On March 19, 2020, the Honourable Scott Fielding, Minister of Finance, released the 2020 Manitoba budget. This year’s budget maintains a trend of safeguarding the environment, improving services, ensuring communities are safer and stronger, and making life more affordable for Manitobans.
The budget reaffirmed the province’s commitment to the $2,020 Tax Rollback Guarantee announced in 2019. Under this guarantee, Manitobans can expect to save roughly $2,020 in taxes and fees over the next few years.
From a tax perspective, several interesting changes were announced, including a 1% decrease in the province’s retail sales tax (PST) rate, as summarized below.
Retail Sales Tax (PST) Measures
PST Rate Decrease
The budget includes a previously announced PST rate decrease from 7% to 6%, effective July 1, 2020. As part of this reduction, the PST rate on mobile, modular, and ready-to-move homes will drop from 4% to 3.5%, and the reduced PST rate for electricity used by qualifying manufacturers, mining companies, and oil well operators will be lowered from 1.4% to 1.2%. Similarly, the PST rate on mixed uses of electricity and natural gas for home heating, heating and cooling farm buildings, and operating farm grain dryers will drop from 1.4% to 1.2%.
The prorate vehicle tax rates will also be decreased for registration periods beginning on or after July 1, 2020. Manitoba Information Notice RST 20-02, “Reduction of Prorate Vehicle Tax Rates,” outlines the new rates.
As with any sales tax change, transitional rules to determine the proper tax treatment of transactions occurring around the effective date of the decrease have been announced by the province. These rules are similar to the transitional rules put in place for the PST rate reduction that took effect on July 1, 2019, and will be summarized in a future Ryan Tax Alert. The province has also released a summary of the transitional rules in Information Notice RST 20-01.
Exemption for Personal Income Tax Return Preparation
As part of the province’s $2,020 Tax Rollback Guarantee, the budget announced that personal income tax preparation services will become exempt from PST, effective October 1, 2020. In addition, the province has indicated plans to introduce future PST exemptions for home insurance and personal services.
A green levy, also previously announced, was included in this year’s budget. Effective July 1, 2020, this levy, calculated at a flat rate of $25 per tonne of carbon dioxide equivalent emissions, will apply to gas, liquid, and solid fuel products intended for combustion. The green levy applied to natural gas and coal will not be subject to PST. Gasoline, diesel fuel, and propane will not require a similar exemption, as they are currently exempt from PST.
In addition, certain uses of fuel, such as those associated with agricultural processes, will not be subject to the green levy and entities emitting at least 50,000 tonnes of carbon dioxide equivalent emissions annually will be subject to a separate, output-based carbon pricing system.
Tobacco Tax Measures
Effective July 1, 2020, the tax rate for many tobacco products will increase by 0.5 cents per unit or gram, with the rate for: cigarettes increasing to 30.5 cents from 30 cents per cigarette; fine cut tobacco increasing to 46 cents from 45.5 cents per gram; raw leaf tobacco increasing to 28 cents from 27.5 cents per gram, and other tobacco products increasing to 29.5 cents from 29 cents per gram. The tax rate on cigars will not change as part of these increases.
Corporate Tax Measures
Effective January 1, 2021, the exemption threshold for the Health and Post-Secondary Education Tax Levy will be raised to $1.5 million of annual remuneration from $1.25 million, with the reduced rate threshold increasing to $3 million from $2.5 million.
Various corporate income tax credits scheduled to expire on December 31, 2020, will be extended by this year’s budget. Under this announcement, the Manufacturing Investment Tax Credit will become permanent, the Mineral Exploration Tax Credit will be extended through December 31, 2023, and both the Cultural Industries Printing Tax Credit and Community Enterprise Development Tax Credit will be extended for another year through to December 31, 2021.
In addition, the refundable portion of the Manufacturing Investment Tax Credit that applies to eligible property purchased and available for use after June 20, 2020, will be reduced to 6% from 7%. This reduction is required to reflect the PST rate decrease that will take effect on July 1, 2020.
Further information on Manitoba’s 2020 budget may be found on the province's website at: Manitoba Budget 2020
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirectTM line at 1.800.667.1600.