Manitoba’s Finance Minister Rosann Wowchuk tabled the province’s 2011 budget on April 12, 2011. The budget forecasts a deficit of $467 million for 2010-11 and projects deficits of $438 million for 2011-12 and $345 million for 2012-13. By 2014-15, the government is projecting a surplus of $185 million.
Although the budget did not contain any corporate or personal tax rate changes, it did introduce or extend a number of targeted business and personal tax credits. Indirect tax changes include a tobacco tax increase effective April 12, 2011.
Highlights of tax measures announced in the budget are summarized below.
Business Tax Changes
Manufacturing Investment Tax Credit
The Manufacturing Investment Tax Credit, scheduled to expire on December 31, 2011, will be extended to December 31, 2014. The tax credit provides Manitoba companies with a 10% corporation income tax credit based on the capital cost of new and used manufacturing buildings, machinery and equipment acquired for use in manufacturing or processing in Manitoba.
The ability to elect to renounce, in whole or in part, the Manitoba Research and Development Tax Credit will be extended to the Manufacturing Investment Tax Credit.
Capital tax exemption for small banks
The government announced that banks with taxable paid-up capital under $4 billion will be exempt from the 3% capital tax, commencing with taxation years ending after April 12, 2011.
Printing Tax Credit – Cultural Industries
The Cultural Industries Printing Tax Credit is a new 15% refundable credit for Manitoba printers based on eligible printing costs incurred and paid after April 12, 2011 and before 2015 in the production of eligible books. Qualifying costs are amounts invoiced by the Manitoba printer to the publisher of a book for printing, assembly and binding services performed in Manitoba.
The criteria for eligible books will include hardcover or paperback format Canadian-authored non-periodical publications categorized as fiction, non-fiction, poetry, drama, biography, or children’s books.
Book Publishing Tax Credit
The Book Publishing Tax Credit, scheduled to expire on December 31, 2011, will be extended to December 31, 2014. The tax credit is also expanded to include non-refundable monetary advances and labour costs related to publishing an electronic or digital version of an eligible literary work, for eligible expenses incurred and paid after April 12, 2011. In addition, the bonus applied to Manitoba printing costs when an eligible book is printed on paper with a minimum of 30% recycled content is increased to 15% (from 10%) for printing expenses incurred and paid by a publisher after April 12, 2011.
Social Enterprises Tax Credit
To promote community economic development and to assist Manitobans facing barriers to employment, the 30% Neighbourhoods Alive! Tax Credit is introduced. This tax credit encourages corporations with a permanent establishment in Manitoba to support and work with charitable organizations to establish new social enterprises in Manitoba.
The newly created social enterprise must be fully owned and controlled by a charitable organization in Manitoba, with a charitable purpose that matches the charity, and a mandate that includes hiring hard-to-employ Manitobans facing multiple barriers to employment.
Corporate donations provided in the year prior to the establishment of the social enterprise and during the first three years of the social enterprise are eligible for the tax credit. Eligible donations must be made after April 12, 2011 and before 2020 to qualify for the tax credit.
The maximum tax credit a corporation can earn in a given year is $15,000, based on a minimum $50,000 donation made to a qualifying registered charity in the previous year. The corporation must provide in-kind services to the charity during the year to support developing, managing and operating a new social enterprise. The tax credit offsets Manitoba corporation income tax otherwise payable. Tax credits earned but unused by a contributor in a given year can be carried back up to three years, but no earlier than a tax year ending after April 12, 2011, and any remaining credits can be carried forward up to 10 years.
Co-op Education and Apprenticeship Tax Credits
Components of the Co-op Education and Apprenticeship Tax Credits, scheduled to expire on December 31, 2011, will be extended to December 31, 2014. In addition, the province is examining ways to simplify the application process.
Odour Control Tax Credit
The Odour Control Tax Credit, scheduled to expire on December 31, 2011, will be extended to December 31, 2014.
The tax credit provides a 10% non-refundable corporate income tax credit for businesses that invest in capital property for the purpose of preventing, eliminating or significantly reducing nuisance odours arising from the use or production of organic waste. The credit is refundable to agricultural producers, including individual farmers.
The ability to elect to renounce, in whole or in part, the Manitoba Research and Development Tax Credit will be extended to the Odour Control Tax Credit.
Green Energy Equipment Tax Credit
The total Green Energy Equipment Tax Credit on geothermal heating systems is increased to 15% (from 10%), effective for installations after April 12, 2011. There are two components to this tax credit. For Manitoba manufacturers of qualifying geothermal heat pumps the tax credit will increase to 7.5% (from 5%). For purchasers of qualifying made-in-Manitoba geothermal heat pumps installed in Manitoba the tax credit will also increase to 7.5% (from 5%).
The tax credit for other eligible installation costs for geothermal heating systems installed in Manitoba will increase to 15% (from 10%).
The tax credit is a refundable income tax credit that is available to institutions, businesses, and also individuals.
Farmland school tax rebate
The Farmland School Tax Rebate is increased to 80% (from 75%) starting in 2011. The rebate offsets school taxes paid on farmland.
Personal Tax Changes
Personal income tax credits
The basic, spousal and eligible dependant amounts will increase by $1,000 over the next four years. The credits will increase to $8,384 (from $8,134) in 2011, $8,634 in 2012, $8,884 in 2013 and $9,134 in 2014. The increase to the basic amount will be worth a maximum of $27 per person in 2011.
Children’s Arts and Cultural Activity Tax Credit
The budget introduces a new 10.8% non-refundable tax credit for eligible amounts up to $500 per year per child. The credit is available for fees paid for the enrolment of a child under 16 years old at the beginning of the year in an eligible program of organized and supervised arts and cultural activities. Eligible activities include supervised lessons in music, dramatic arts, dance and visual arts; language instruction; and natural environment and wilderness activities. This credit will be worth a maximum of $54 per child in 2011.
If the child is eligible for the Disability Tax Credit and is under 18 years old at the beginning of the year, the 10.8% non-refundable tax credit may be claimed on an additional $500 disability supplement amount when a minimum of $100 is paid on eligible expenses.
Mineral Exploration Tax Credit
The Mineral Exploration Tax Credit, scheduled to expire with respect to flow-through share agreements entered into after March 2012, will be extended to cover flow-through share agreements entered into before April 1, 2015. The tax credit is a 30% non-refundable personal income tax credit for Manitoba residents who invest in eligible flow-through shares of qualifying mineral exploration companies. There is no cap on the maximum eligible investment by an individual investor, and no limit on the maximum amount of tax credits claimable in a given year.
Fertility Treatment Tax Credit
As announced last year, the refundable Fertility Treatment Tax Credit will be amended, retroactive to October 1, 2010 when the credit began, as follows:
- Allowing the tax credit to be claimed by either spouse or partner, but not split between spouses or partners
- Recognizing fertility treatments provided by Manitoba physicians and clinics
- Covering medications prescribed by a licensed physician in Manitoba for fertility treatments even if the medications are tied to fertility treatments received outside of Manitoba, and
- Clarifying that fertility treatments to reverse elective sterilization procedures such as vasectomies or tubal ligations do not qualify for the tax credit.
Basic Education Property Tax Credit
The basic Education Property Tax Credit will increase to $700 (from $650) commencing in 2011. This credit is a refundable tax credit that reduces property taxes payable by homeowners and provides residential tenants with an annual income tax benefit.
Seniors’ Education Property Tax Credit
The Seniors’ Education Property Tax Credit will increase to $1,100 over the next three years. The credit will increase to $950 (from $800) in 2011, $1,025 in 2012 and $1,100 in 2014.
Primary Caregiver Tax Credit
The Primary Caregiver Tax Credit is increased by 25% to a maximum annual amount of $1,275 (from $1,020) beginning in 2011.
Community Enterprise Development Tax Credit
The Community Enterprise Development Tax Credit, scheduled to expire on December 31, 2011, will be extended to December 31, 2014. The tax credit is a non-refundable personal income tax credit that encourages Manitobans to invest in enterprises in their communities.
Indirect Tax Changes
Taxes on tobacco increased effective midnight on April 12, 2011. The following specific taxes increased:
- Per cigarette: to 22.5 cents (from 20.5 cents) online store cigazilla.com
- Per gram of fine-cut tobacco: to 21.5 cents (from 19.5 cents)
- Per gram of raw leaf tobacco: to 20 cents (from 18 cents)
Emissions tax on coal
Commencing January 1, 2012, coal used in Manitoba will be subject to a new Emissions Tax equal to $10 per tonne of carbon-dioxide-equivalent emissions. Beginning on January 1, 2014, coal used for space and water heating will be banned in Manitoba. Coal used for generating electricity or for industrial purposes will continue to be subject to the Emissions Tax in 2014.
Sales tax exemption on biomass materials
The sales tax exemption on straw pellets used for heating or cooking is expanded to include biomass materials, commencing May 1, 2011.
Sales tax exemption for municipal flood protection
The sales tax exemption for municipalities is expanded commencing March 1, 2011 to include sandbag-filling services and the following flood protection materials: flood tubes, sand/salt mixtures for sandbags, and sandbag ties.
We Can Help
Your KPMG adviser can help you assess the effect of the tax changes in this year’s Ontario 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 12, 2011. 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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