2017 British Columbia NDP budget: Tax highlights

September 2017

In brief

On September 11, 2017, British Columbia’s Minister of Finance, Carole James, presented the New Democratic Party’s first provincial budget. The budget:

  • increases the general and manufacturing and processing (M&P) income tax rate from 11% to 12% on January 1, 2018
  • reduces the small business income tax rate from 2.5% to 2.0% on April 1, 2017
  • enhances and extends several business tax credits, including the tax credits for entertainment and media and for scientific research and experimental development
  • increases the personal income tax rate on taxable income over $150,000 from 14.7% to 16.8%, starting 2018
  • increases the dividend tax credit rate on eligible dividends from 10% of grossed-up dividends to 12%, starting 2019
  • reduces the dividend tax credit rate on non-eligible dividends from 2.47% of grossed-up dividends to 2.18%, starting 2017
  • reduces medical services plan (MSP) premiums by 50%, effective 2018, for all taxpayers and eliminates them within four years
  • increases carbon tax rates by $5 per tonne of carbon dioxide equivalent emissions (CO2e) annually from April 1, 2018, to April 1, 2021
  • phases out provincial sales tax (PST) on electricity purchased by businesses by April 1, 2019

This Tax Insights discusses these and other tax initiatives outlined in the budget.

The budget includes many measures that were in the province’s February 21, 2017 budget. That budget was never enacted because of the May 9, 2017 provincial election.

In detail

Business tax measures

Corporate income tax rates

  • General and M&P income tax rate – On January 1, 2018, the provincial rate will increase from 11% to 12% and the combined federal/BC rate will increase from 26% to 27%.
  • Small business income tax rate (on the first $500,000 of active business income) – This rate will decrease from 2.5% to 2% on April 1, 2017. The results are as follows:

Small business income

BC

Federal + BC

Taxation

year ending

December 31, 2016

2.5%

13.0%

December 31, 2017

2.12%

12.62%

December 31, 2018

2.0%

12.5%

Interactive digital media tax credit (IDMTC)

For taxation years ending after February 21, 2017:

  • corporations that have annual qualifying BC labour expenses greater than $2 million will be eligible for this credit; the corporation no longer has to meet the criteria that its principal business must be the development of interactive digital media products
  • interactive digital media corporations participating in the small business venture capital program will be eligible for this credit

Film incentive BC tax credit and production services tax credit

For productions with principal photography beginning after January 24, 2017, the southern part of the eastern boundary of the designated Vancouver area is moved from 200th Street in Langley to the border between Surrey and Langley, so that the regional film tax credit applies in all of the City of Langley and the Township of Langley.

Business tax credits

The budget extends the following BC business tax credits:

  • scientific research and experimental development tax credit – by five years to August 31, 2022
  • training tax credits – by one year to December 31, 2018
  • book publishing tax credit – by one year to March 31, 2018

Preferential tax treatment for credit unions

Effective January 1, 2017, the phase-out of BC's preferential tax treatment for credit unions is cancelled and the full provincial preferential income tax treatment is restored.

Therefore, for the 2017 taxation year, credit unions will receive 100% of the preferential tax treatment, instead of 60%, as was previously scheduled.  The phase-out, which began January 1, 2016, was to occur over five years.

Small business venture capital tax credit

Starting 2017, the budget for the small business venture capital tax credit will increase from $35 million to $38.5 million, allowing up to $11.7 million in additional equity financing for qualifying corporations annually.

International business activity program

The international business activity program is eliminated; starting September 12, 2017, international business activities no longer qualify for personal or corporate income tax refunds.

Personal tax measures

Personal income tax rates

Starting 2018, taxable income above $150,000 will be subject to a provincial personal income tax rate of 16.8%, up from 14.7%.

Eligible dividends

As a result of the increase in the province’s general corporate income tax rate from 11% to 12% on January 1, 2018, BC’s dividend tax credit rate for eligible dividends will increase from 10% of grossed-up dividends to 12% for 2019 and later years.

Non-eligible dividends

As a result of the reduction in the province’s small business tax rate from 2.5% to 2% on April 1, 2017, BC’s dividend tax credit rate for non-eligible dividends will decrease from 2.47% of grossed-up dividends to 2.18% for 2017 and later years.

Top personal income tax rates

The table below shows top combined federal/BC personal income tax rates. These rates apply to individuals who have taxable income above $200,000 in 2016; $202,800 in 2017 (2018 and 2019 thresholds to be indexed). The table reflects the changes to the province’s top personal income tax rate and eligible and non-eligible dividends tax credits rates, discussed above.

Top combined federal/BC rates

2016

2017

2018

2019

Ordinary income & interest

47.70%

49.80%

Capital gains

23.85%

24.90%

Canadian dividends

eligible

31.30%

34.20%

31.44%

non-eligible

40.61%

40.95%

43.41%

Low income climate action tax credit

Effective April 1, 2018, the maximum annual low income climate action tax credit will increase to $135 per adult (from $116) and to $40 per child (from $35).

Children’s fitness, children’s fitness equipment and children’s arts tax credits

The children’s fitness, children’s fitness equipment and children’s arts tax credits will be eliminated after December 31, 2017.

Back-to-school tax credit

For 2016 only, parents can claim a non-refundable back-to-school tax credit that provides a benefit of up to $13 for each child who is 5 to 17 years old at the end of the year. The February 21, 2017 budget had proposed that this credit be available for three years (i.e. for 2016 to 2018). The September 11, 2017 budget cancels it after 2016.

Medical Services Plan (MSP)

The government will establish a task force in the fall of 2017 (to report back by the spring of 2018) to provide advice and recommendations on how to replace MSP premium revenue and ensure MSP premiums are eliminated within four years.

In the interim, effective 2018:

  • MSP premiums will be reduced by 50% for all taxpayers
  • the income threshold at which households are fully exempt from MSP premiums will increase by $2,000

Maximum monthly MSP premiums are shown in the table below.

 

2016

2017 (1)

2018 (1)

Singles

No children

$75

$75

$37.50

With children

 

See Family

Couples

No children or with children

$150

$75

Family

 

 

2 persons

$136

 

See Singles or Couples

> 2 persons $150

(1) For 2017 and 2018, these rates apply when annual household net income is over $42,000 for single adults or over $45,000 for couples (different thresholds apply to senior couples and families).

Volunteer firefighter and search and rescue volunteer tax credit

Starting 2017, individuals who provide at least 200 hours of volunteer service to a volunteer fire department and/or an eligible search and rescue organization can claim a non-refundable tax credit that provides a benefit of up to $152 per year, in addition to the existing federal tax credit.

Training tax credits

BC’s training tax credits are extended by one year to December 31, 2018.

Mining tax credits

Enhancements to:

  • the BC mining flow-through share tax credit – extend this credit by one year to December 31, 2017
  • BC’s mining exploration tax credit – make environmental studies and community consultations incurred after February 28, 2015, eligible for this credit, mirroring a similar change provided by the federal government

Other taxes

Carbon tax

Effective April 1, 2018, carbon tax rates – currently $30 per tonne of CO2e – will increase by $5 per tonne of CO2e annually until rates equal $50 per tonne of CO2e on April 1, 2021.

Part 2 of the Carbon Tax Act is repealed. Therefore, after September 11, 2017, the requirement to prepare the Carbon Tax Report and Plan will no longer apply. In addition, the Carbon Tax Act will no longer require that revenue measures be introduced to offset carbon tax revenues, allowing the government to spend carbon tax revenues on measures that reduce emissions.

PST on electricity

The PST rate on electricity – currently 7% of the purchase price – will be phased out as follows:

  • to 3.5% – effective on a date to be specified by regulation (once the legislation receives royal assent, at least one month of notice will be provided before this change takes effect)
  • fully exempt – April 1, 2019

Tobacco taxes

Effective on a date to be specified by regulation, tobacco tax rates will increase as follows:

  • cigarettes – from $47.80 to $49.40 per carton of 200 cigarettes
  • fine-cut tobacco – from 23.9 cents to 24.7 cents per gram

Once the legislation receives royal assent, at least one month of notice will be provided before these changes take effect.

Motor fuel

Effective on a date be specified by regulation, natural gas for use in an internal-combustion engine for any rolling stock or vehicle when run on rails is exempt from the 3¢ per litre tax on locomotive fuel. Once the legislation receives royal assent, at least one month of notice will be provided before this change takes effect.

Home owner grant

As announced on January 10, 2017, the threshold for the phase-out of the home owner grant will increase by $400,000 to $1,600,000 for 2017. The grant is reduced by $5 for every $1,000 in assessed value exceeding this threshold.

Property transfer tax

Effective for registrations after February 21, 2017, the fair market value threshold for eligible residential property under the First Time Home Buyers’ Program will increase from:

  • $475,000 to $500,000 – full exemption (resulting in a property transfer tax savings of up to $8,000)
  • $500,000 to $525,000 – partial exemption

Property tax rates

In 2017, 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
Information sharing

To improve administration and enforcement, the Income Tax Act (ITA) and Home Owner Grant Act are amended to allow for information sharing between the two acts. The ITA is also amended to provide income tax administrators with access to assessment data.

Contact us

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