Saskatchewan Budget Report 2018 | FBC, Canada's Farm & Small Business Tax Specialist

Saskatchewan Budget Report 2018

Saskatchewan Budget Report 2018

Saskatchewan Budget Report 2018

On April 10, 2018, Finance Minister Donna Harpauer delivered her first budget as Finance Minister.

The Finance Minister pointed to the province’s continued shift away from a reliance on natural resource revenue as a positive sign for the economy: Natural resource revenue is projected to make up 10% — or $1.48 billion — of what the province brings in.

Taxation makes up 51% — $7.2 billion — of projected revenue.  Total revenue is pegged at $14.24 billion while expense is $14.61 billion.

Although the province is relying less on natural resource revenue, a $1 difference up or down in the pegged price of oil ($58.18 for the 2018-19 budget) results in a $16 million swing to government coffers.

If the Canadian dollar is off one cent from the average projected now (78.24 U.S. cents), the province loses or gains $21 million in non-renewable resource revenue.

In order to balance the budget by 2020, the government has focused on both spending cuts (ranging from rollbacks of public sector wages to spending reductions in a wide range of areas) and a slight shift from income taxation to consumption taxation.

Highlights

  • Deficit of $365 million for 2018-19
  • A surplus of $6 million is projected for 2019-20
  • A surplus of $108 million in 2020-21
  • Cancellation of the previously announced 0.5% reduction of personal income tax
  • Introduction of a technology start up incentive and an agriculture incentive

Personal Tax Measures

The budget announced that Saskatchewan will introduce legislation to adjust the province’s effective dividend tax credit rate on non-eligible dividends to 3.333% of taxable dividends for 2018, and to 3.362% of taxable dividends for the 2019 and subsequent years to address federal income tax changes.

In addition, the budget cancels the planned reduction to the provinces personal tax rates by 0.5%, as originally proposed in Saskatchewan’s 2017 provincial budget. The reduction was scheduled to be effective July 1, 2019.

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

Personal Combined Federal/Provincial Top Marginal Rates

 

2018

2019

Interest and regular income

47.50%

47.50%

Capital gains

23.75%

23.75%

Eligible dividends

29.64%

29.64%

Non-Eligible dividends

39.60%

40.37%

Personal tax credits for 2017 will be indexed by 1.000%.  

The maximum tax credit amounts and actual Saskatchewan tax credits for 2017 and 2018 are set out below.

Saskatchewan Non-Refundable Tax Credits

 

2017

2018

Maximum Amount

Saskatchewan Tax Credit

Maximum Amount

Saskatchewan Tax Credit

Basic Personal Amount

$16,065

$1,727

$16,065

$1,727

Spousal Amount

16,065

1,727

16,065

1,727

Eligible dependent amount

16,065

1,727

16,065

1,727

Age amount

4,894

526

4,894

526

Infirm dependent amount

9,464

1,017

9,464

1,017

CPP Contributions

2,564

276

2,594

279

EI Contributions

836

90

858

92

Pension income amount

1,000

108

1,000

108

Disability amount

9,464

1,017

9,464

1,017

Disability supplement

9,464

1,017

9,464

1,017

Tuition amounts

N/A

 

N/A

 

Adoption expenses

N/A

 

N/A

 

Medical expenses

Variable

Variable

Variable

Variable

Medical expenses (other dependents)

Variable

Variable

Variable

Variable

Caregiver amount

9,464

1,017

9,464

1,017

Interest on student loans

Variable

Variable

Variable

Variable

Donations & Gifts
-first $200
- over $200


200
75% of income


22
Variable


200
75% of income


22
Variable

In general, credits are multiplied by 10.75% to arrive at the deduction from Saskatchewan Tax.  In the case of donations and gifts over $200, the credit is 15%

Caregiver Tax Credit

The budget indicates that Saskatchewan will not mirror the federal consolidation of caregiver-related income tax credits into a single Canada Caregiver Credit. 

Saskatchewan will maintain its existing provincial Infirm Dependent Tax Credit and Caregiver Tax Credit.

Corporate Tax Measures

Corporate Tax Rates

The budget did not announce changes to Saskatchewan’s corporate tax rates.  As a result, Saskatchewan’s corporate tax rates remain as follows:

 

Rates

2018

2019

Sask

Federal & Sask Combined

Sask

Federal & Sask Combined

Small-business tax rate

2.0%

12/17%

2.0%

12/17% **

General manufacturing and processing tax rate

10%

25%

10%

25%

General corporate tax rate*

12%

27%

12%

27%

* On first $600,000 of active business income
**The combined federal and provincial rate of 17% applies to active business income in excess of $500,000 to the Saskatchewan threshold of $600,000

Saskatchewan Technology Start-up Incentive

The budget introduces a new 45% non-refundable tax credit for qualifying new investments made in eligible small businesses by individuals and corporations. 

The Saskatchewan Technology Strat-up Incentive is a 2.5-year pilot program that will be available to early stage technology start-ups that:

  1. Develop new technology or apply existing technologies in a way to create proprietary new products, services, or processes that are repeatable and scalable
  2. Have less than 50 employees
  3. Are incorporated and headquartered in Saskatchewan
  4. Have a majority of staff and operations located in Saskatchewan

Accredited investors (e.g., local investment fund managers and financial institutions) and non-accredited investors can participate in the program. 

Non-accredited investors can invest within the confines of Saskatchewan securities legislation. 

Venture capital corporations may also raise capital and make investments under the terms of the program.

Eligible investors that make an approved investment will receive an eligible certificate from Innovation Saskatchewan which may then be used to claim the tax credit. 

An investor may claim up to $140,000 in tax benefits per year, and unused tax credit amounts may be carried forward for up to 4 years after the installment is made. 

The minimum hold period for eligible small business investment is 2 years and the business may not be acquired, go public or leave Saskatchewan within the two-year period.

Saskatchewan Value-added Agriculture Incentive

The budget introduces a 15% non-refundable tax credit on qualifying new capital expenditures. 

The Saskatchewan Value-added Agriculture Incentive will be available for eligible companies that are involved in the physical transformation or upgrading of any raw/primary agricultural product or any agricultural by-product or waste into a new or upgraded product (e.g., pea protein processing, canola seed crushing, oat milling, malt production and cannabis oil processing).

To be eligible, new or existing value-added agriculture facilities must make capital expenditures of at least $10 million related to new or expanded production capacity and must be approved by the Saskatchewan Ministry of Trade and Export Development. 

Redemption of the tax credit will be limited to 20% in year one after the facility begins operations, 30% in year two, and 50% in year three.  

Unused tax credit amounts can be carried forward to subsequent taxation years, up to the tenth year after the facility begins operations.  

The program will end after December 31, 2022

Provincial Sales Tax (PST)

PST Exemption – Used Vehicles

The budget eliminates the exemption for used light vehicles, effective April 11, 2018.

However, the budget restores the trade-in allowance so that, when trading in a vehicle, purchasers pay GST only on the difference in price between the value of the trade-in and the total selling price of the vehicle being purchased. 

This allowance is also effective April 11, 2018.  

The PST does not apply for used vehicles gifted between qualifying family members.

The budget also introduces a $5,000 exemption of individuals that privately purchase a used vehicle and register the vehicle for personal use or farm use. 

This exemption replaces Saskatchewan rules that allowed purchasers of these vehicles to deduct $3,000 from the purchase price when computing the PST.

PST Exemption – Energy Star-certified appliances

The budget eliminates the PST exemption for Energy Star-certified appliances, effective April 11, 2018.

Indirect Tax Changes

Cannabis Tax

The budget states that Saskatchewan intends to enter into a coordinated cannabis tax framework with the government of Canada for a two-year period following the legalization of recreational cannabis. 

Under this agreement, the federal government will impose a federal excise duty of $0.25 per gram of flowing material in a cannabis product and will collect $0.75 per gram additional duty on behalf of the province.

Saskatchewan notes that the PST will also apply to all retail sales of cannabis in the province, and the federal cannabis excise duty rate will be increased to account for interprovincial sales tax rate differentials. 

(Source: Saskatchewan Government)

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