2016 Manitoba Budget Report | FBC, Canada's Farm & Small Business Tax Specialist

2016 Manitoba Budget Report

2016 Manitoba Budget Report

Correcting the Course

On May 31, 2016, the Honourable Cameron Friesen presented his first budget as Minister of Finance and the first budget of the newly elected Progressive Conservative government, elected on April 19, 2016.

Highlights

  • Deficit of $1.011 billion projected for 2015-16
  • Deficit of $911 million forecast for 2016-17
  • Personal tax brackets and basic credit to be indexed
  • Seniors’ School Tax Rebate to be subject to clawback

The new government reports that the financial situation for the province has worsened and the revised budget deficit for the 2015/16 fiscal year is now $1.011 billion which is up from the $422 million deficit predicted in last year’s budget.

The Finance Minister also stated that the province’s debt has grown from $10 billion to $21 billion during the last 8 years.

The government predicts that with a careful approach, it will be able to balance the books during its second term in office.

In terms of fiscal initiatives, the government does make it clear that it will take time to enhance key areas such as health care, education, family assistance and building a stronger economy due to the province’s fiscal position.

On the health front, measures will be introduced to cut ambulance fees in half, reduce wait times and address the shortage of personal care home beds.  

Overall, the budget provides for a 3.8% increase in health care expenditures. Funding for families and education will also increase.

Personal Tax Measures

Manitoba did not announce any changes to its personal income tax rates for 2016.  

As a result, Manitoba’s combined federal and provincial top marginal rates for income, capital gains and dividends are as follows:

Combined Federal/Provincial Top Marginal Tax Rates

 

2015

2016

Interest and regular income 46.4% 50.4%
Capital gains 23.2% 25.2%
Eligible dividends 32.3% 37.78%
Non-Eligible dividends 40.8% 45.69%

Indexing Personal Income Tax Brackets

Beginning in 2017, Manitoba tax brackets will be increased in 2017 by the Manitoba Consumer Price Index (CPI) for the 12-month period of October 2015 to September 2016.

It will continue to be indexed in subsequent years.

The index factor for 2017 will be known by November 2016, following the release of provincial inflation figures by Statistics Canada.

Indexing the Basic Personal Amount

The Manitoba Basic Personal Amount (BPA) will be increased in 2017 by the Manitoba CPI for the 12-month period of October 2015 to September 2016.

Like the tax brackets, the BPA will continue to be indexed in subsequent years. 

The 2016 BPA is currently $9,134 and the new indexed BPA will be known by November 2016, following the release of provincial inflation figures by Statistics Canada.

Seniors’ School Tax Rebate

For the 2016 and subsequent property tax years, the maximum Seniors’ School Tax Rebate limit of $470 for eligible seniors is retained.

The rebate will now be calculated on net school taxes paid after the Basic and Seniors’ Education Property Tax Credits (EPTC) are taken into account.

In addition, the rebate will be reduced by 2.0% of net family income for senior households over $40,000.

The rebate will now be delivered as part of the annual income tax return. Administration of the rebate through the income tax system will permit retroactive claims of up to 3 years, but no earlier than the 2016 Rebate.

Eligible seniors below the $40,000 income-tested threshold will still be eligible for a full rebate depending on net school tax paid.

Senior households with a family net income of $63,500 and over will no longer receive the rebate.

Personal Tax Credits for 2016

The maximum tax credits amounts and actual Manitoba tax credits for 2015 and 2016 are set out below.

Manitoba Non-Refundable Tax Credits

 

2015

2016

Maximum Amount

Manitoba Tax Credit

Maximum Amount

Manitoba Tax Credit

Basic Personal Amount

$9,134

986

$9,134

986

Spousal Amount

9,134

986

9,134

986

Eligible dependent amount

9,134

986

9,134

986

Age amount

3,728

403

3,728

403

Infirm dependent amount

3,605

389

3,605

389

CPP Contributions

2,480

268

2,544

275

EI Contributions

931

100

955

103

Pension income amount

1,000

108

1,000

108

Disability amount

6,180

667

6,180

667

Disability supplement

3,605

389

3,605

389

Tuition and education amounts

Variable

Variable

Variable

Variable

Adoption expenses (max)

10,000

1,080

10,000

1,080

Medical expenses

N/A

Variable

N/A

Variable

Medical expenses (other dependents)

Variable

Variable

Variable

Variable

Caregiver amount

3,605

389

3,605

389

Interest on student loans

Variable

Variable

Variable

Variable

Donations & Gifts
-first $200
- over $200


200
75% of income


21.60
Variable


200
75% of income


21.60
Variable

In general, credits are multiplied by 10.8% to arrive at the deduction from Manitoba Tax.  In the case of donations and gifts over $200, the credit is 17.40%

Corporate Tax Measures

Corporate Tax Rates (No Change)

The budget did not announce any changes to the corporate tax rate.

As a result, Manitoba’s corporate income tax rates effective January 1, 2016 is as follows:

Corporate Income Tax Rates — As of January 1, 2016

 

Manitoba

Combined Federal
and Manitoba

General

12%

27%

M&P

12%

27%

Small business1

0.0%

10.5%

1On the first $450,000 of active business income (increases to $500,000 on January 1, 2017)

Small Business Venture Capital Tax Credit

This 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.

The Small Business Venture Capital Tax Credit is scheduled to expire December 31, 2016. 

Budget 2016 will be extended 3 years to the end of 2019. The province will be reviewing the tax credit program parameters to improve accessibility for Manitoba companies.

Interactive Digital Media Tax Credits

Budget 2016 indicated that the Interactive Digital Media Tax Credit will be reviewed to consider enhancements to the eligibility criteria. 

This refundable corporation income tax credit is currently targeted at companies that develop and produce eligible interactive digital media projects in Manitoba.  

The credit is equal to 40% of the remuneration paid to Manitobans on eligible projects approved by the Department of Growth, Enterprise and Trade.

Green Energy Equipment Tax Credit

The budget expands the Green Energy Equipment Tax Credit to include gasification equipment and equipment for co-generation of energy using biomass fuel.

This refundable tax credit is targeted at the production and purchase of machinery and equipment used to generate renewable energy in Manitoba.  

Geothermal heating equipment is currently eligible for a maximum 15% credit and solar thermal heating equipment is eligible for a 10% credit.  

As a result of these enhancements, gasification and biomass fuel energy equipment installed in Manitoba and used in a business are eligible for a 15% credit.

Other Measures (Not related to income tax)

Enhanced Enforcement and Administration

The budget announces that Manitoba will enhance enforcement and administration measures under the Tax Administration and Miscellaneous Taxes Act and the Retail Sales Tax Act

No further details were provided.

Other Related Provisions

The Balanced Budget, Fiscal Management and Taxpayer Accountability Act will be repealed and replaced with legislation which will suspend current balanced budget requirements but will restore the right of taxpayers to vote on major tax increases.

Sales Tax Measures

Vendor Registration

The budget provides that out-of-province businesses that hold an inventory of taxable goods in Manitoba that are for sale to Manitoba customers must register to collect and remit retail sales tax.

This measure is effective June 1, 2016.

Retail Sales Tax

The following retail sales tax changes will take effect on June 1, 2016.

Museum and Art Gallery Exhibits

The sales tax exemption for temporary museum and art gallery exhibits brought into the province will be expanded to include permanent exhibit acquisitions.

This exemption will apply to museums and art galleries whose revenue is greater than 50% by donations, grants or government funding.

Manufacture and Installation of Kitchen Cabinets

Contractors who manufacture and install residential kitchen cabinets can choose to calculate the sales tax payable on their manufacturing costs by using either the general manufacturing formula for goods installed into real property or a simplified formula of 70% of the total contract price (excluding any GST and sales tax previously paid on materials).

Out of Province Businesses

An out of province business must register to collect and remit retail sales tax if it holds an inventory of taxable goods in the province, available for sale to Manitoba customers.

Tax Credit Review

The Budget noted that Manitoba Finance will undertake a value-for-money review of the province’s personal and business tax credit system.

How Manitoba Compares

The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to May 31, 2016.

 

 

2016 Corporate Tax Rates

 

 

Top 2016 Personal Rates

General
%

M&P
%

Small Business
%

2016 Prov. Sales Tax

B.C.

47.70

26.00

26.00

13.00

7.00

Alta.

48.00

27.00

27.00

13.50

-

Sask.

48.00

27.00

25.00

12.50

5.00

Man.

50.40

27.00

27.00

10.50

8.00

Ont.

53.53

26.50

25.00

15.00

8.00(5)

Qué.

53.31

26.90

26.90

18.50(3) 

9.975(6)

N.B.

53.30

29.00(1) 

29.00(1)

14.00(1)

8.00(7)

N.S.

54.00

31.00

31.00

13.50

10.00(5)

P.E.I.

51.37

31.00

31.00

15.00

9.00(8)

N.L.

49.80

30.00(2)

30.00(2)

13.50

8.00(7)

Yukon

48.00

30.00

17.50

13.50(4)

-

N.W.T.

47.05

26.50

26.50

14.50

-

Nunavut

44.50

27.00

27.00

14.50

-

  1. Effective April 1, 2016, the general corporate tax rate increased from 27% and the small business tax rate decreased from 14.5%
  2. Effective January 1, 2016, the general corporate tax rate increased from 29% and the M&P rate increased from 20% due to the elimination of the Manufacturing and Processing Profits Tax Credit.
  3. Quebec provides a rate reduction for manufacturing SMEs.  Where certain conditions are met, the maximum reduction available is 4%, for a combined rate of 14.5%.  Note that a lessor reduction may be available to certain manufacturing SMEs where not all conditions are met.
  4. The tax rate for M&P profits eligible for the small business deduction is 12%.
  5. As part of the HST (combined rates are 15% in Nova Scotia and 13% in Ontario).
  6. The QST system is harmonized with the GST, though two separate tax systems remain – the GST and the amended QST.
  7. Effective July 1, 2016, the provincial portion of the HST in New Brunswick and Newfoundland & Labrador will increase to 10%, which will increase the combined HST rate from 13% to 15%.
  8. Effective October 1, 2016, the provincial portion of the HST in Prince Edward Island will increase to 10%, which will increase the combined HST rate from 14% to 15%. 

(Source: Manitoba Government)

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