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Government: Recent Strategic Tax Incentives

Tax Incentives: Recent Manufacturing R & D Film & Video Education Mining Federal

Summary of Strategic Tax Incentives announced in the last three Manitoba budgets.

2009

• Corporation Income Tax: The general rate is reduced to 12% in 2009, with a reduction to 11%* planned for the future. The small business tax, already the lowest in Canada at 1%, will be eliminated, December 2010.

• Accelerated Capital Cost Allowance (CCA) Rates:  The 50% accelerated CCA rate on manufacturing machinery and equipment is extended to property acquired in 2010 and 2011. Computer hardware and systems software acquired in 2009 and 2010 qualify for 100% CCA rate.

• Mining tax: The mining tax rate is reduced from 18% to 17% effective July 1, 2009. In addition, a 15% rate will apply when operator profits are between $55 million and $100 million and a 10% rate will apply when operator profits are under $50 million. Transitional tax rates will apply when operator profits are between $50 million and $55 million or between $100 million and $105 million.

• Gasoline & Motive Fuel Tax - Aviation Fuel: Effective July 1, 2009, the aviation fuel tax rate for domestic cargo flights is reduced from 3.2 cents to 1.5 cents per litre and the fuel tax exemption for international cargo flights is expanded, effective July 1, 2009, to include direct and indirect cargo flights to and from the United States. The exemption will be provided through a rebate program.

• Co-op Education & Apprenticeship Tax Credits:  A new refundable credit is now available to employers that hire advanced-level apprentices. The new credit equals 5% of wages paid to the advanced-level apprentice for work performed in Manitoba, net of other government assistance. The maximum credit for one apprentice completing one level is $2,500. There is no limit on the number of apprentices in respect of whom the employer can apply.

• Research & Development Tax Credit: The credit will become refundable after 2009 for qualifying Manitoba corporations that conduct eligible R&D with research institutes in Manitoba on new technologies in biotechnology, medical science, the environment, agriculture, information, communications and computers, as prescribed. Eligible R&D expenses must be incurred in Manitoba under an eligible contract with a qualifying research institute, which will include post-secondary institutions and research institutes in Manitoba, as prescribed.

• Green Energy Equipment Tax Credit:  The credit is extended to solar thermal energy systems purchased for use in Manitoba starting in 2009.

• Mineral Exploration Tax Credit:  The rate of this credit is increased and the program is extended to cover share agreements entered into before April 1, 2012. The credit was introduced in Budget 2002 as a 10% non-refundable personal income tax credit earned when a Manitoba taxpayer purchases flow-through shares in qualifying exploration companies to finance Manitoba mineral exploration projects. The credit will increase in two steps: to 20% on flow-through share agreements entered into from April 1, 2009 until March 31, 2010, and to 30% on flow-through share agreements entered into from April 1, 2010 until March 31, 2012.

• Community Enterprise Investment Tax Credit: The maximum annual approval limit will increase from to $33,000,000 from $16,667,000, commencing in 2009. The credit is a non-refundable income tax credit equal to 30% on a maximum $450,000 investment in equity capital. It is available to both individual and corporate investors who acquire equity capital in emerging enterprises that require larger amounts of capital than community ownership can provide. The credit is available on eligible securities acquired after 2007 and before 2011.
  

• Community Enterprise Development Tax Credit:  The maximum value of issuable shares that a business can apply for under this program is doubled from $500,000 to $1,000,000, commencing in 2009. The credit encourages Manitobans to invest in community-based enterprise development projects. This non-refundable personal income tax credit is equal to 30% on a maximum $30,000 investment in equity capital.

* Subject to requirements of Balanced Budget legislation

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2008

• Corporation Income Tax: The general rate is reduced to 13% in 2008, and will be further reduced to 12% in 2009, with a reduction to 11%* planned for the future. The small business tax will be reduced to 1% in 2009.

• Accelerated Capital Cost Allowance (CCA) for Machinery and Equipment: The 50% straight-line accelerated CCA for manufacturing equipment will be extended for an additional year. After 2010, CCA calculation will return to a declining balance basis, with a 50% rate for 2010, a 40% rate for 2011 and 30% rate for subsequent years.

• Corporation Capital Tax:  CCT is eliminated for manufacturers, effective July 2008.  The general CCT will be phased-out (except for Crown corporations) over the next two years and eliminated by Dec.31, 2010.

• Journeypersons Hiring Incentive added to Co-op Education & Apprenticeship Tax Credits:  The new credit is available to employers that hire recent apprenticeship graduates. The credit is equal to 5% of each journeyperson’s salary/wages (net of other government assistance), up to $2,500 for each of the first two 12-month periods of permanent, full-time employment.

• Manufacturing Investment Tax Credit: The refundable portion of the credit increased from 35% to 70% on January 1, 2008. The credit will be extended until December 31, 2011.

• Film and Video Production Tax Credit: The credit now provides a 5% bonus credit for films with a Manitoba producer. The frequent filming bonus is doubled to 10%, and the percentage of eligible salaries paid to non-residents eligible for the credit has increased to 30% of eligible salaries paid to Manitobans.

• Interactive Digital Media Tax Credit:  Eligible companies that develop and produce interactive digital media projects in Manitoba may receive a refundable corporate income tax credit equal to 40% of Manitoba labour costs on eligible projects.

• Book Publishing Tax Credit: The credit provides a refundable income tax credit equal to 40% of eligible Manitoba labour costs, and a 10% bonus for all books printed on forest-friendly paper.

* Subject to requirements of Balanced Budget legislation

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2007

• Corporation Income Tax: The general rate is reduced to 14.0% in 2007, and will be further reduced to 13.0% in 2008, and to 12.0%* in 2009. The small business rate is reduced to 3.0% in 2007, and will be further reduced to 2.0% in 2008 and to 1.0% in 2009*.

• Corporation Capital Tax: In 2008, the capital tax rate for corporations with taxable paid-up capital between $10 million and $20 million will be reduced to 0.2% from 0.3%; and the rate for corporations with taxable paid-up capital over $21 million, will be reduced to 0.4% from 0.5%. There is a notch provision for total paid-up capital between $20 million and $21 million. The 2007 Budget commits to eliminate the general CCT, except for Crown corporations, by December 31, 2010.

• Capital Cost Allowance for manufacturing equipment: CCA for manufacturing equipment is changed from 30% declining balance to 50% straight line on assets acquired after March 18, 2007 and before 2009; CCA for Manufacturing buildings is increased from 4% to 10% on assets acquired after March 18, 2007.

• Health and Post Secondary Education Levy (Payroll Tax): Effective January 1, 2008, the exemption threshold will increase to $1.25 million, and the $2.0 million threshold will increase to $2.5 million.

• Tax Credit Program adjustments:

  • Manufacturing Investment Tax Credit -- The refundable portion will be increased to 50% of earned credits for qualified property purchased on or after January 1, 2008.

  • Green Energy Manufacturing Tax Credit -- A new 10% refundable credit for purchase of new equipment used to generate renewable energy

  • Film & Video Production Tax Credit -- is extended to March 1, 2011.

  • Community Enterprise Development Tax Credit -- is broadened to include a new 30% provincial non-refundable income tax credit for individuals and corporations who invest directly in emerging enterprises that require larger amounts of investment capital than community ownership could provide. The credit will apply to eligible securities acquired on or after January 1, 2008

* Subject to requirements of Balanced Budget legislation