Tax Insights: 2014 British Columbia budget - Tax highlights

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In brief

On February 18, 2014, British Columbia’s Minister of Finance, the Honourable Michael de Jong, presented the province’s budget.

BC’s budget does not change corporate or personal tax rates, but does extend its Scientific Research and Experimental Development Tax Credit and enhance its Distant Location Tax Credit. It also phases out preferential income tax treatment for credit unions and increases Medical Service Premiums. This Tax Insights discusses these and other tax initiatives introduced in the budget.

The budget also unveils a framework for the province’s much-anticipated liquefied natural gas (LNG) tax. For information on the LNG tax, see our Tax Insights, ‘British Columbia unveils its liquefied natural gas (LNG) tax’ at www.pwc.com/ca/taxinsights.

In detail

Business tax measures

Corporate income tax rates

BC’s corporate income tax rates will remain as follows:

Income Rate
General1 11%
Small business2 2.5%
  1. The general income tax rate, which also applies to manufacturing and processing (M&P) income, increased from 10% to 11% on April 1, 2013.
  2. The small business threshold remains $500,000.

Combined federal/BC corporate rates are in the following table: 

  2013 2014
General and M&P income 25.75% 26.00%
Canadian-controlled private corporations (CCPCs) active business income to $500,000

13.5%

investment income 45.42% 45.67%

 

Credit unions

BC will phase out its preferential income tax treatment for credit unions over five years, beginning taxation years that include 2016.

This parallels the phase out of the federal preferential income tax treatment for credit unions over five years beginning in 2013.

Scientific research and experimental development (SR&ED)

BC’s Scientific Research and Experimental Development Tax Credit is extended three years to September 1, 2017.

Distant Location Tax Credit

For productions with principal photography starting after February 18, 2014, the Distant Location Tax Credit will apply in the Capital Regional District for purposes of the:

  • Production Services Tax Credit
  • Film Incentive BC tax credit

Personal tax measures

Personal income tax rates and brackets

As previously announced, for 2014 and 2015, taxable incomes above $150,000 will be subject to a provincial personal income tax rate of 16.8%, up from 14.7%.

As a result of a decline in the federal gross-up for non-eligible dividends after 2013, BC’s non-eligible dividend tax credit rate will decrease from 3.4% in 2013 to 2.59% in 2014.

The following table takes these changes into account.

Top combined federal/BC rates

  2013 2014
Ordinary income & interest 43.70% 45.80%
Capital gains 21.85% 22.90%
Canadian dividends eligible 25.78% 28.68%
non-eligible 33.71% 37.99%

Home owner grant

The threshold for the phase-out of the home owner grant will decrease from $1,295,000 to $1,100,000 for the 2014 tax year.

The grant is reduced by $5 for every $1,000 in assessed value exceeding this threshold.

Medical Services Plan

Effective January 1, 2015, Medical Services Plan maximum monthly premiums will increase for:

  • single individuals – by $2.75 to $72.00
  • two-person families – by $5.00 to $130.50
  • families of three or more – by $5.50 to $144.00

Premium assistance will be enhanced to ensure those receiving assistance will be unaffected.

BC Early Childhood Tax Benefit

The budget provides a reminder that, commencing April 1, 2015, the BC Early Childhood Tax Benefit will provide eligible families up to $55 per month ($660 annually) for each child under six.

The maximum benefit will be paid when family net income is under $100,000. The benefit will start to phase out when family net income is $100,000 and will be eliminated when it reaches $150,000.

The benefit will be administered through the Canada Child Tax Benefit system. To be eligible, individuals must file their annual personal income tax returns.

BC Mining Flow-Through Share Tax Credit Extended

As announced on January 27, 2014, the BC Mining Flow-Through Share Tax Credit is extended to December 31, 2014.

Provincial sales tax measures

Exemption for settler’s effects

Commencing February 19, 2014, the exemption for tangible personal property brought, sent or delivered into British Columbia by a new resident is expanded to include non‑business tangible personal property that enters the province within one year from the date the individual becomes a resident of British Columbia if the property was owned at least 30 days before becoming a resident of British Columbia.

Purchase price of accommodation sold with meals and services

Effective February 19, 2014, if an accommodation provider sells only packages of accommodation, meals and services for a single price, the purchase price of that accommodation is the lesser of:

  • 15% of the total value of the consideration accepted by the accommodation provider
  • $100 per day

This is the case regardless of the type of services provided or the type of the accommodation provider.

Multi-jurisdictional vehicle exit tax

Effective April 1, 2013, the multi-jurisdictional vehicle exit tax will be payable only when a vehicle, previously licensed under a licence to which a prorating agreement applies, is licensed for use solely within British Columbia.

A refund can be claimed if the tax was paid when the vehicle was not licensed for use solely within British Columbia.

Technical amendments

Technical amendments are made to clarify:

  • various exemptions and refunds
  • the taxation of leases
  • the original purchase price of certain passenger vehicles subject to the 1% to 3% surtax
  • the taxation of vehicles brought, sent or received in British Columbia and registered under vehicle registration legislation
  • the purchase price of software purchased with qualifying educational programs for a single price
  • tax payment agreements
  • the taxation of tangible personal property used to improve real property
  • various other administrative matters

The amendments also expand voluntary and mandatory registration to include certain out of province businesses, such as direct sellers.

Land tax deferment

Effective on royal assent, deferment of property taxes can continue when the property becomes subject to an easement, statutory right of way or similar interest, if the homeowner continues to meet the minimum equity requirements of the program.

Property transfer tax

For registrations after February 18, 2014, of eligible residential property under the First Time Home Buyers’ Program:

  • the fair market value threshold will increase to $475,000 from $425,000
  • the partial exemption applies to homes valued between $475,000 and $500,000

As a result, eligible first time home buyers can save up to $7,500 in property transfer tax.

Property tax rates

In 2014, British Columbia will continue to apply its longstanding rate setting policies for:

  • residential school property taxes
  • non-residential school property taxes
  • residential rural property taxes
  • non-residential rural property taxes

Other property tax measures

Other budget measures affect:

  1. ports property taxes – as previously announced, the municipal tax rate cap on designated port property and new improvements past 2018 is made permanent
  2. property taxes for affiliated colleges – land (and improvements) of a university that is leased to a college affiliated with the university is exempt from property tax as long as it is held for college purposes
  3. property taxes of Regent College – a property tax exemption will apply to property of Regent College as long as the property is occupied by the College and used by it for educational purposes

The property tax exemptions described in 2 and 3 are effective on royal assent, but retroactive, as necessary, to give them effect for the 2014 taxation year.

Carbon tax and motor fuel tax

Collector appointments and vendor penalties

To facilitate vendor compliance with collector obligations, the director is authorized to appoint a vendor as a collector up to four years retroactively, to a date that is on or after the first day of the month in which the vendor’s first sale of fuel in British Columbia after its manufacture or importation occurred.

The penalties that may be imposed on a vendor who sells fuel before being appointed a collector are clarified to recognize retroactive collector appointments.

Assessment of interest

The assessment of interest is clarified, particularly when before a notice of assessment is issued there is both a refund claim and an amount owing for the same period. This is consistent with similar provisions under the Provincial Sales Tax Act.

Tobacco tax

Effective April 1, 2014, the following tobacco tax rates will increase:

  • cigarettes – from $44.60 to $47.80 per carton of 200 cigarettes
  • fine-cut tobacco – from 22.3¢ to 23.9¢ cents per gram