Tax Alert Canada. Manitoba budget

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1 2017 Issue No April 2017 Tax Alert Canada Manitoba budget EY Tax Alerts cover significant tax news, developments and changes in legislation that affect Canadian businesses. They act as technical summaries to keep you on top of the latest tax issues. For more information, please contact your EY advisor or EY Law advisor. Budget 2017 puts Manitoba on a road to recovery with tax relief, no tax increases and no new taxes. And in keeping with the commitment we made to Manitobans, our government is continuing to invest in the services that they depend upon, with a 2.1% increase to core government spending in Manitoba s tax credit system is among the most complex and diversified in Canada, with more than 30 provincial tax credits. This adds to the compliance costs incurred by Manitobans and the administrative fees that our province must pay to the federal government. Our government is focused on ensuring an affordable and competitive tax environment that increases productivity, and encourages economic growth and job creation. Manitoba Minister of Finance Cameron Friesen budget speech On 11 April 2017, Manitoba Finance Minister Cameron Friesen tabled the province s fiscal budget. While the budget contains several tax measures affecting individuals and corporations, it contains no new taxes and no tax increases. The minister anticipates a deficit of $840m for Following is a brief summary of the key tax measures.

2 Business tax measures Corporate tax rates No changes are proposed to the Manitoba corporate tax rates or the $450,000 small-business limit. Manitoba s 2017 corporate tax rates are summarized in Table A. Table A: Corporate tax rates 2017 MB Federal and MB combined Small-business tax rate 0.0% 10.5% General corporate tax rate 12.0% 27.0% Research and Development Tax Credit The budget reduces the Research and Development Tax Credit from 20% to 15% for eligible expenditures made after 11 April, Specific to research and development performed under a contract with a prescribed Manitoba institution (including post-secondary institutions), this credit is 100% refundable. The credit is 50% refundable in all other instances. Paid Work Experience Tax Credit Starting with the 2017 tax year, the budget eliminates the eligibility of Crown corporations and other provincial government entities for the Paid Work Experience Tax Credit. However, the eligibility of other entities is not affected. Manufacturing Investment Tax Credit The budget reduces the non-refundable portion of the Manufacturing Investment Tax Credit (MITC) from 2% to 1% for qualifying property acquired after 11 April, The 8% refundable portion remains unchanged. Corporation Capital Tax The budget eliminates the capital tax deduction effective for fiscal years ending after 30 April, Tax credits proposed for elimination Co-operative Development Tax Credit: The budget eliminates this tax credit for contributions made after 11 April, The Odour Control Tax Credit: The budget eliminates this tax credit for expenditures made after 11 April, Nutrient Management Tax Credit: The budget eliminates this tax credit for expenditures made after 11 April, The Riparian Tax Credit: The budget eliminates this tax credit effective immediately. Manitoba budget

3 The Neighbourhoods Alive! Tax Credit: The budget eliminates this tax credit effective immediately. The Data Processing Investment Tax Credits: The budget eliminates this tax credit effective immediately. For each of the above-noted credits, with the exception of the Neighbourhoods Alive! Tax Credit, unused credits remain available to be carried forward and are not impacted by these changes. Other technical and administrative tax measures The legislation respecting the Seniors School Tax Rebate and the Volunteer Firefighter and Search & Rescue Tax Credits is being amended to ensure that these tax credits are targeted to Manitoba residents. The budget enhances the enforcement and administration measures under The Tax Administration and Miscellaneous Taxes Act and The Retail Sales Tax Act. Extensions to existing tax credits The budget has extended the following tax credits: The Manufacturing Investment Tax Credit has been extended to 31 December, The Mineral Exploration Tax Credit has been extended to 31 December, The Book Publishing Tax Credit has been extended to 31 December, The Interactive Digital Media Tax Credit has been extended to 31 December, Personal tax Personal income tax rates The budget does not include any changes to personal income tax rates. The 2017 Manitoba personal tax rates are summarized in Table B. Table B: Manitoba personal tax rates 2017 First bracket rate Second bracket rate Third bracket rate $0 to $31,465 $31,466 to $68,005 Above $68, % 12.75% 17.40% For taxable income in excess of $91,831, the 2017 combined federal-manitoba personal income tax rates are outlined in Table C. Table C: Combined 2017 federal and Manitoba personal tax rates Bracket Ordinary income* Eligible dividends Non-eligible dividends $91,832 to $142, % 28.12% 37.55% $142,354 to $202, % 32.26% 41.06% Above $202, % 37.78% 45.74% *The rate on capital gains is one-half the ordinary income tax rate. Manitoba budget

4 Personal tax credits This budget proposes changes to the following personal credits/amounts: Tuition Fee Income Tax Rebate The budget proposes to phase out the Tuition Fee Income Tax Rebate. Starting in 2017, the annual maximum rebate claim is the least of the Manitoba income tax payable, 10% of eligible tuition fees and $500. This rebate is fully eliminated for the 2018 tax year and any unclaimed rebate credits will expire. Tuition Fee Income Tax Rebate Advance For tuition and ancillary fees paid during school terms beginning after April 2017, the budget eliminates the Tuition Fee Income Tax Rebate Advance. Primary Caregiver Tax Credit The Primary Caregiver Tax Credit is a refundable income tax credit available to unpaid caregivers providing assistance to care recipients. The budget limits the maximum annual credit that can be claimed by a caregiver to $1,400 in 2017 and future years. The budget prohibits retroactive claims for this credit. The eligibility for this credit will instead be based on the date of the application submission to the assessing authority. Political Contribution Tax Credit Beginning in 2018, the budget increases the Political Contributions Tax Credit from $650 to $1,000 by increasing the maximum eligible contribution amount from $1,275 to $2,325. Learn more For more information, please contact your EY or EY Law advisor or one of the following professionals: Jason Burbank jason.a.burbank@ca.ey.com Blair Evans blair.a.evans@ca.ey.com Joe Ng joe.ng@ca.ey.com James Jaworsky james.jaworsky@ca.ey.com Kartik Nurpuri kartik.nurpuri@ca.ey.com And for up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/budget. Manitoba budget

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