Canada Tax: Manitoba Tax Rates - 2010 budget tax changes

Manitoba Finance Minister Rosann Wowchuk tabled the province's fiscal 2010 budget on 23 March 2010. The budget contains no new taxes and no tax increases. Instead, it focuses on investing in children, education, health care, infrastructure and training.

The minister anticipates a deficit of $545 million for 2010-2011, and projects a return to balanced budgets by 2014.

Following is a brief summary of the key tax measures.


Business tax measures
Corporate tax rates

No changes are proposed to corporate tax rates. Manitoba's current corporate tax rates in are summarized below:

- Small business tax rate: 0% (Effective 1 December 2010. Prior to that date, the small business tax rate will be 1%)
- General corporate tax rate: 12%
- Manufacturing and processing income tax rate: 12%


Capital tax

No changes are proposed to the capital tax rates.


Other business tax measures

The minister proposed the following business tax measures:

- SR&ED refundable tax credit: Budget 2010 extends the refundable portion of the scientific research and development (SR&ED) tax credit to include eligible in-house SR&ED. Starting in 2011, 25% of the tax credit will be refundable for in-house SR&ED, increasing to 50% of the tax credit in 2012. For 2010, only SR&ED carried on in Manitoba under an eligible contract with a qualifying research institute in the province is eligible for refund.

- Co-op education and apprenticeship tax credit: Starting in 2011, the tax credit will be broadened to include employers hiring high-school and post-secondary level 1 and level 2 apprentices who are not eligible for the federal apprenticeship job creation tax credit.

- Co-operative development tax credit: A new tax credit for co-operatives that make financial contributions toward co-operative development in Manitoba. Program details will be announced later in 2010. Contributions made after September 2010 will be eligible for the tax credit.

- Credit unions and caisses populaires profits tax: With the elimination of Manitoba's small business income tax on 1 December 2010, credit unions and caisses populaires would become largely exempt from Manitoba income tax. Commencing 1 January 2011, credit unions and caisses populaires with a permanent establishment in Manitoba will be subject to a 1% profit tax on taxable income in excess of $400,000. Profits will be defined as Manitoba taxable income as determined under federal income tax rules.

- Film and video production tax credit: This credit was set to expire 1 March 2011, but has now been extended to 1 March 2014. Where principal photography commences after March 2010, production companies will be able to elect to claim either the maximum 65% film tax credit based on eligible labour costs or a new 30% tax credit based on the production costs incurred for labour, goods and services provided in Manitoba that are directly attributable to the production of an eligible film.

- Small business venture capital tax credit: This credit (formerly the community enterprise investment tax credit) was set to expire 31 December 2010, but has been extended to 31 December 2013. The program will be amended to prioritize economic development in accordance with provincial objectives.

- Interactive digital media tax credit: Originally set to expire 31 December 2010, this credit has been extended to 31 December 2013. The program will be amended to prioritize economic development in accordance with provincial objectives. Changes to the program have also been proposed for certificates issued after 23 March 2010.

- Farmland school tax rebate: The scheduled increase to the tax rebate in 2010 from 75% to 80% has been deferred. The rebate will remain at 75%.


Personal tax
Personal income tax rates

The budget does not include any changes to personal income tax rates.

The 2010 personal tax rates are summarized below:

First bracket tax rate: 10.80% on the first $31,000
Second bracket tax rate: 12.75% on the next $36,000
Third bracket txa rate: 17.40% on amounts above $67,000


Personal tax credits

This budget proposes changes to the following personal tax credits / amounts:

- Tuition fee income tax rebate: Beginning in 2010, students resident in Manitoba and attending a post-secondary institution can claim an advance on their tuition fee income tax rebate in the form of a refundable 5% tax credit on tuition and ancillary fees paid after 31 August 2010. The tax credit is claimable by a student even if the tuition and education amount is transferred to a parent or spouse. There is an annual cap of $250 in 2010 and $500 in following years, to a lifetime cap of $5,000. Amounts claimed as an advance will reduce the lifetime maximum of $25,000 under the tuition fee income tax rebate.

- Fitness tax credit: This has been extended to include claims for fitness activities by individuals age 16 through 24. The credit may be claimed by the individual, a spouse or a parent.

- Fertility treatment tax credit: This is a refundable credit equal to 40% of fertility treatment costs paid to an accredited clinic in Manitoba and for prescription costs, net of any amounts reimbursed. Up to $20,000 in annual eligible costs incurred and paid after September 2010 may be claimed for a maximum credit of $8,000. The credit can be shared with a spouse or common-law partner.


Previously announced income tax measures

Certain corporate and personal tax proposals previously announced and subject to balanced budget legislation have not been enacted. These include the following:
- A proposed decrease in the general corporate business tax rate from 12% to 11%.
- A proposed decrease in the personal income tax rate on the lowest income tax bracket from 10.8% to 10.5%.
- Certain proposals to adjust the ranges of the lower- and middle-tier tax brackets.


Other tax measures

Changes pursuant to the Tax Collection Agreement

The Manitoba budget included measures to parallel certain tax changes announced in the 2010 federal budget. These changes include the following:
- Beginning in 2010, a single parent has the option of having the universal child-care benefit treated as income of the dependent child.
- Beginning in 2010, the proceeds from a deceased person's RRSP may be rolled over to the registered disability savings plan of a financially dependent infirm child or grandchild.
- Manitoba has adopted changes to the tax treatment of employee stock options, including the elimination of the double deduction, limitation of deferrals and measures to ensure that the taxes payable do not exceed the proceeds of disposition in cases where the value of the securities has declined.
- Interest on overpaid income taxes will no longer include the two-point premium over the prescribed rate.


Retail sales tax

Effective 1 July 2010, the retail sales tax will be applied to tanning services.


Tobacco tax

The tobacco tax is increased effective midnight on 23 March 2010. The rate will rise from 18.5 cents to 20.5 cents per cigarette, from 17.5 cents to 19.5 cents per gram of fine-cut tobacco, and from 16 cents to 18 cents per gram on raw-leaf tobacco.