Sales Taxes
Federal Goods and Services Tax
Individuals, businesses and other entities pay the 5% Federal Goods and Services Tax (GST) on most goods and services.
Most businesses, including manufacturers and processors, qualify for full input tax credits on the amount of GST paid on purchases made for business purposes where the firm is not the final consumer.
There is also a GST credit for low-income households. The amount of the GST credit depends on a number of factors, including household income, number of dependent children, marital status.
Manitoba Retail Sales Tax
In Manitoba, there is a 7% retail sales tax (RST) on most goods and on some services. The RST is applied alongside, not on top of, GST inclusive prices.
There are several exemptions which apply to the manufacturing and processing industry, most notably: (1) direct agents, (2) up to 80% of the electricity used in manufacturing and processing activity, and (3) used buildings and fixed (nonchattel) machinery and equipment purchased for manufacturing and processing.
Payroll Taxes
Federal Canada Pension Plan
The Canada Pension Plan (CPP) is a federally levied and administered plan that provides retirement, disability and survivors’ benefits, certain children’s benefits and death benefits. Employees and employers, including the self-employed, must contribute to the plan.
For the 2008 calendar year, the CPP contribution rate, by both the employee as well as the employer on behalf of the employee, is 4.95% on maximum contributory earnings of $44,900, less an exemption of $3,500. The maximum contribution is $2,049.30; for the self-employed, the maximum contribution is $4,098.60 (2 times $12,049.30).
Federal Employment Insurance
Employment Insurance is levied at the federal level in Canada. Both the employee and the employer contribute to the plan, but the employer contributes an amount equal to 1.4 times the amount paid by the employee.
For the 2008 calendar year, the Employment Insurance rate is 1.73% on maximum insurable earnings of $14,100. The maximum contribution for an employee is about $711.03 and the maximum contribution for an employer is $995.44 (1.4 times $711.03).
Manitoba Health and Post-Secondary Education Tax Levy
Employers are required to pay the 2.15% Health and Post-Secondary Education Tax Levy depending on their annual payroll. Employers with annual payrolls of up to $1 million are exempt from the tax. Employers with annual payrolls between $1 million and $2.0 million pay tax at a reduced rate (calculated as: annual payroll minus $1 million multiplied by 4.3%).
Federal Corporate Income Taxes
The basic federal corporate income tax rate in Canada is 38% and is assessed on national corporate taxable income. Corporations which are liable for provincial corporate income tax receive an abatement equal to 10%, reducing the basic federal rate to 28%. Corporations also pay a surtax equal to 4% of the basic federal corporate income tax (less the abatement).
The 2000 Federal Budget announced a gradual reduction in the general corporate income tax rate from 28% to 21%, commencing January 1, 2001. The rate for 2005 is 21%. However, only business income not otherwise receiving preferential corporate income tax treatment would qualify for the lower rate. As well, the 4% corporate surtax will continue to be calculated based on the 28% basic rate.
The 2005 Federal Budget announced that the general corporate income tax rate will be further reduced from 21% to 19%. The rate will be reduced to 20.5% on Januay 1, 2008; 20.0% on January 1, 2009 and 19.0% on January 1, 2010. In addition, the federal surtax will be eliminated for taxation years that end after December 31, 2007.
The 7% manufacturing and processing profits deduction reduces federal corporate income taxes otherwise payable. Manufacturing and processing income qualify for the deduction if at least 10% of the corporation’s revenue from businesses carried on in Canada is derived from the sale or lease of goods manufactured or processed in Canada by it. Income eligible for the 16% small business tax rate reduction does not qualify for the manufacturing and processing profits deduction.
Manitoba Corporate Income Taxes
The 14% basic provincial corporate income tax rate in Manitoba is applied to corporate taxable income allocated to the Province. Corporations which are eligible for the federal small business tax rate reduction pay 3%** on the first $400,000 of corporate taxable income allocated to Manitoba, apportioned in accordance with federal provisions.
Manitoba corporate income taxes are administered and collected by Canada Customs and Revenue Agency on behalf of the Province.
Capital Taxes
Federal Large Corporations Tax
The Federal Large Corporation Tax has been eliminated.
Manitoba Corporation Capital Tax
Corporations in Manitoba with paid-up taxable capital of at least $10 million are subject to the 0.3% Manitoba Corporation Capital Tax. For taxation years that commence after January 1, 2007, Manitoba will provide a deduction for the first $10 million in capital. Corporations with taxable capital of at least $20 million (less the $10 million deduction) are subject to a rate of 0.5%.
The Corporation Capital Tax rate will be reduced from 0.5% to 0.4% for corporations with taxable paid-up capital over $20 million, and from 0.3% to 0.2% for corporations with taxable paid-up captial between $10 million and $20 million, effective for taxation years commencing after July 1, 2008.
Subject to balanced budget requirements, the general Corporation Capital Tax, except for Crown Corporations, will be eliminated as of December 31, 2010.
For more information about the Corporation Capital Tax in Mantioba, visit the Taxation Division, Manitoba Department of Finance, website.
Source: Manitoba Finance, 2008