To encourage research and development in Manitoba, the Research and Development Tax Credit provides a 20% non-refundable tax credit applied against Manitoba corporate income tax payable. Eligible corporations must incur qualifying scientific research and development expenditures (as defined for federal income tax purposes) in Manitoba.
The Manitoba R&D Tax Credit is administered by Canada Revenue Agency, and firms eligible for the provincial credit will also be eligible for the federal Scientific Research and Experimental Development Tax Credit, which may be refundable in certain circumstances.
The amount deductible against Manitoba income tax will be lesser of the Manitoba R&D Tax Credit and the Manitoba Corporate Income Tax otherwise payable. Any unused credit will be available for carry-forward for up to ten years, and carry-back for up to three years.
The Manitoba R&D Tax Credit will reduce qualified expenditures for the purposes of the Federal Income Tax Act, including the refundable Investment Tax Credit. Where a corporation does not anticipate having taxable income and prefers to make use of the refundable Federal tax credit provisions, it may renounce its rights to the provincial credit (in whole or in part) in order to maximize its Federal refund.
The credit is refundable for eligible expenditures incurred after 2009 by a corporation with a permanent establishment in Manitoba and where the R&D is carried on in Manitoba under an eligible contract with a qualifying research institute.
Budget 2010 extended refundability of this tax credit to in-house R&D expenditures (i.e. R&D not undertaken under contract with an institute in Manitoba) as follows:
The 2013 federal budget removed capital expenditures from the federal investment tax credit base, but Manitoba Budget 2013 protected the Manitoba credit from this federal tax cutting measure. The federal budget also reduced to 80% the claimable portion of contract payments; Manitoba retained full eligibility for contract payments to eligible institutes only. Manitoba reflected the further federal change reducing the prescribed proxy amount to recognize overhead costs attributable to eligible projects, from 65% to 60% of direct labour costs in 2013, and to 55% starting in 2014.
For more information on the Manitoba Research and Development Tax Credit, please visit the Manitoba Department of Finance at:
or visit Canada Revenue Agency at: http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html