Tax Insights: 2026 British Columbia budget – Tax highlights

Issue 2026-06

In brief

On February 17, 2026, British Columbia’s Minister of Finance, Brenda Bailey, presented the province’s budget. The budget does not change corporate income tax rates, but does:

• introduce a temporary refundable manufacturing and processing (M&P) investment tax credit (ITC) for Canadian‑controlled private corporations (CCPCs)
• enhance the province’s scientific research and experimental development tax credit
• increase the lowest personal income tax rate for 2026 and pause indexation of personal income tax brackets and non‑refundable tax credit amounts for the next four years
• expand the services to which provincial sales tax applies, effective October 1, 2026
• increase speculation and vacancy tax rates for foreign owners and untaxed worldwide earners, effective January 1, 2027

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

In detail

Business taxes

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 income tax rates.

B.C. manufacturing and processing investment tax credit (BC M&P ITC)

The budget introduces a temporary refundable BC M&P ITC, which will be available for investments by CCPCs in buildings and machinery and equipment used in M&P, subject to exclusions in the enacting legislation. Investments in eligible property made after March 31, 2026, and before April 1, 2031, will qualify for a 15% ITC on up to $2 million in eligible investments (maximum annual credit of $300,000, to be shared by associated corporations). Starting April 1, 2031, the tax credit rate will be reduced by 2.5 percentage points annually until it is eliminated for investments made after March 31, 2036.    

Scientific research and experimental development (SR&ED) tax credit

Effective for taxation years that begin after December 15, 2024, enhancements to the province’s SR&ED tax credit:

• increase the annual expenditure limit for the refundable SR&ED tax credit from $3 million to $6 million, and the taxable capital phase‑out thresholds (at which the annual expenditure limit begins to be reduced) from $10 million and $50 million, to $15 million and $75 million, respectively
• restore eligibility of capital expenditures for purposes of claiming the SR&ED tax credit
• allow eligible Canadian public corporations to claim the refundable SR&ED tax credit

These enhancements align with the recent changes to the federal SR&ED tax credit program (for more information on the federal SR&ED changes, see our Tax Insights “SR&ED updates: Enhanced credits, expanded eligibility and emerging opportunities”).

Also, the province’s SR&ED tax credit will be made permanent.

B.C. mining exploration tax credit

Subject to legislative amendments to the federal Income Tax Act, effective November 4, 2025, British Columbia will amend the B.C. mining exploration tax credit to clarify that expenses incurred to assess the quality of a Canadian mineral resource do not include expenses related to determining its economic viability or engineering feasibility. This aligns with the proposed federal changes that were announced in the 2025 federal budget.

These changes are in response to a recent landmark Supreme Court of British Columbia decision, which held that the reference to “quality” under the provincial equivalent of the federal Canadian exploration expenses definition could be interpreted to include the economic viability, and not just the physical characteristics, of a mineral resource.

Amendments also clarify that the Canada Revenue Agency may reduce a renounced amount under the provincial Income Tax Act for purposes of the B.C. mining exploration tax credit and the B.C. mining flow‑through share tax credit, effective August 4, 2023.

Film incentive B.C. tax credit (FIBCTC) and B.C. production services tax credit (BCPSTC)

Effective on royal assent of the enacting legislation, the budget:

• eliminates the requirement for corporations to file a notice of intent to claim the BCPSTC for notices due after February 16, 2026
• extends the time in which a corporation must file a claim for either the FIBCTC or the BCPSTC from 18 months to 36 months after the end of the corporation’s taxation year, effective for corporations with a taxation year beginning after February 16, 2026 (for corporations with a taxation year beginning before February 17, 2026, the time limit will also be extended to 36 months if the original 18 month time limit would have expired after February 16, 2026)
• no longer requires corporations claiming the FIBCTC to file a completion certificate with the Canada Revenue Agency that would have been due after February 16, 2026

The budget also, effective March 1, 2026:

• increases the accreditation certificate fee for the BCPSTC to $19,000
• introduces a major production tax credit certificate fee of $5,000

Other tax credits

The budget also:   

• makes permanent:
  • the book publishing tax credit, effective March 31, 2026
  • the farmers’ food donation tax credit, upon royal assent of the enacting legislation
• extends the shipbuilding and ship repair industry tax credit by one year, to the end of 2027

Personal taxes

Personal income tax rates

The budget increases the province’s lowest personal income tax rate from 5.06% to 5.60%, effective for the 2026 and subsequent taxation years. For 2026, the 5.60% rate will apply to the first $50,363 of taxable income. Consequential to this rate increase, the province’s tax credit rate on which many non‑refundable personal tax credits are calculated will also increase from 5.06% to 5.60%.

Personal income tax brackets and non-refundable tax credits

The budget pauses indexation of the province’s personal income tax brackets and non-refundable tax credits at their 2026 levels, effective for the 2027 to 2030 taxation years. Indexation will resume for the 2031 taxation year.

Top personal tax rates

The top two combined federal/British Columbia personal income tax rates are shown in the table below.

B.C. tax reduction credit

The budget increases the maximum B.C. tax reduction credit for low-income taxpayers from $575 to $690, effective for the 2026 taxation year.

Volunteer firefighters and search and rescue volunteers tax credit

The budget doubles the amount of income an individual can claim for this tax credit to $6,000; thereby doubling the maximum tax credit to $336.

Children and youth disability supplement

The budget introduces an income-tested children and youth disability supplement that will be available starting July 1, 2027. This supplement will be part of the B.C. family benefit. Families who have children with disabilities meeting certain criteria will be eligible for an additional annual amount of up to $6,000 for each eligible dependent.   

Other taxes

Provincial sales tax (PST)

The budget expands the PST to the following services, effective October 1, 2026:

• accounting and bookkeeping
• architectural, engineering and geoscience (to apply to 30% of the purchase price subject to PST)
• rental property and strata management (in addition to commissions on buying and selling non‑residential real estate)
• security and private investigation

Businesses providing these services will be required to register for, collect and remit PST, or in certain instances, the purchaser may be required to self‑assess the tax. The tax will generally apply to the extent (expressed as a percentage) that the services relate to British Columbia.

Effective October 1, 2026, the budget also eliminates PST exemptions for:

• clothing patterns, yarn, natural fibres, synthetic thread and fabric commonly used in making or repairing clothing
• services related to clothing and footwear (basic laundry services remain exempt)
• basic cable television, toll‑free telephone and residential landline telephone services

Amendments to the Provincial Sales Tax Act will also enable sellers of goods to provide a point‑of‑sale exemption or refund to businesses purchasing goods for use outside of British Columbia, effective February 18, 2026. The purchaser must provide evidence that the goods are being shipped outside of the province for business use.  

Speculation and vacancy tax (SVT)

Effective January 1, 2027, the budget increases the SVT rate to 4% (from 3%) for foreign owners and untaxed worldwide earners, as well as others specified under the Speculation and Vacancy Tax Act (SVTA). The increased rate will apply with respect to the use of residential properties during the 2027 calendar year and beyond. (The SVT rate will remain at 1% for Canadian citizens and permanent residents who are not untaxed worldwide earners.)

In addition, amendments to the SVTA:

• charge a $250 non‑refundable late declaration penalty for property owners who do not declare by the March 31 due date, effective January 1, 2027
• remove a property owner’s right to appeal an assessment arising from their own declaration that an exemption does not apply to their property under the SVTA, effective on royal assent of the enacting legislation

Property transfer tax (PTT)

Effective January 1, 2025, the budget expands the PTT purpose‑built rental exemptions to newly constructed purpose‑built rental buildings leased for a maximum of 24 months before their first taxable transaction is registered at the Land Title and Survey Authority of British Columbia. These exemptions apply to the:

• 2% PTT on the fair market value of the residential component of a taxable transaction exceeding $3 million
• general PTT, for transactions between January 1, 2025 and December 31, 2030

Qualifying properties must:

• be newly constructed, non‑stratified and held as rentals on a monthly basis or longer for at least 10 years
• for the residential portion of the property, be entirely used for rental purposes and have at least four apartments

In addition, the budget amends the Property Transfer Tax Act, upon royal assent of the enacting legislation, to:

• allow a person to appeal a gross negligence penalty to the Minister of Finance
• extend the limitation period for charging a person with an offence to six years (from one year)
• clarify that residential property is defined as property classified as class 1 on the assessment roll for the applicable year

Property taxes

School tax rates

Effective starting the 2027 taxation year, additional school tax rates will increase on residential properties (or the residential portion of mixed-use properties) and most residential vacant land valued at:

• between $3 million and $4 million, to 0.3% (from 0.2%)
• over $4 million, to 0.6% (from 0.4%)

Rate setting policy

Starting 2026, the new rate setting policy for provincial non‑residential and residential class school property taxes will be based on the 3‑year average annual change in provincial nominal gross domestic product (before applying the homeowner grant for the residential class). Increases to rural property tax rates will follow the same policy.

Property tax deferment program

Starting in the 2026 taxation year, the property tax deferment program interest rate terms are amended.

Other amendments

Effective on royal assent of the enacting legislation, amendments to the School Act and Taxation (Rural Area) Act expand the definition of “eligible corporation” to include trusts for the benefit of one or more First Nations and wholly‑owned subsidiary corporations of other eligible corporations.