Today Manitoba Finance Minister Jennifer Howard delivered the province’s 2014 budget. The budget anticipates a deficit of $432 million in 2014, $357 million in 2015 and $218 million in 2016 with a surplus of $39 million in 2017. The budget does not include any corporate or personal income tax rate changes, but proposes changes to certain tax credits, including the Co-op Education and Apprenticeship Tax Credits and the Small Business Venture Capital Tax Credit. The budget also provides for a rebate of school tax for seniors starting in 2014.
Highlights of tax measures in the budget are noted below.
Personal income tax
No changes to Manitoba’s personal income tax rate were announced in the budget. As a result, Manitoba’s combined federal and provincial top marginal tax rates remain as follows:
Mineral Exploration Tax Credit
The budget extends the Mineral Exploration Tax Credit to cover flow-through share agreements entered into before April 1, 2018. The 30% non-refundable personal income tax credit is available when a Manitoba resident purchases eligible flow-through shares of qualifying mineral exploration companies to finance Manitoba mineral exploration projects.
Seniors’ School Tax Rebate
The budget proposes to allow a rebate of up to $235 for eligible Manitoba residents who own their principal residence in Manitoba and are 65 years of age or older or have a spouse or common-law partner 65 years of age or older. This rebate, effective in 2014, will be calculated based on school division special levy paid less existing property tax credits. The rebate limit will be increased in 2015 and be fully implemented in 2016.
Community Enterprise Development Tax Credit
The budget proposes changes to the Community Enterprise Development Tax Credit to encourage Manitobans to invest in business opportunities in their communities and assist community-based enterprise development projects to raise local equity capital. The budget proposes to extend the credit to December 31, 2019. For eligible shares issued after 2014, the budget also proposes to:
- Make the tax credit fully refundable
- Increase the tax credit rate to 45% (from 30%)
- Increase the maximum annual shares an investor can acquire to $60,000 (from $30,000)
- Allow corporations with a permanent establishment in Manitoba and that pay at least 25% of their payroll to Manitoba residents to be eligible to acquire tax creditable shares
- Increase the maximum eligible shares an approved company can issue under the program to $3 million (from $1 million).
The proposed enhancements increases the maximum annual tax credit that can be earned by an investor to $27,000 (from $9,000).
Corporate income tax
The budget did not announce any changes to the corporate income tax rate. As a result, the corporate income tax rates effective January 1, 2014 therefore remain as follows:
Manufacturing Investment Tax Credit
The budget proposes to extend the Manufacturing Investment Tax Credit to December 31, 2017 (it was scheduled to expire December 31, 2014). This credit provides Manitoba companies with a 10% partially refundable income tax credit on the capital cost of new and used manufacturing buildings, machinery and equipment acquired for use in manufacturing or processing in Manitoba.
Co-op Education and Apprenticeship Tax Credits
The budget proposes to enhance and indefinitely extend the refundable Co-op Education and Apprenticeship Tax Credits, which are available to employers who offer work experience to Manitobans. The enhancements are effective for employers with a taxation year ending after 2014. The budget proposes to increase the maximum credit for Level 1 and Level 2 apprentices to $5,000 per apprentice per year per level (up from $3,000 for apprentices in Winnipeg and $4,000 for apprentices outside of Winnipeg).
In addition, employers will be able to receive the credit through their annual personal or corporate income tax return; a pre-approval process will no longer be required.
Small Business Venture Capital Tax Credit
The budget proposes changes to the non-refundable Small Business Venture Capital Tax Credit. The credit is intended to encourage resident individuals and companies to acquire equity capital in emerging enterprises that require larger amounts of capital than community ownership can provide. For eligible shares issued after 2014, the budget proposes to:
- Increase the tax credit rate to 45% (from 30%)
- Increase the lifetime limit in tax creditable shares an approved corporation can issue to $10 million (from $5 million)
- Increase the annual cap on the credit claimed by an investor in a taxation year to $67,500 (from $45,000).
The budget also increases the threshold of shares an investor can own to be eligible to acquire tax creditable shares to 35% (from 10%).
Cultural Industries Printing Tax Credit
The budget amends the 15% Cultural Industries Printing Tax Credit, which supports eligible printing costs incurred and paid in the production of eligible books. The budget changes the definition of “eligible book” to:
- Cap the credit at $30,000 per book title
- Require at least 90 per cent of the book to be new (not previously published material)
- Require at least 65% of the page be text in a non-children’s book
- Require the book to be sold through an established distributor.
Other Tax Measures
The budget proposes to subject petroleum coke used in Manitoba to an Emissions Tax equal to $10 per tonne of carbon-dioxide-equivalent emissions. This measure would by effective January 1, 2014.
Other Tax Credits
The budget proposes to extend the following tax credits to December 31, 2017.
- The refundable Book Publishing Tax Credit for 40% of eligible Manitoba labour costs plus non-refundable author advances
- The Odour Control Tax Credit which provides a 10% corporate income tax credit for businesses that invest in capital property to prevent odours arising from organic waste.
Rental Housing Construction Tax Credit
The budget proposes to amend the tax credit to clarify the affordable unit requirements and the certification process for projects and tenants.
The budget proposes to provide authority to withhold or withdraw the licences of an income tax discounter who repeatedly files inaccurate tax credit claims.
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We can help
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 March 6, 2014. 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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