Highlights

[38 KB]

Download this budget as an Adobe Acrobat PDF file.

On March 6, 2006, Manitoba’s Minister of Finance, Greg Selinger, presented the province’s 2006 budget. The budget does not change corporate or personal income tax rates for 2006, apart from enhancing the province’s dividend tax credit to parallel the proposed federal credit. However, the budget does reduce corporate and capital taxes and personal income tax rates in future years. It also extends some existing tax credits and introduces several new tax credits. The key changes are discussed below.

Corporate Tax Measures

Small business tax rate

On January 1, 2007, Manitoba’s small business rate, which applies to active income of $400,000 or less, will be reduced from 4.5% to 3%, instead of to 4%, as previously announced. This change will save companies subject to the small business rate up to $6,000 in tax in 2007, compared to 2006.

General tax rate

Previous announcements reduced Manitoba’s general corporate rate (which also applies to manufacturing and processing income) from 14.5% to 14%, on July 1, 2007. Manitoba’s Premier has confirmed that the effective date of the reduction will be January 1, 2007, which had not been clear from the budget itself.

This budget further reduces the general rate to 13% on July 1, 2008, subject to balanced budget requirements.

Corporation capital tax

Manitoba’s capital tax deduction will increase from $5 million to $10 million, effective for years commencing after January 1, 2007. Therefore, in most cases, this change will not apply until taxation years ending in 2008.

The change will result in a tax saving of up to $15,000 per year (for companies with taxable capital of $10 million or less) and $25,000 per year (for companies with over $10 million of taxable capital). It is likely that the increased deduction will be shared by associated corporations, as is currently the case, although this is not clear from the budget.

Subject to balanced budget requirements, capital tax rates will decrease from 0.3% to 0.2% (on the first $10 million of taxable capital) and from 0.5% to 0.4% (on taxable capital exceeding $10 million). Because these rate changes would not be effective until years commencing after July 1, 2008, most corporations will not benefit from them until 2009.

Manitoba Investment Tax Credit (MITC)

The Manitoba Investment Tax Credit (MITC) is extended three years to June 30, 2009. Furthermore, the refundable portion of the credit is increased from 20% to 35%, meaning that the MITC effectively pays back a minimum of 53.5% of the 7% PST on qualified equipment in the first year.

Personal Tax Measures

Personal tax rates

The province’s middle personal tax bracket is reduced from 13.5% to 13% on January 1, 2007, resulting in an annual saving of up to $172.

Basic personal amount

The basic personal amount will increase by $100 to $7,834 in 2007.

Dividend tax credit

The top combined federal and Manitoba tax rate on dividends is 35.08%, which is among the highest in Canada. Mirroring federal tax proposals announced on November 23, 2005, separate dividend tax credit rates for Canadian-controlled private corporations and public companies are proposed. This change is contingent on details to be announced by the federal government.

Adoption expenses tax credit

Commencing 2006, Manitoba will provide a tax credit that parallels the federal adoption tax credit. Eligible expenditures will be based on federal criteria and cannot exceed $10,000 per adoption.

Children’s physical activity tax credit

Manitoba will parallel a proposed federal tax credit that supports families with children enrolled in physical activities, once the federal credit is introduced.

Retail Sales Tax Measures

Oil and gas and exploration development equipment

Commencing April 1, 2006, geophysical survey equipment, drill rigs and well-servicing equipment, used in oil and gas exploration and development, will be exempt from retail sales tax.

Other Tax Measures

Co-operative education tax credit andco-op graduates hiring incentive

For co-op education work placements starting after March 6, 2006, unincorporated employers and corporations and other organizations that are exempt from income tax will be provided an incentive that parallels Manitoba’s co-operative education tax credit. The co-operative education tax credit provides a 10% tax credit of up to $1,000 for each student hired for a work placement as part of a recognized post-secondary education program.

In addition, under a new co-op graduates hiring incentive, employers, including unincorporated and tax-exempt entities, that hire students who graduate after March 6, 2006 from a recognized post-secondary education program, are eligible for an incentive, to a maximum of $2,500 per year.

Odour control tax credit

Commencing the 2006 property tax year, agricultural landholders are eligible for a new odour control property tax credit to offset 10% of the purchase price of eligible odour control equipment. The new credit may be claimed instead of the odour control corporation tax credit, which has been enhanced.

Riparian tax credit