will be relocated from The Retail Sales Tax Act to a new provincial statute to better integrate taxes on utilities