On February 21, 2017, British Columbia’s Minister of Finance, the Honourable Michael de Jong, presented the province’s budget. The budget:
This Tax Insights discusses these and other tax initiatives outlined in the budget, some of which were previously announced.
The budget also provides $87 million additional funding for technology sector support; details will be released at next month’s BC Tech summit.
Corporate income tax rates
|Small business income||BC||Federal + BC|
|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 qualifying BC labour incurred after February 21, 2017, the IDMTC program is expanded to include:
The tax credit does not apply to films or videos that provide the user with limited or no immersion, including 360°, 270° and 180° videos, and spherical and panoramic videos.
In addition, for taxation years ending after February 21, 2017:
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:
Preferential tax treatment for credit unions
The phase-out of BC's preferential tax treatment for credit unions will halt for 2017, pending a review of the Financial Institutions Act and Credit Union Incorporation Act.
Therefore, for the 2017 taxation year, credit unions will continue to receive 80% of the full 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.
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. It reflects the change to BC’s non-eligible dividend tax credit rate, discussed above. These rates apply to individuals who have taxable income above $202,800 in 2017 ($200,000 in 2016).
|Top combined federal/BC rates||2016||2017|
|Ordinary income & interest||47.70%|
Education tax credit
The education tax credit will be eliminated on January 1, 2018. Unused credits from years before 2018 can be claimed in 2018 and later years.
Back-to-school tax credit
Parents can claim a new 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 credit is available for 2016 to 2018, after which it will be reviewed.
Medical Services Plan (MSP)
The budget provides a reminder that the 4% MSP premium rate increase for 2017 (announced in the 2016 budget) was not implemented. Instead, the maximum MSP premium will remain $75 per month per adult, as indicated in the table below.
Further, effective 2018:
|2016||2017 (1)||2018 (1)|
|Couples||No children or with children||$150|
See Singles of Couples
|> 2 persons||$150|
(1) These rates apply when annual household net income is:
- in 2017 – over $42,000 for single adults or over $45,000 for couples (different thresholds apply to senior couples and families)
- in 2018 – over $120,000 for all singles, 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 three years to December 31, 2020.
BC’s 2016 budget announced the establishment of an independent Commission on Tax Competitiveness to make recommendations regarding the PST and other business taxes to help drive business competitiveness, increase investment and enhance BC’s standard of living.
The Commission’s report includes four key recommendations:
1) exempt business capital expenditures, including machinery and equipment, from PST
2) exempt business use of electricity and other energy inputs, software and telecommunications services from PST
3) engage the public in a process to consider and design a made-in-BC value added tax
4) introduce a framework within which major investors and municipalities can negotiate long-term property tax arrangements to increase certainty
Consistent with the Commission’s recommendations, the government is first phasing-out PST on electricity purchased by businesses (see below).
The government acknowledges that further improvements to the PST are a priority and will consider future steps to mitigate the negative effects of the PST and other business taxes.
PST on electricity
As a result of a recommendation of the Commission on Tax Competiveness (see above), the PST rate on electricity purchased by businesses – currently 7% of the purchase price – will be phased out as follows:
On October 1, 2017, tobacco tax rates will increase as follows:
More information on the requirement to take an inventory of, and pay additional security on, unsold tobacco products held in BC as of midnight on September 30, 2017, will be provided.
Effective October 1, 2017, 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.
Home owner grant
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:
Property tax rates
In 2017, British Columbia will continue to apply its longstanding rate-setting policies for:
These rates will be set in the spring, once revised assessment roll data become available.
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.