2018 Saskatchewan budget: Tax highlights

April 11, 2018

In brief

On April 10, 2018, Saskatchewan’s Minister of Finance, Donna Harpauer, presented the province’s budget. The budget:

  • introduces the Saskatchewan Technology Start-up Incentive and the Saskatchewan Value-added Agriculture Incentive
  • freezes the province’s personal income tax rates at 2018 levels (by temporarily suspending the tax rate reductions planned for 2019 and 2020)
  • revises the dividend tax credit rate for non-eligible dividends

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

In detail

Business tax measures

Corporate income tax rates

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

Federal and Saskatchewan corporate rates

General income tax rates

M&P income tax rates

Small business income tax rates

 

SK1

Federal + SK

SK2

Federal + SK

SK

Federal + SK

Taxation year ending

December 31, 2017

11.75%

26.75%

9.75%

24.75%

 

 


2%

12.5%

December 31, 2018

 

12%

 

27%

 

10%

 

25%

12%3, 4

December 31, 2019

11%3, 4

1. Saskatchewan’s general rate decreased from 12% to 11.5% on July 1, 2017, and then was restored to 12% on January 1, 2018.

2. Saskatchewan’s minimum M&P rate decreased from 10% to 9.5% on July 1, 2017, and then was restored to 10% on January 1, 2018.

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

4.  Saskatchewan’s small business threshold increased from $500,000 to $600,000 on January 1, 2018. The combined rate that applies to active business income between $500,000 and $600,000 is 17% for taxation years ending December 31, 2018 and December 31, 2019.

Saskatchewan Technology Start-up Incentive

The budget introduces the Saskatchewan Technology Start-up Incentive (STSI), a 45% non-refundable tax credit available to individuals and corporations (including venture capital corporations) on qualifying new investments in eligible small businesses. The credit that can be claimed each year is capped at $140,000 per investor. Unused tax credits can be carried forward for four years after the eligible investment is made.

Eligible small businesses are early stage technology start-ups that:

  • develop new technologies or apply existing technologies in a new way, to create proprietary new products, services, or processes that are repeatable and scalable
  • have less than 50 employees, of which a majority are located in Saskatchewan
  • are incorporated and headquartered in Saskatchewan

Eligible investors must receive an eligibility certificate from Innovation Saskatchewan, and must hold the eligible investment for a minimum period of two years. The eligible small business cannot be acquired, go public or leave Saskatchewan within the two-year holding period.

The STSI is a 2½ year pilot program.

Saskatchewan Value-added Agriculture Incentive

The budget introduces the Saskatchewan Value-added Agriculture Incentive (SVAI), a 15% non-refundable tax credit available to corporations on qualifying new capital expenditures in qualifying projects. Qualifying projects include new or existing value-added agriculture facilities that make a minimum capital investment of $10 million, to expand productive capacity in eligible value-added agriculture activities (e.g. pea protein processing, canola seed crushing, oat milling, malt production and cannabis oil processing).

The credit is claimed only after the facility is completed and has proven to have new or expanded value-added production. It is limited to:

  • 20% in year one after the facility begins operation
  • 30% in year two
  • 50% in year three

Unused tax credits can be carried forward for 10 years after the facility begins operations.

Corporations must receive an eligibility certificate from the Saskatchewan Ministry of Trade and Export Development, and then claim the tax credit from the Saskatchewan Ministry of Finance.

The SVAI program will sunset after December 31, 2022.

Personal tax measures

Personal income tax rates

The budget freezes Saskatchewan’s personal tax rates at 2018 levels. The tax reductions planned for 2019 and 2020 that would have decreased each of Saskatchewan’s tax rates by 0.25 percentage points in 2019 and 2020, are temporarily suspended. As a result, the following rates apply.

 

2017

2018

2019 to 2020

Income tax bracket

Highest

14.75%

            14.5%

Middle

12.75%

            12.5%

Lowest

10.75%

            10.5%

Personal taxes on non-eligible dividends

Saskatchewan’s non-eligible dividend tax credit rate will be revised from 3.367% in 2017, to 3.333% in 2018, and to 3.362% after 2018. These changes maintain the current level of provincial tax on non-eligible dividends and are introduced to counteract decreases to the federal non-eligible dividend gross-up factor for 2018 and 2019, which otherwise automatically increase Saskatchewan’s non-eligible dividend tax rates.

Top personal income tax rates

Top combined federal/Saskatchewan personal income tax rates are shown in the table below. These rates apply to individuals with taxable incomes above $205,842 in 2018 ($202,800 in 2017; to be indexed after 2018). The table reflects:

  • changes to the province’s top personal income tax rate and non-eligible dividend tax credit rate, discussed above
  • increases to the federal non-eligible dividend tax rates in 2018 and 2019; this results from decreases to the federal non-eligible dividend tax credit rate (which is a consequence of the federal small business tax rate reductions, as noted above)

Top combined federal/SK rates

2017

2018

2019 to 2020

Ordinary income & interest

47.75%

              47.50%

Capital gains

23.88%

              23.75%

Canadian dividends

eligible

30.33%

              29.64%

non-eligible

39.62%

39.60%

40.37%

Saskatchewan Technology Start-up Incentive

The Saskatchewan Technology Start-up Incentive (STSI), a 45% non-refundable tax credit available to individuals and corporations (including venture capital corporations) on qualifying new investments made in eligible small businesses, is discussed under Business tax measures.

Caregiver tax credits

The budget confirms that the province will not mirror the federal government’s consolidation of federal caregiver-related income tax credits into a single Canada Caregiver Credit. Saskatchewan will maintain its provincial Infirm Dependant Tax Credit and Caregiver Tax Credit.

Provincial sales tax (PST)

Taxation of vehicles

Effective April 11, 2018:

  • the PST exemption for used light vehicles is eliminated
  • the trade-in allowance when determining the PST on the purchase of a taxable light vehicle is restored

In addition, individuals purchasing a used vehicle through a private sale and registering the vehicle for personal or farm use, are now eligible for a $5,000 PST exemption (previously, a $3,000 deduction from the purchase price in computing the PST was available). As a result, PST will not apply to these used vehicles with a purchase price up to $5,000, but will apply in full for vehicles with a purchase price above $5,000.

ENERGY STAR® appliances

Effective April 11, 2018, ENERGY STAR® certified appliances no longer qualify for a PST exemption.

Other tax measures

Cannabis taxation

In December 2017, the federal and provincial governments agreed to a common set of principles that would cover the first two years after cannabis becomes legalized. Saskatchewan will receive:

  • 75% of the federal cannabis excise duty revenue generated in the province
  • a proportionate share of any revenue generated in Canada above the $100 million cap on federalrevenues from the federal cannabis excise duty

The PST will also apply to all retail sales of cannabis products in Saskatchewan.

Carbon tax

The budget does not introduce a carbon tax.

Contact us

Erick Preciado

Saskatchewan Tax Leader, PwC Canada

Tel: +1 306 668 5913

Troy Berdahl

Senior Manager, PwC Canada

Tel: +1 306 668 5971

Stefan Koo

Senior Manager, PwC Canada

Tel: +1 306 668 5970

David Reiner

Senior Manager, PwC Canada

Tel: +1 780 441 6783

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