Page 93

(4) Eligible expenditures in Manitoba are those that qualify for federal ITC purposes. In its

2013 budget, Manitoba announced that the province will protect its tax credit from capital

expenditures removed from the federal investment tax credit base announced in the

2012 federal budget. In addition, the Manitoba tax credit retains full eligibility for contract

payments to eligible institutes.

The 2013 Manitoba budget announced that the province’s ITC will reflect the following

changes included in the 2012 federal budget:

• the SR&ED tax credit will be adjusted to reduce the 65% prescribed proxy amount –

which recognizes overhead costs attributable to eligible projects – from 65% to 60%

of direct labour costs in 2013 and to 55% starting in 2014.

• contract payments will be 80% claimable instead of fully claimable, so that tax credits

will no longer include the profit element under the contract fees.

The 20% tax credit is fully refundable if the eligible expenditures are incurred after 2009

and by a corporation with a PE in Manitoba and where the research and experimental

development is carried on in Manitoba under contract with a qualifying research institute in

Manitoba.

Manitoba extended the refundability of this tax credit to in-house R&D expenditures (i.e.,

R&D not undertaken under contract with an institute in Manitoba) incurred in 2011 and

subsequent years 25% of the credit for in-house R&D was refundable beginning in 2011

and this amount has increased to 50% beginning in 2012.

For eligible expenditures incurred prior to 2010, the tax credit was non-refundable. Unused

non-refundable credits earned in taxation years ending after 2003 may be carried forward

10 years and carried back three years. Unused credits earned in prior years may only be

carried forward seven years.

The tax credit (refundable and non-refundable) is considered to be government assistance

and reduces federal expenditures for both the R&D deduction and ITCs. All or part of

the credit can be renounced each year, however, the renunciation must be made in

the year the credit was earned and no later than 12 months after the filing due date of

the corporate income tax return. The tax implications for federal purposes are different

depending on whether the credit is renounced by the filing due date or after the filing due

date. Requests to renounce the Manitoba ITCs after the deadline will be denied.

(5) Eligible expenditures in Ontario are those that qualify for federal ITC purposes and are

not in excess of the expenditure limit. The expenditure limit is $3 million. All current

expenditures and 40% of capital expenditures qualify for the credit. The credit is available

to corporations with taxable income under the federal small business income threshold,

and taxable paid-up capital (for Ontario capital tax purposes) of less than $25 million, in the

preceding year. The corporation’s expenditure limit will be reduced where either of these

restrictions are exceeded by the associated group, and, for taxation years ending after

2009, will be eliminated once taxable income of the group reaches $800,000 or taxable

paid-up capital exceeds $50 million, in the preceding year. Transitional rules apply if a

corporation does not have a calendar year end.

Provincial Research and Development Tax Incentives / 87

Current as of May 3, 2013