Canada | Manitoba Budget 2024-25 includes certain business tax credits

On 2 April 2024, Manitoba Finance Minister Adrien Sala tabled the province's fiscal 2024-25 budget. The budget contains several tax measures affecting individuals and corporations. The budget contains no increases in personal or corporate income tax rates but does introduce a phase-out of the basic personal amount above a certain net income level, beginning in 2025, as well as a few business tax credits.

The minister anticipates a deficit of CA$796m for 2024-25 and projects deficits for each of the following two years, before returning to a small surplus in 2027-28.

Following is a brief summary of the key tax measures.

Business tax measures

Corporate income tax rates

No changes are proposed to the corporate income tax rates or the CA$500,000 small-business limit.

Manitoba's 2024 corporate income tax rates are summarized in Table A.

Table A — 2024 Manitoba corporate income tax rates¹

1 The rates represent calendar-year-end rates unless otherwise indicated.

2 The federal corporate income tax rates for manufacturers of qualifying zero-emission technology are reduced to 7.5% for eligible income otherwise subject to the 15% federal general corporate income tax rate or 4.5% for eligible income otherwise subject to the 9% federal small-business corporate income tax rate. These reductions are not reflected in the combined federal and Manitoba rates above.

3 An additional federal tax applies to banks and life insurers at a rate of 1.5% on taxable income (subject to a CA$100m exemption to be shared by group members).

Other business tax measures

The minister also proposed the following business tax measures:

• Rental housing construction tax credit — A new rental housing construction tax credit will be effective for the 2024 tax year. A credit of CA$8,500 will be available for the construction of new market-rate rental units, and a credit of CA$13,500 will be available for units classified as affordable rental units that are maintained as affordable units for at least 10 years. For nonprofit organizations, the credit will be fully refundable. For other businesses, CA$8,500 will be refundable on all types of units and a further CA$5,000 will be available as a nonrefundable tax credit for units classified as affordable units, over a period of 10 years.

• Data processing investment tax credits — Data processing investment tax credits will be eliminated, effective for the 2025 tax year.

• Cultural industries printing tax credit — The cultural industries printing tax credit will be extended by one year, now expiring on 31 December 2025 (rather than on 31 December 2024).

Personal tax

Personal income tax rates

The budget does not include any changes to personal income tax rates.

The 2024 Manitoba personal income tax rates are summarized in Table B.

Table B — 2024 Manitoba personal income tax rates

The budget confirmed that the tax bracket thresholds will return to annual indexing beginning in 2025.

For taxable income exceeding CA$111,733, the 2024 combined federal-Manitoba personal income tax rates are outlined in Table C.

Table C — Combined 2024 federal and Manitoba personal income tax rates

1 The rate on capital gains is one-half the ordinary income tax rate.

2 The federal basic personal amount comprises two elements: the base amount (CA$14,156 for 2024) and an additional amount (CA$1,549 for 2024). The additional amount is reduced for individuals with net income exceeding CA$173,205 and is fully eliminated for individuals with net income exceeding CA$246,752. Consequently, the additional amount is clawed back on net income exceeding CA$173,205 until the additional tax credit of CA$232 is eliminated; this results in additional federal income tax (e.g., 0.32% on ordinary income) on net income between CA$173,206 and CA$246,752.

Personal tax credits

This budget proposes changes to the following personal credits/amounts:

• Basic personal amount — Beginning in the 2025 tax year, the basic personal amount (projected to be CA$16,206 for 2025) will be phased out for individuals earning net income between CA$200,000 and CA$400,000, with Manitoba residents earning more than CA$400,000 no longer entitled to the basic personal amount.

Other personal tax measures include:

• Renters tax credit — For the 2025 tax year, the renters tax credit will be increased to a maximum of CA$575, and the seniors top-up will be increased to a maximum of CA$328.

• Fertility treatment tax credit — For the 2024 tax year, the maximum annual eligible expense that may be claimed under the fertility treatment tax credit is CA$40,000 (increased from CA$20,000), resulting in a maximum annual refundable personal income tax credit of CA$16,000 (increased from CA$8,000).

Retail sales tax measures

The minister made the following retail sales tax announcements:

• Sales tax registration threshold — Effective 1 January 2024, the government will increase the sales tax registration threshold to CA$30,000 (from CA$10,000) of taxable sales. Businesses with sales below this increased threshold will no longer be required to register and collect sales tax in Manitoba.

• Sales tax commissions — Effective for filing periods ending after April 2024, the province will no longer provide sales tax commissions to businesses reporting less than CA$3,000 in sales tax in a filing period.

Other tax measures

School tax-related credits

Beginning in 2025, the new homeowners affordability tax credit of up to CA$1,500 will replace the existing school tax rebate and education property tax credit on principal residences. Several other changes are also being made to streamline the current system of school tax credits and rebates, specifically impacting seniors, farm property owners and commercial property owners.

Gas tax

The zero cents per liter gas tax rate (for gasoline, diesel and marked gasoline) implemented on 1 January 2024 that was set to expire on 30 June 2024 will be extended for an additional three months, now expiring on 30 September 2024.

Vaping tax

The budget confirms that Manitoba will sign a Coordinated Vaping Product Taxation Agreement with the federal government, under which the federal government will administer and collect excise duty on vaping products and share the resulting revenues with the province. The new vaping tax is expected to begin applying in Manitoba on 1 January 2025.

Administrative tax measures

The budget announced several administrative measures, including the following:

• Qualified disability trusts — A new recovery tax will negate preferential treatment where trust funds are not going to the intended qualified beneficiary.

• Land transfer tax — New measures will allow administrative penalties to be levied for certain instances of noncompliance, such as providing inaccurate fair market value when registering a land transfer.

• Interactive digital media tax credit — Clarifying changes are being introduced to ensure that expenses relating to eligible projects are claimed in the tax year in which the costs were incurred. Further, a new sub-category of qualifying corporations is established for Manitoba video game companies, which will exempt them from the requirement to apply for a preapproval Certificate of Eligibility in advance of commencing the project.

• Provincially administered tax audit periods — The tax audit period will be capped at six years from the date of notification, except in cases where tax has been collected and not remitted or the taxpayer has made a misrepresentation attributable to neglect, carelessness or willful default. A notice of assessment will be required to be issued at the conclusion of any tax audit.

• Tax clearance certificate fee and advance ruling fee — The budget announces that the CA$50 tax clearance certificate fee and the advance ruling fee (for provincially administered tax statutes) are eliminated, effective 1 May 2024.

For up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/Budget.

Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (Canada), Winnipeg

• Jason Burbank

• Nina Pekach

• Matthew Lapka

• Mark Jing

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.