Corporate Income Tax - Income of corporations includes all returns
derived from carrying on business or holding property
Corporate Income Surtax
Goods and Services Tax - Tax is levied on goods and services in
Canada unless specifically exempt
Excise Taxes - These taxes consist of ad valorem taxes levied on
the same price or duty-paid values as the general sales tax and of specific
taxes of certain products
Large Corporations Tax - Tax on taxable capital creditable against
surtax
Major Taxes Levied by the Province of Manitoba
Personal Income Tax
Personal Income Tax Surtax
Personal Net Income Tax
Corporate Income Tax
Capital Tax - Tax levied on their taxable paid-up capital corporations
operating within the province
Health and Post secondary Education (Payroll) Tax - Employers with
gross payrolls between $1 million and $2 million are taxed at 4.3 percent
on portion of payroll over $1 million. Employers with payrolls in excess
of $2 million are taxed at 2.15 percent of gross payroll. Employers with
annual gross payroll of less than $1 million are exempt from this tax.
Retail Sales Tax - tax at the retail level of a wide range of consumer
goods and services purchased or brought into the province.
Motive and other Fuel Taxes
Tobacco and Alcoholic Beverages Taxes
Taxes Levied by local Municipal Government
Real Property Taxes
Business Taxes
Overview of Taxes
In Canada, all three levels of government - federal, provincial or territorial,
and municipal - levy taxes on both individuals and businesses. The federal government
levies an income tax, capital tax, excise tax, customs duties and a consumption
tax. The provincial and territorial governments impose income tax, retail sales
tax, capital tax, payroll taxes and taxes or royalties on natural resources.
At the municipal level, there are property taxes and school taxes.
Corporate Income Tax
In general, all corporations resident in Canada are subject to income tax.
Companies residing within Canada are taxed on income earned world wide, subject
to the provision of various income tax treaties. For corporations residing outside
of Canada, taxable income is derived from all income earned from carrying on
business in Canada and in respect of the disposition of taxable Canadian property,
for example, Canadian real estate.
Canada does not have a net wealth or net worth tax. There are no inheritance
or gift taxes in Canada, but gifts may result in an income tax charge on a deemed
disposition, and there are special rules that apply in respect of transfers
of property within a family and upon the death of a taxpayer.
Federal Corporate Income Tax
Corporate Income Tax Rates (1999)
General
Small Business1
Manufacturing
Non-Manufacturing
Federal rate
29.12%2
29.12%
29.12%
Deductions:
Small business
-16.00%
n/a
n/a
Manufacturing & processing (M&P)
n/a
-7.00%
n/a
Total federal rate
13.12%
22.12%
29.12%
Provincial Rate Only Rate
8.50%
17.00%
17.00%
Provincial + Federal Rate
21.62%
39.12%
46.12%
Notes:
Small business rates apply only to the first $200,000 of active business
income earned by CCPCs. A $200,000 annual business limit must be allocated
among associated corporations. The $200,000 limit is reduced on a straight-line
basis for CCPCs that, in the preceding year, had taxable capital employed
in Canada between $10 million and $15 million on an associated basis. It
is completely eliminated at the $15 million threshold. This clawback applies
to all provincial and terrritorial small business deductions except Ontario’s.
Ontario has its own mechnaism to reduce its small business deduction when
taxable income exceeds $200,000. (Source: PriceWaterhouseCoopers, 1999)
The rate excludes the 6-2/3% refundable federal tax on investment inocmom
e of CCPCs. This tax is refundable through the refundable dividend tax on
hand mechanism, and increases the total federal rate that applies to investment
income of a CCPC to 35.79% after the federal surtax. (Source: PriceWaterhouseCoopers,
1999
Non-resident Corporations and Branch Operations
A non-resident corporation is subject to tax on the income the business
earns in Canada and on the gains from the sale or disposition of taxable Canadian
property. The tax is computed on the same basis and at the same rates as for
a resident corporation, except that the non-resident corporation would not be
eligible for certain tax provisions such as the lower tax rate for certain Canadian-controlled
private corporations that are small businesses.
The taxable income of a branch is treated in the same manner as if the
branch were a foreign-controlled subsidiary carrying on business in Canada.
An additional tax of 25 percent applies to that part of a non-resident’s taxable
income from branch operations in Canada that is not reinvested in the Canadian
business. This rate may be reduced by treaty. Consultation with specialists
in tax accounting may avail a company of this rate reduction.
This additional tax also applies to corporations resident in Canada that
are not Canadian corporations, and to non-resident or non-Canadian corporations
carrying on business in Canada as members of partnerships.
Non-resident Members of a Partnership
A non-resident partner is subject to tax on that share of the partnership’s
business income that is derived from business activity carried out in Canada.
If the partnership’s income includes amounts earned outside Canada, the non-resident
partner can exclude that portion of such income from Canadian taxable income.
Non-resident Individuals
Employment income, business income and taxable capital gains on Canadian
property derived in Canada by a non-resident individual are subject to income
tax in generally the same manner and at the same rates as income of a resident.
Certain other amounts, such as dividends, interest and rents paid or credited
to non-residents by residents of Canada, are subject to withholding tax of 25
percent. In many cases, this rate is reduced by treaty. This withholding tax
is applied only on amounts that are not taxed as income of a resident.
Imported and Exported Supplies
Since the GST is a tax on consumption in Canada, it applies to imports
of both goods and services. For goods crossing the border, the GST is paid at
Canadian Customs upon entering the country along with any other custom duties.
For registrants importing services or intangible property intended for use exclusively
in a commercial activity, GST is neither paid nor is an input tax credit received.
Where the imported service is not for use in a commercial activity - that is,
it is supplied to a financial institution - the importer is required to self-assess
the tax payable.
Exports are zero-rated under the GST: no tax is charged by the exporter,
and all GST paid on inputs to the exported supply is refunded to the exporter
through the input tax credit system.
Excise Duties and Taxes
The federal government also levies excise duties and taxes on a number
of specific goods and services including: gasoline, aviation gasoline, diesel
fuel, beer, spirits, wine, cigarettes and tobacco, and jewelry. Excise duties
and taxes are levied as either a specific amount per item or as a percent of
value.
Sales Taxes
Federal
The federal government applies the Goods and Services Tax of 7 percent
on most goods and services. This tax is a value-added tax similar to those of
Europe, Japan and New Zealand. A value-added tax refunds all sales tax paid
by producers on their inputs.
There are two significant categories of goods and services that do not
attract the GST: tax-exempt supplies, and zero-rated supplies. Supplies defined
as tax-exempt - for example, financial services - are not subject to GST. The
tax paid on inputs to tax-exempt supplies cannot be claimed as a GST input tax
credit. Zero-rated supplies are similar to tax-exempt supplies in that no tax
is charged on sales. However, the registrant may claim the GST input tax credit
on inputs for these supplies, for example, on basic groceries.
Provincial
The Manitoba government imposes a 7 percent tax on all retail sales. This
tax is collected once from the ultimate consumer. Goods purchased by a business
for its own consumption are subject to the sales tax. Businesses are required
to self-assess and remit the sales tax on goods purchased outside the province
where the seller is not registered and does not apply and collect the tax. Sales
made outside of Manitoba are exempt from this tax. No sales tax is applicable
on materials used in the manufacture of goods for sale.
Production machinery and equipment in a plant incurs the Manitoba provincial
sales tax.
Corporation Capital Tax
Capital Tax Rates (1999)
General
Financial Institutions
1999 Rate
Changes
1999 Rate
Changes
Federal
0.225%
No changes
1.625%4
See note 4
Provincial
0.50%
No changes
3.00%
No changes
Notes:
Financial institutions rates apply to banks and trust and loan corporations,
but not to insurance companies.
The federal rate reflects the Large Corporations Tax, the Financial
Institutions Capital Tax and the 12% surtax on the Financial Institutions Capital
Tax.
Health and Post Secondary Education Tax Levy (Payroll
Tax)
Manitoba imposes a payroll tax on salaries and wages. The tax rate is 2.15%
of gross payroll for employers with payrolls in excess of $2 million. Employers
with payrolls between $1 million and $2 million will pay 4.3% on the portion
exceeding $1 million.
Provincial Payroll Tax Rate (1999)
Rate
Payroll
Payroll Tax
Health and Post-Secondary Education Tax
2.15%
over $2,000,000
Payroll x 2.15%
4.30%
$1,000,000 to $2,000,000
(Payroll $1,000,000) x 4.3%
0%
$0 to $1,000,000
$0
Payroll Taxes
Public Pension Plans
Employers and employees are required to contribute to a public pension plan-(CPP)
Canada Pension Plan which pays prescribed benefits to qualifying employees
upon retirement, death or disability.
Employers are required to withhold a portion of their employees’ salaries
and remit these amounts to Revenue Canada, along with a matching employer
contribution.
Unemployment Protection Plans
Both the employee and the employer fund the Canadian Employment Insurance
(EI) program through contributions. EI is a federal program and there is
no provincial employment insurance in Canada.
Corporations are required to withhold the employee portion of EI contributions
from each salary payment and to remit these amounts to Revenue Canada, along
with the employer’s premium
In Canada, there is no federal medical plan to which employers or employees
are required to contribute. Canada’s public medical system is financed principally
from general income tax revenue collected by each of the provinces.
Workers’ Compensation Insurance
In Canada, each province has established a government agency to administer
the workers’ compensation insurance (WCI) system, and to act as the sole
insurer. The Workers Compensation Board does this in Manitoba.
Maximum Weekly Benefits
Average Cost for all Manufacturing per $100 Payroll
Individuals resident in Canada are taxed on their world-wide income. An
individual is normally deemed to be a resident of Canada after residing in Canada
for 183 days or more during a year.
Income subject to tax includes salary, wages, commissions, gratuities,
director’s and other types of fees, and any other remuneration or taxable benefit
received by the individual from an office or employment during the year.
Income from property is the return on invested capital and includes interest,
dividends, rents and royalties. Currently, 75 percent of capital gains must
be included in income for tax purposes. Similarly, 75 percent of capital losses
can be used to offset capital gains realized in the year. Net capital losses
may be carried back three years and forwarded indefinitely, but can only be
deducted from taxable capital gains in the carry-over period.
For employees, both federal and provincial income tax on salaries and wages
are deducted by the employer at source. Tax credits are deducted from taxes
payable rather than from income. Some major personal income tax credits include
a basic personal credit of $1,098($1183 on total income below $6956) and a married
credit of up to $915($1000 on total income below $6956).
Municipalities, i.e. cities, towns and other regional subdivisions within
a province, are regarded as creatures of provincial law. The municipalities
are responsible for collecting real property taxes, which constitutes their
major source of revenue. Real property taxation usually proceeds from assessment
separately of the capital value of land and buildings or other improvements.
To the two assessed values, rates are applied which vary from time to time.
Some municipalities duplicate the process for school taxes, while other
impose only one tax, the proceeds of which are used for schools as well as general
municipal purposes. The actual rates of tax are fixed each year and the valuation
roll or base is reappraised at less frequent intervals. Extraordinary needs
are sometimes met by additional special assessments.
On the plus side of the ledge, many municipalities in Canada offer periods
of total or partial exemption for real property taxes as an inducement for establishing
new industries within their borders.
Since Manitoba tax legislation contains various exemptions, special provisions,
and other important details, inquiries for full information should be directed
to:
Manitoba Finance - Taxation Division
101 - 401 York Avenue
Winnipeg, Manitoba R3C 0P8
General Office (204) 945-6444
Tax Inquiries and Interpretations (204) 945-5603
Toll Free in Manitoba: 1-800-782-0318
