April 17, 2012
Manitoba’s Finance Minister Stan Struthers tabled the province’s 2012 budget on April 17, 2012. The budget forecasts a deficit of $1 billion for 2011-12 and projects a deficit of $460 million for 2012-13. By 2014-15, the government is projecting a surplus of $23 million.
Although the budget did not contain any corporate or personal income tax rate changes, it increases the effective tax rate on eligible dividends. In addition, the budget introduces or extends a number of targeted business tax credits. Indirect tax changes include sales tax on insurance premiums and increases to tobacco tax and fuel tax.
Highlights of tax measures announced in the budget are summarized below.
Dividend Tax Credit
The budget increases the tax rate on eligible dividends. This is accomplished by decreasing the Dividend Tax Credit on eligible dividends to 8% (from 11%), beginning with the 2012 taxation year. As a result, the combined federal and Manitoba dividend tax rate on eligible dividends increases to 32.26% (from 28.13%). Manitoba's combined top marginal tax rates will be as follows for 2012:
Mineral Exploration Tax Credit
The budget notes that technical amendments will be made to the Mineral Exploration Tax Credit to ensure it operates as intended, including where credits earned in a higher tax credit year are carried back to a year where lower tax credits were provided.
Corporation Capital Tax on Financial Institutions
The budget increases the Corporation Capital Tax on Financial Institutions to 4% (from 3%), beginning with taxation years ending after April 17, 2012.
Corporate income tax rates
The budget did not introduce any new corporate income tax rate changes. As a result, Manitoba's corporate income tax rates effective January 1, 2012 remain as follows:
Co-op Education and Apprenticeship Tax Credits
Early-Level Apprentice Hiring Incentive — Increases to 15% (from 10%) of wages and salaries up to a maximum of $3,000 (from $2,000) per year per apprentice. The budget also expands this program to cover employers eligible for the federal Apprenticeship Job Creation Tax Credit.
An additional 5% tax credit will be available for employers who hire early-level apprentices who normally reside outside of Winnipeg and who normally report to an employer's office in rural and northern Manitoba, subject to a maximum of $4,000.
Advanced-Level Apprentice Hiring Incentive — Increases to 10% (from 5%) of wages and salaries up to a maximum of $5,000 (from $2,500) per level per employee.
Journeypersons Hiring Incentive — Increases to 10% (from 5%) of wages and salaries up to a maximum of $5,000 (from $2,500) per year per employee.
Data Processing Investment Tax Credit
The budget establishes a refundable corporation income tax credit for property purchased or leased by an eligible data processing corporation after April 17, 2012 for use in Manitoba. The credit will be equal to 4% on the capital cost of new qualified property that is a building and 7% on the capital cost of new qualified property that is machinery or equipment. The property must be purchased or leased by the company for use in its data processing centre in Manitoba and be available for use after April 17, 2012 and before 2016.
To qualify, the corporation must have a permanent establishment in Manitoba and its primary business activity, including the activities of its affiliates, must be data processing.
Film and Video Production Tax Credit
For purposes of calculating the cost-of-production tax credit, the budget allows companies starting a film or video production after April 17, 2012 to claim accommodation costs incurred and paid up to $250 per night per unit as eligible tangible property expenditures.
Nutrient Management Tax Credit
The budget announces a new, refundable Nutrient Management Tax Credit for agricultural producers. The credit will be equal to 10% of the capital cost of prescribed nutrient management equipment designed to meet water quality requirements. The assets must be acquired and available for use after April 17, 2012 and before 2016.
Neighbourhoods Alive! Tax Credit
The budget amends the Neighbourhoods Alive! Tax Credit, retroactive to April 12, 2011, to:
- Allow a corporation up to four years to achieve the minimum $50,000 donation threshold
- Allow a corporation to make an up-front donation of up to $200,000 in the first year, and provide in-kind service contributions to earn the maximum credit in each of the subsequent four tax years
- Limit in-kind contributions to earn the credit to the first five years of the social enterprise.
Sales tax will be applied to prescribed insurance premiums under a contract of insurance, effective July 1, 2012, other than for health, accident or sickness, Autopac, or individual life insurance.
The budget also pledges to reduce the retail sales tax return filing frequency for businesses (no details provided).
The existing formula regarding the application of the retail sales tax on the taxable use of demonstrator vehicles will be updated (no details provided).
Certain personal cosmetic services will also be taxable, effective July 1, 2012.
Taxes on tobacco increase effective midnight on April 17, 2012. The following specific taxes increase
- Per cigarette: to 25 cents (from 22.5 cents)
- Per gram of fine-cut tobacco: to 24 cents (from 21.5 cents)
- Per gram of raw leaf tobacco: to 22.5 cents (from 20 cents).
The budget increases taxes on unmarked gasoline and diesel fuel to 14 cents per litre (from 11.5 cents) and marked gasoline will be subject to 3 cents per litre, effective May 1, 2012.
Interest on tax debts
The budget increases the interest rate on tax debts owing under provincially administered taxes and refundable Manitoba personal income tax credits. The rate will increase to the prime interest rate plus six percentage points (from prime interest rate plus four percentage points), effective on accounts receivable starting July 1, 2012. This measure is intended to encourage improved tax remittance compliance.
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Your KPMG adviser can help you assess the effect of the tax changes in this year's Manitoba budget on your personal finances or business affairs, and point out ways to take advantage of their benefits or ease their impact. We can also keep you abreast of the progress of these proposals as they make their way into law and help you bring any concerns you may have to the attention of the Manitoba Ministry of Finance.
Information is current to April 17, 2012. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.
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