On April 6, 2021, the Saskatchewan government released its 2021 budget. The following are highlights of the key tax measures.

Personal tax measures

No personal income tax rate changes were announced in this year’s budget. The current personal combined income tax rates for 2021 are outlined below:

*The top marginal tax rate on non-eligible dividends is scheduled to decrease to 41.82 per cent for 2022, 40.86 per cent for 2023 and 40.37 per cent for 2024.

Active Families Benefit

The Active Families Benefit (AFB) has been reinstated retroactive to January 1, 2021 to make children’s activities more affordable.

• The benefit will provide a refundable tax credit of up to $150 per year per child to eligible families.
• Families of children with a disability can claim an additional $50 for a total tax credit of up to $200 per year per child.
• The AFB will be an income-tested tax credit. In order to be eligible, families must have a combined net income of $60,000 or less.

Corporate tax measure

No corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2021 are outlined below:

*As announced on December 7, 2020, Saskatchewan's small business corporate income tax rate temporarily dropped from 2 per cent to zero effective October 1, 2020. Beginning July 1, 2022, the small business tax rate will move to 1 per cent. On July 1, 2023, the small business tax rate will return to 2 per cent.

⁺ The combined rate for active business income up to the small business threshold of $500,000 is 9 per cent with the rate increasing to 15 per cent for active business income between $500,000 and $600,000.

Other tax measures

Vapour Products Tax

A new Vapour Products Tax (VPT) was introduced with a rate of 20 per cent on the retail price of all vapour liquids, products and devices effective September 1, 2021. Retailers selling vapour products will be required to obtain a VPT license and submit a VPT return.

Taxation on heat-not-burn tobacco products

The budget will add tax on heat-not-burn (HNB) tobacco sticks as a separate category under The Tobacco Tax Act at a rate of approximately 75 per cent of the tax rate on tobacco cigarettes effective June 1, 2021. The current tax rate on cigarettes is 27 cents per stick, resulting in a HNB tax rate of 20.5 cents per stick.

Taxation of electric vehicles

The 2021-22 budget introduces a new annual tax of $150 for each passenger electric vehicle (EV) registered in Saskatchewan effective October 1, 2021. The tax, which only applies to passenger vehicles, will be collected by Saskatchewan Government Insurance (SGI) when the EV is registered.

Saskatchewan Home Renovation Tax Credit

Last fall, the government introduced the Saskatchewan Home Renovation Tax Credit to help stimulate residential construction activity and improve housing affordability. Saskatchewan homeowners may save up to $1,155 in provincial income tax in 2021 by claiming a tax credit on eligible home renovation expenses incurred between October 1, 2020 and December 31, 2021. A further $945 in savings may be claimed in 2022 in respect of eligible expenses incurred between January 1, 2022 and December 31, 2022.

Saskatchewan Technology Startup Incentive

With the goal of growing Saskatchewan’s technology sector, the Saskatchewan Technology Startup Incentive (STSI) program is being extended for an additional five years through to 2025-26.

The program provides a non-refundable 45 per cent income tax credit for individual, corporate or venture capital corporation investments in Eligible Startup Businesses (ESBs) that are developing new technologies or applying existing technologies in a new way to create new proprietary products, services or processes that are repeatable and scalable.

In response to feedback received from the sector – and with the intent of making the program more effective – the following changes will be made:

• The amount an ESB can raise under the program will double, from $1 million to $2 million.
• The carry-forward period to claim unused tax credits increases from four years to seven years.
• An annual cap of $2.5 million per year is established on the maximum value of tax credits that can be issued.

Royalty moratorium

With the 2021-22 budget, the province is introducing a moratorium on associated natural gas royalties at a royalty rate of 0 per cent for a period of five years on all natural gas produced in association with oil.

Royalty incentives

The 2021-22 budget also introduces:

1. A modernized and expanded High Water-Cut Program (HWCP). The new HWCP begins April 1, 2021 and will remain in place for five years, with a sunset date of March 31, 2026.
2. A new sodium sulphate royalty system retroactive to April 6, 2020, with two components:
   • Replacement of the scaled production-based royalty with a flat rate of three per cent on all sodium sulphate production
   • A credit of ten per cent of qualifying capital expenditures that will be eligible for use against current year royalties otherwise payable

Next steps

Contact your Baker Tilly advisor to learn more about how we can help navigate the complexities of the Canadian tax system.