FBC – Canada's Small Business Tax Specialist

Budget 2010 projects a summary deficit of $545 million for the current fiscal year, ending a string of ten straight balanced budgets. 

The deficit is expected to be eliminated over the course of Manitoba’s five-year economic plan that will see the province return to surplus by budget 2014.

The budget contained a number of tax measures for individuals and businesses, which are summarized below. 

Personal Tax Changes 

Rate Reductions Delayed – The 2007 Budget announced plans to reduce personal income tax rates in 2010 and 2011, subject to balanced budget requirements.  However, Budget 2010 has delayed these reductions so that rates and brackets for 2010 will remain the same as in 2009.

Tuition Fee Income Tax Rebate Advance Introduced – The Tuition Fee Income Tax Rebate will be amended to allow students resident in Manitoba and attending a post-secondary institution to claim a Tuition Fee Income Tax Rebate Advance in the form of a refundable 5% tax credit on tuition and fees paid after August 31, 2010.  The tax credit is claimable by the 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 with a lifetime Advance cap of $5,000.  Any Advance claimed will reduce the lifetime maximum of $25,000 under the Rebate following graduation.  An individual claiming a Rebate in a given year is not eligible to claim the Advance.

Fitness Tax credit Expanded – Starting in 2011, the Children’s Fitness Tax Credit is renamed the Fitness Tax Credit and is expanded to include claims for fitness activities for young people ages 16 to 24.  The annual cost of eligible fitness activities up to $500 can be claimed by the young adult, or by a spouse or parent that provides an annual benefit of $54 per young adult as a reduction to Manitoba income tax otherwise payable for the year.  The annual benefit is doubled to $108 for young adults with a disability, as is currently the case for children.

Fertility Treatment Tax Credit Introduced – Manitoba will offer a new Fertility Tax Credit in the form of a 40% refundable personal income tax credit in respect to costs paid to an accredited clinic in Manitoba and for prescription drugs, net of any reimbursements such as private health care coverage.  Eligible costs must be claimable as a medical expense under Federal income tax rules.  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.

Business Tax Changes

General Corporate Rate Reductions Postponed – The 2008 Budget announced the intention to reduce the general corporate income tax rate to 11% at a date to be determined.  The 2010 Budget announced that the reduction to 11% will be postponed until the economy strengthens.

Film and Video Production Tax Credit Extended – The Film and Video Production Tax credit is extended another three years to March 1, 2014.  Also, starting with productions which start principal photography after March 2010, production companies can elect to claim either the maximum 65% film tax credit based on eligible labour costs or a new 30% tax credit based on production costs incurred and paid for labour, goods and services provided in Manitoba that are directly attributable to the production of an eligible film.  Additional administrative changes are also proposed, effective March 24, 2010. 

Research and Development (R&D) Tax Credit Enhanced – The refundable portion of the R&D Tax Credit will be expanded to include in-house R&D.  Starting in 2011, one-quarter of the credit for in-house R&D will be refundable.  This will be increased to one-half in 2012.

Co-op Education and Apprenticeship Tax Credits Expanded – Starting in 2011, the Co-op Education and Apprenticeship Tax Credits will be expanded to include employers who are not eligible for the federal Apprenticeship Job Creation Tax Credit.  This includes tax-exempt employers and taxable employers of non-Red Seal apprentices.  This new tax credit will equal 10% of net wages and salaries paid to an apprentice, up to a maximum of $2,000.

Small Business Venture Capital Tax Credit Extended – The Community Enterprise Investment Tax Credit will be renamed the Small Business Venture Capital Tax credit and is extended to December 31, 2013.

Interactive Digital Media Tax Credit Extended – The Interactive Digital Media Tax Credit is extended another three years to December 31, 2013.  Several administrative changes are also proposed for certificates of eligibility and tax credit certificates issued after March 23, 2010.

Interest on Overpaid taxes – Interest on overpaid taxes is currently set at 2 percentage points above the government T-Bill rate.  This two percentage point premium will be eliminated.

Other Changes

Riparian Tax Credit Extended – To encourage sound management of lakeshores, river and stream banks in agricultural areas, the Riparian Tax Credit was established for the property taxes levied on riparian land. The application deadline for the Riparian Tax Credit will be extended to permit another intake group running from 2010 through 2014 with an application deadline of June 30, 2010.

Farmland School Tax Rebate – The scheduled increase of the Farmland School Tax Rebate to 80% in 2010 is deferred with the rate remaining at 75%.

Small Business Retail Sales Tax (RST) Registration – Small businesses with annual taxable sales under $10,000 will no longer be required to register and collect RST.  

Used Motorcycles, Snowmobiles and All Terrain Vehicles (ATVs) – Effective June 1, 2010, the application of RST on the private purchase of used motorcycles, snowmobiles and ATVs will be aligned with the existing valuation program for the private purchase of used vehicles.  RST will be payable on the greater of the purchase price or the current established resale value.

Tanning Services – Effective July 1, 2010, RST will apply to all tanning services, except for air brush and spray-on tanning services.

Tobacco Tax – Effective midnight March 23, 2010, the tobacco tax rate on cigarettes is increased by 2 cents from 18.5 cents to 20.5 cents each.

Biodiesel Exemption – Effective April 1, 2010, the motive fuel tax exemption for biodiesel will be replaced with a production grant.  Effective this date, all biodiesel blends will be subject to motive fuel tax at 11.5 cents per litre. 

Phased-in Measures (previously announced)

Exemption for Bio-fuel (2006 Manitoba Budget) – Effective March 7, 2006, Manitoba-produced bio-fuel that meets the ASTM-6751 standard is exempt from sales tax for a five-year period, ending March 31, 2011.  [Note: See the 2010 budget announcement above that repeals the motive fuel tax exemption for biodiesel effective March 31, 2010.]

Tax Rate and Bracket Changes (2007 Manitoba Budget) – The middle income tax rate is reduced from 13.0% to 12.75% and the top income threshold is raised from $65,000 to $66,000, effective January 1, 2008.  Subject to budget balancing requirements, there is a multi-year plan to raise the middle and top income tax brackets to $35,000 and $70,000 respectively and reduce the first tax bracket rate to 10.5% by 2011 as follows:

[Note: See the Budget 2010 announcement above delaying the tax rate reductions planned for 2010.]

Community Enterprise Investment (CEI) Tax Credit (2007 Manitoba Budget) – The CEI tax credit is introduced to complement the Community Enterprise Development (CED) tax credit. It is a new 30% provincial non-refundable tax credit for individuals and corporations in Manitoba who invest a minimum of $20,000 directly in an emerging enterprise (start-ups and early expansions) on or after January 1, 2008 and before 2011.  The maximum annual tax credit claimable by an investor is $45,000 based on a $150,000 investment.  The 2008 budget confirms that the maximum annual investment limit by an investor is $450,000 which earns a $135,000 tax credit. This change does not affect the maximum amount of the tax credit deductible against Manitoba income tax otherwise payable in a given year ($45,000). Qualifying securities will not qualify as an eligible RRSP investment.  The CEI Tax Credit is eligible for a three-year carry-back (but not before 2008) and a ten-year carry-forward.  There is a penalty of 30% of the investment if the investment is returned as a return of capital within three years. [Note: See the 2010 Budget announcement above that renames this credit to the Small Business Venture Capital Tax Credit and extends it to December 31, 2013.]   

Enterprise Development (CED) Tax Credit (2008 Manitoba Budget) – The 30% CED tax credit is extended for another three years, to the end of 2011.

Manufacturing Investment Tax Credit (2008 Manitoba Budget) – This credit, scheduled to expire on June 30, 2009, is extended to December 31, 2011.

Book Publishing Tax Credit (2008 Manitoba Budget) – A new refundable tax credit was introduced for book publishers, equal to 40% of eligible Manitoba labour costs incurred and paid after April 9, 2008 and before 2012.  The maximum tax credit claimable by a publisher is $100,000 per year.  An eligible publisher must have a permanent establishment or be resident in Manitoba, must pay at least 25% of its remuneration to employees who are Manitoba residents, and must have recently published at least two qualifying books.  A qualifying book is a new, non-periodical publication that is Canadian-authored, and is published after April 9, 2008, and before 2012.  

Corporation Capital Tax (CCT) (2008 Manitoba Budget) – The CCT is eliminated for manufacturing and processing corporations effective July 1, 2008.  For other corporations subject to the general CCT, elimination as of December 31, 2010 is confirmed subject to the following rate reduction:

• For corporations with total paid-up capital over $21 million, the rate will be reduced from 0.4% to 0.3% for fiscal years starting after January 1, 2009, and to 0.2% for fiscal years starting after January 1, 2010;
• For corporations with total paid-up capital between $10 million and $20 million, the rate will be reduced from 0.2% to 0.1% for fiscal years starting after January 1, 2009, and to zero for fiscal years starting after January 1, 2010.  Special provisions apply to corporations with total paid-up capital between $20 and $21 million.  

Dividend Tax Credit (2009 Manitoba Budget) – The dividend tax credit on ineligible taxable Canadian dividends is reduced to 2.5% in 2009 (from 3.15%) and further reduced to 1.75% in 2011.

Manitoba Mineral Exploration Tax Credit (METC) (2009 Manitoba Budget) – The Manitoba METC is extended by three years, to flow-through share agreements entered into before April 1, 2012.  Also, the tax credit rate has been increased from 10% to 20% for flow-through share agreements into after March 31, 2009 and before April 1, 2010.  The credit will be further increased to 30% for agreements entered into after March 31, 2010 and before April 1, 2012.

Small Business Tax Rate (2009 Manitoba Budget) – Effective December 1, 2010, the small business rate will be reduced from 1% to zero.  Manitoba Finance will release a discussion paper and start consultations with the private sector on how best to treat non-refundable tax credits carried forward after 2010 and earned after 2010 by corporations no longer paying Manitoba corporate income tax because of the zero rate.

Research and Development (R&D) Tax Credit (2009 Manitoba Budget) – The R&D Tax Credit will be made refundable for eligible expenditures incurred after 2009 by a corporation with a permanent establishment in Manitoba.  Eligible expenditures must be carried on in Manitoba under an eligible contract with a qualifying research institute. The refundable credit will benefit qualifying corporations conducting R&D in prescribed priority areas involving biotechnologies, and new technologies in such fields as medical science, the environment, agriculture, information, communications and computers.

Co-op Education and Apprenticeship Tax Credit (2009 Manitoba Budget) – The Co-op Education and Apprenticeship Tax Credit has been extended to December 30, 2011.

Odour Control Tax Credit (2009 Manitoba Budget) – The Odour Control Tax Credit, which was scheduled to expire at the end of 2009, has been extended to the end of 2011.