2018 Manitoba budget: Tax highlights

12 March, 2018

Issue 2018-13

In brief

On March 12, 2018, Manitoba’s Minister of Finance, Cameron Friesen, presented the province’s budget. The budget does not change corporate or personal tax rates, but does:

  • increase the small business income threshold from $450,000 to $500,000 on January 1, 2019
  • reduce personal taxes, by increasing the basic personal tax credit for 2019 and 2020 
  • introduce a carbon tax, starting September 1, 2018

This Tax Insights discusses these and other tax initiatives introduced in the budget.

In detail

Business tax measures

Small business income threshold

The income eligible for Manitoba’s 0% small business income tax rate will increase from $450,000 to $500,000 on January 1, 2019.

Corporate income tax rates 

Manitoba’s corporate income tax rates will remain as shown in the table below. The table also shows combined federal/Manitoba corporate tax rates.

Federal and Manitoba corporate rates

Manitoba

Federal + Manitoba

 

2017-2019

2017

2018

2019

General and M&P income

12%

27%

Canadian-controlled private corporations (CCPCs)

active business income

to $450,000

0%

10.5%

10% (1)

9% (1)

$450,000 to $500,000

12% (2017-2018)
0% (2019)

22.5%

22% (1)

investment income

12%

50.67%

[1.]  The combined rates reflect the decline in the federal small business tax rate from 10.5% to 10% on January 1, 2018, and to 9% on January 1, 2019.
 

Small Business Venture Capital Tax Credit

The Small Business Venture Capital Tax Credit entitles eligible investors who purchase eligible investments to earn a 45% non-refundable tax credit against Manitoba taxes payable. Effective March 12, 2018, the $15 million revenue cap on the size of an eligible corporation is eliminated and the investment minimum is lowered from $20,000 to $10,000. 

Credit unions and caisse populaires 

Profits tax

The credit unions and caisses populaires profits tax of 1% that applies on taxable income over $400,000, is eliminated effective January 1, 2019.

Special deduction

Starting January 1, 2019, the special tax deduction, which currently allows credit unions and caisses populaires to pay a lower rate of tax on a portion of their income, will be phased out over five years.

Small business deduction

As announced on March 2, 2018, the budget changes the rules relating to the calculation of the Manitoba small business deduction for credit unions and caisses populaires. The changes ensure that the Manitoba small business deduction for credit unions is calculated as intended by Manitoba Finance in connection with the elimination of the federal small business deduction for credit unions.   

Business tax credits 

The budget makes the following announcements related to business tax credits:

  • Child Care Centre Development Tax Credit – a new refundable tax credit will be available for private corporations that are not engaged primarily in child care services, but create new child care centres after March 12, 2018, and before 2021, providing a benefit of $10,000 (to be claimed over five years) for each new infant or preschool space 
  • Manitoba Book Publishing Tax Credit – extended one year to December 31, 2019
  • Cultural Industries Printing Tax Credit – extended one year to December 31, 2019
  • Labour-Sponsored Funds Tax Credit – eliminated for shares acquired after 2018
  • Rental Housing Construction Tax Credit – eliminated effective January 1, 2019, but projects currently under provincial review or with provincial approvals are not affected; future projects must be available for use before 2021

Personal tax measures 

Personal income tax rates 

The budget does not change personal income tax rates. Top combined federal/Manitoba personal income tax rates are shown below. These rates apply to individuals with taxable incomes above $205,842 in 2018 ($202,800 in 2017; 2019 threshold to be indexed). 

Top combined federal/Manitoba rates

2017

2018

2019

Ordinary income & interest

50.40%

Capital gains

25.20%

Canadian dividends

eligible

37.78%

non-eligible

45.74%

45.92% (1)

46.67% (1)

[1.]  The combined non-eligible dividend tax rates reflect the decline in the federal non-eligible dividend tax credit rate (which results from decreases to the federal small business tax rates, as noted above).
 

Personal income tax credits

Basic Personal Tax Credit

The basic personal amount will increase from $9,382 in 2018, to $10,392 in 2019, and to $11,402 in 2020.

Primary Caregiver Tax Credit

The process to claim this credit will be streamlined, as follows:

  • primary caregivers will no longer be required to apply for pre-approval to claim this credit; instead they will submit a registration form to Manitoba Finance and continue to claim the credit on their income tax return
  • the requirement to calculate the credit based on number of days that care was provided will be removed and a flat $1,400 annual credit will be available to all eligible caregivers; the requirement to provide a minimum of 90 days of care before eligibility commences remains

Education Property Tax Credit

Effective for 2019, all property tax credits will be calculated based on school taxes, and the $250 deductible will be eliminated for the Education Property Tax Credit. 

Carbon tax

Starting September 1, 2018, a carbon tax will apply to gas, liquid and solid fuel products intended for combustion in Manitoba. The tax will reflect a price of $25 per tonne of greenhouse gas emissions. The following rates will apply to major fuels:

Fuel type

Carbon tax rate per unit

Gasoline

5.32 ¢/L

Diesel

6.71 ¢/L

Natural Gas

4.74 ¢/m3

Propane

3.87 ¢/L

Certain fuel uses will not be subject to the carbon tax. Exemptions include agricultural process emissions, marked fuels and output-based pricing system (OBPS) entities. 

The OBPS will apply to firms in emissions-intensive trade exposed sectors that compete in global markets. Output-based pricing applies the carbon pollution price to that portion of a facility’s emissions that exceeds a designated emissions-intensity benchmark for that type of facility. Facilities that emit less than their emissions-intensity benchmark earn credits that can be banked or sold to facilities that have exceeded their benchmark.

Other tax measures

Retail sales tax

Effective May 1, 2018, the following will be exempt from retail sales tax:

  • drill bits designed specifically for oil or gas exploration or development
  • fertilizer bins used in a farming operation

Tobacco tax

Effective midnight on March 12, 2018, the tobacco tax rate for fine cut tobacco increased from 28.5¢ per gram to 45¢ per gram. The tobacco tax rate on cigarettes, cigars and raw leaf tobacco remains unchanged.

Technical and administrative measures

The government intends to streamline the administration of the insurance corporations tax, and enhance administration of the Community Enterprise Development Tax Credit, the Research and Development Tax Credit, the Green Energy Equipment Tax Credit, and right-of-recovery provisions. Also, amendments will be made to the Chiropractors Act to allow chiropractors to provide their professional services through a professional corporation.
 

Contact us

Danny Wright

Winnipeg Tax Leader , PwC Canada

Tel: +1 204 926 2427

Carol Stockwell

Associate Partner, PwC Canada

Tel: +1 204 926 2449

Stephen May

Partner, M&A Tax / Corporate Tax, PwC Canada

Tel: +1 204 926 2451

Jeremy Bomhof

Senior Manager, PwC Canada

Tel: +1 204 926 2411

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