On April 7, 2021, Finance Minister Scott Fielding presented the 2021 Manitoba budget. Titled “Protecting Manitobans, Advancing Manitoba,” this year’s budget focuses on seeing the province through the COVID-19 pandemic while fostering economic recovery and growth. Projecting a deficit of $1.6 billion, the budget includes $1.2 billion for pandemic support and record spending on health care for the coming year.
In addition to a few major funding announcements, the budget includes several significant tax measures, as summarized below.
Retail Sales Tax Measures
Exemption for Personal Services
The province has proposed to exempt many personal services from Retail Sales Tax (RST), effective December 1, 2021. Under this exemption, hair and salon services, spa services, aesthetician services, and non-medical skin care services will no longer be subject to RST. However, ultraviolet radiation tanning services will not qualify for exemption.
Non-resident E-commerce Suppliers
Following a nationwide trend, Manitoba has turned its attention to e-commerce transactions facilitated by non-resident vendors. To prevent RST leakage on taxable supplies made by or through online services and platforms to customers in Manitoba and create an equitable marketplace for local businesses, the province will make the following changes, effective December 1, 2021:
- Streaming services delivering audio and video content (e.g., Spotify and Netflix) will be subject to RST, and providers of such services will be required to collect and remit tax on these supplies;
- Online marketplaces will be required to collect and remit RST on sales of taxable goods by third parties to customers in Manitoba made through their platforms; and
- Online accommodation platform operators will be required to collect and remit RST on any taxable accommodations booked in Manitoba.
Further details are expected to be released prior to implementation, but based on the proposed rules, it is likely that many non-resident e-commerce suppliers will be required to register for and collect RST on any taxable supplies made to Manitoba customers.
Property Tax Measures
This year’s budget includes Manitoba’s first step in phasing out its education taxes on property and adjusting its funding model for schools. The province plans to provide residential and farmland property owners with a 25% Education Property Tax Rebate in 2021, and a further 25% rebate in 2022. Owners of commercial and other types of property will receive a 10% rebate. Rebate cheques are expected to be issued this June. Property owners will still be required to pay the full amount of the School Division Special Levy and Community Revitalization Levy or Education Support Levy portions of their property taxes.
The average residential owner in Manitoba can expect to save approximately $210 in 2021 through the rebates and reductions included in the province’s new approach to funding education. The net cost to the province of the first step in the phase-out is anticipated to be $151 million in 2021.
City of Winnipeg
Winnipeg’s funding will remain unchanged from 2020, which may impact local property tax levies. Currently, the city receives a total of $273 million in funding from the province, broken down as follows:
- $49 million for emergency services;
- $28 million for public safety;
- $121.2 million for operating expenditures; and
- $75.3 million for infrastructure.
Corporate Tax Measures
Payroll Tax Exemption Threshold
The province announced that the Health and Post-Secondary Education Tax Levy exemption threshold will be raised from $1.5 million to $1.75 million of annual payroll, effective January 1, 2022. Similarly, the payroll threshold below which a reduced rate applies to an employer will be raised from $3 million to $3.5 million.
Tax Credit Extensions and Enhancements
As part of this year’s budget, the province announced the extension of the Cultural Industries Printing Tax Credit and Community Enterprise Development Tax Credit to December 31, 2022. Furthermore, the Interactive Digital Media Tax Credit and Book Publishing Tax Credit, both previously set to expire over the next few years, have been made permanent.
In addition, effective for the 2021 tax year, the following tax credit enhancements will be put in place:
- Eligible activities for the Interactive Digital Media Tax Credit will be expanded to include complementary “add-on” digital media and content (e.g., downloadable content and updates);
- The maximum eligible investment for the Small Business Venture Capital Tax Credit will rise from $450,000 to $500,000, and the maximum tax credit allowable against Manitoba income tax will increase from $67,500 to $120,000; and
- The frequent filming bonus (part of the Cost-of-Salaries Tax Credit and Film and Video Production Tax Credit) will be suspended for two years, allowing eligible businesses as of March 31, 2020 to retain that status until at least March 31, 2022.
This year’s budget includes significant investments to protect Manitobans from COVID-19 and provide incentives to grow the provincial economy by creating jobs, boosting skills, and attracting newcomers. Specific investments announced to promote economic growth include:
- $62 million for COVID-19 recovery job creation and workforce training that will help businesses find workers and workers find jobs;
- $25 million for youth and student job hiring, through a range of sector-focused programs; and
- $1.2 million in funding for the Climate and Green Plan Implementation Office to advance the Made-in-Manitoba Climate and Green Plan.
Further information on Manitoba’s 2021 budget may be found on the province’s website at: https://www.manitoba.ca/budget2021/
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.