Tax Insights: 2022 British Columbia budget – Tax highlights

Issue 2022-09

In brief

On February 22, 2022, British Columbia’s Minister of Finance, Selina Robinson, presented the province’s budget. The budget does not change corporate or personal income tax rates, but does:

• introduce the clean buildings tax credit, for eligible building retrofit expenditures that improve energy efficiency
• temporarily expand the budget for the small business venture capital tax credit, for clean technology investments
• extend several business and personal tax credits, including the scientific research and experimental development (SR&ED) and training tax credits
• require marketplace facilitators, effective July 1, 2022, to collect and remit provincial sales tax (PST) on certain sales and leases made in British Columbia

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

In detail

Business tax measures

Corporate income tax rates

British Columbia’s corporate income tax rates have not changed and will remain as shown in the table below. The table also shows combined federal/British Columbia corporate tax rates.

Clean buildings tax credit

The budget introduces the clean buildings tax credit for retrofit expenditures that improve the energy efficiency of multi-unit residential buildings with four or more dwellings (and certain prescribed types of commercial buildings). Eligible taxpayers can claim this refundable tax credit of 5% of eligible expenditures made before April 1, 2025, under a contract entered into after February 22, 2022.

Small business venture capital tax credit

The budget temporarily increases the funding available under the small business venture capital tax credit, which provides a 30% non‑refundable tax credit to eligible corporate investors. For the 2022, 2023 and 2024 years, the program will have an additional $2.5 million in tax credits available for taxpayers who invest in clean technology businesses.

The budget also proposes technical amendments to the Income Tax Act to clarify the authority to disclose taxpayer information for purposes of administering the Small Business Venture Capital Act, effective on royal assent of the enacting legislation.

British Columbia production services tax credit

For film productions incurring their first eligible accredited labour expenditure after February 21, 2022, the budget proposes to extend, for the production services tax credit, the pre-certification filing deadline from 60 days to 120 days after the production’s first eligible accredited labour expenditure.

Other business tax credits

The budget extends British Columbia’s:

• SR&ED tax credit, by five years to August 31, 2027
• training tax credits, by two years to the end of 2024
• shipbuilding and ship repair industry tax credit, by two years to the end of 2024

Personal tax measures

Personal income tax rates

The budget does not change British Columbia personal income tax rates. The top two combined federal/British Columbia personal income tax rates are shown below.

Clean buildings tax credit

The budget introduces the clean buildings tax credit for retrofit expenditures that improve the energy efficiency of multi-unit residential buildings with four or more dwellings (and certain prescribed types of commercial buildings). Eligible taxpayers can claim this refundable tax credit of 5% of eligible expenditures made before April 1, 2025, under a contract entered into after February 22, 2022.

Small business venture capital tax credit

The budget temporarily increases the funding available under the small business venture capital tax credit, which provides a 30% refundable tax credit to eligible individual investors, up to an annual maximum tax credit of $120,000. For the 2022, 2023 and 2024 years, the program will have an additional $2.5 million in tax credits available for taxpayers who invest in clean technology businesses.

The budget also proposes technical amendments to the Income Tax Act to clarify the authority to disclose taxpayer information for purposes of administering the Small Business Venture Capital Act, effective on royal assent of the enacting legislation.

Training tax credits

The budget extends British Columbia’s training tax credits, by two years to the end of 2024.

Provincial sales tax (PST) measures

Tax collection, remittance and reporting obligations for marketplace facilitators

The budget will, effective July 1, 2022, require businesses that facilitate sales or leases of certain goods, services or software for third parties through their online platform, including accepting payment from a consumer (known as marketplace facilitators), to collect and remit PST on those sales and leases made in British Columbia.

This obligation will apply to sales of taxable goods shipped from within Canada, taxable services (including short‑term rentals and other taxable accommodation, but not including legal services), software and leases of goods made through a marketplace facilitator. Sellers will be relieved of their obligation to collect and remit tax on sales and leases made through a marketplace facilitator.

Effective July 1, 2022, marketplace facilitators will also be required to charge PST on marketplace facilitation services that they provide to sellers.

The budget further states that the government “will work over the coming months to expand the collection obligations to the sales of goods shipped from outside Canada to consumers in the [province].”

Zero-emission vehicles

The budget temporarily, for five years from February 23, 2022 to February 22, 2027:

• exempts sales of all used zero-emission vehicles from PST (including private sales of these vehicles if they have been driven for at least 6,000 kilometres)
• increases the passenger vehicle surtax threshold for zero-emission vehicles from $55,000 to $75,000

Heat pumps and fossil fuel heating equipment

To encourage switching from a fossil fuel heating system to a heat pump system, effective April 1, 2022:

• heat pumps will be exempt from PST (a refund will generally be available for PST paid for a heat pump that is purchased before April 1, 2022 to fulfil a contract, but affixed or installed into real property after March 31, 2022)
• the PST rate on a fossil fuel combustion system that heats or cools buildings or water will increase from 7% to 12% (transitional rules will generally apply for systems affixed or installed into real property after March 31, 2022, but whose contracts were entered into before February 23, 2022); detailed transition rules will be published by the Ministry of Finance

Private vehicle sales

The budget adjusts the purchase price of private vehicles (excluding those involved in a trade-in) used to apply the PST. Effective October 1, 2022, tax on private sales of motor vehicles will be based on the greater of:

• the reported purchase price, and
• the average wholesale value of the vehicle

Tobacco products

Effective July 1, 2022, PST will apply to tobacco sales. The budget removes the PST exemption for tobacco products.

Other PST measures

The budget makes technical amendments to the Provincial Sales Tax Act:

• effective February 23, 2022, to clarify that gift cards and gift certificates are not subject to PST when acquired
• effective April 1, 2013, to clarify the evidentiary requirements for real property contracts where the customer and the contractor agree that the customer is responsible for paying the PST
• effective on a date to be specified by regulation, to make minor changes to provisions related to tax payment agreements

Other tax measures

Speculation and vacancy tax

The budget addresses certain exemptions available under the speculation and vacancy tax by:

• making permanent the exemption for strata accommodation properties, which was originally set to expire at the end of 2021
• expanding the exemption for hazardous or damaged residential property to apply to properties damaged by the 2021 flooding in Abbotsford, Chilliwack and Mission, for the 2021 tax year only; the exemption will be available to these properties, even if the property was uninhabitable for less than 60 days, if no other exemption was available due to the flooding

The budget also proposes technical amendments to the Speculation and Vacancy Tax Act to extend the deadlines to apply for a tax credit for eligible taxpayers by 90 days when a notice of assessment or a minister’s notice of decision is given after the end of the normal application period.   

Motor fuel tax

The budget expands the hydrogen exemption from motor fuel taxes. Effective February 23, 2022, hydrogen fuel is classified as a Category 1 alternative motor fuel and is exempt from motor fuel tax provided that the hydrogen:

• is purchased for use in an internal combustion engine vehicle, and
• is not produced by electrolysis using coal-generated electricity, unless the carbon dioxide emitted as a result of the process is captured and stored or captured and sequestered

The budget also proposes technical amendments to the Motor Fuel Tax Act to authorize the director to specify the form to be used as an application for a carrier licence under the International Fuel Tax Agreement.

School (property) tax rates

In 2022, British Columbia will continue to apply its long-standing rate-setting policies for:

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

The budget reminds us that the provincial industrial property tax credit for class 4 major industry will no longer be available after the 2022 taxation year, and instead, the 2023 major industry school tax rate will be reduced to offset the removal of this credit.