2016 British Columbia Budget | FBC, Canada's Farm & Small Business Tax Specialist

2016 British Columbia Budget

2016 British Columbia Budget

On February 16, 2016, Finance Minister Michael de Jong presented his fourth budget as Finance Minister. 

The B.C. government introduced another balanced budget for 2016, which includes forecast surpluses in all 4 years of the fiscal plan and modest investments in priority areas.  

With steady and stable growth, this budget lays out a fiscal game plan to maintain a balanced budget through to the election expected next year and beyond. 

Highlights

  • Surplus of $377 million forecast for 2015-16
  • Surplus of $264 million estimated for 2016-17
  • Surplus of $287 million in 2017-18
  • Surplus of $373 million in 2018-19
  • No changes announced to personal and corporate tax rates
  • PST review announced.  [There is no consideration given to return to HST]

The $377 million surplus reported for the 2015-16 fiscal year is higher than the predicted surplus of $284 million in last year’s budget.

The provincial economy is expected to grow by 2.4% in 2016 and 2.3% in 2017.

Personal Tax Measures

Personal income tax rates

No changes to personal tax rates were announced. As a result, BC’s personal income tax rates effective January 1, 2016 remain as follows:

 

Personal Combined Federal/Provincial Top Marginal Rates

 

2015

2016

Interest and regular income

45.8%

47.70%

Capital gains

22.9%

23.85%

Eligible dividends

28.7%

31.30%

Non-eligible dividends

38.0%

40.61%

 

British Columbia Non-Refundable Tax Credits

The government confirmed today that personal tax credits for 2016 will be indexed by 1.007%.

The maximum tax credits amounts and actual BC tax credits for 2015 and 2016 are set out below.

British Columbia Non-Refundable Tax Credits

 

2015

2016

Maximum Amount

BC Tax Credit

Maximum Amount

BC Tax Credit

Basic Personal Amount

$9,938

503

$10,027

507

Spousal Amount

8,509

431

8,586

434

Eligible dependent amount

8,509

431

8,586

434

Age amount

4,457

226

4,497

228

Infirm dependent amount

4,348

220

4,388

222

CPP Contributions

2,480

125

2,544

129

EI Contributions

931

47

955

48

Pension income amount

1,000

51

1,000

51

Disability amount

7,454

377

7,521

381

Disability supplement

4,348

220

4,387

222

Tuition and education amounts

Variable

Variable

Variable

Variable

Adoption expenses

15,255

772

15,453

782

Medical expenses

Variable

Variable

Variable

Variable

Medical expenses (other dependents)

N/A

N/A

N/A

N/A

Caregiver amount

4,349

220

4,387

222

Interest on student loans

Variable

Variable

Variable

Variable

Donations & Gifts
-first $200
- over $200


200
75% of income


10
Variable


200
75% of income


10
Variable

In general, credits are multiplied by 5.06% to arrive at the deduction from BC Tax. In the case of donations and gifts over $200, the credit is 14.70%

Senior’s Home Renovation Tax Credit and Persons with Disabilities

In today’s budget, it was announced that the BC seniors’ home renovation tax credit will be expanded.

This refund tax credit assists individuals age 65 and over with the cost of certain permanent home renovations to improve accessibility or to help an individual be more functional or mobile at home.

The tax credit will be extended for the 2016 tax year to include persons with disabilities who are eligible to claim the federal disabilities tax credit and to family members living with these individuals. 

The expanded credit will be available in respect of eligible expenditures made or incurred under agreement entered into on or after February 17, 2016. 

The credit will be renamed the home renovation tax credit for seniors and persons with disabilities.

BC Tax Reduction Credit Enhanced

The BC tax reduction credit is a non-refundable tax credit for individuals who have net income below a certain amount. 

The maximum tax reduction credit is available to individuals with net income below the threshold amount for a tax year, and is reduced by a percentage of an individual’s net income over the threshold amount.

The budget proposes to increase the credit phase-out threshold to $19,400 (from $19,000).

The credit phased-out rate also increased to 3.56% of net income from 3.50% of net income.

This change is effective for the 2016 tax year.  

BC Mining Flow-Through Share Tax Credit

The BC mining flow-through share (BC MFTS) tax credit is available for individuals who invest in flow-through share offered by a corporation conducting mining exploration in BC. 

It is a non-refundable tax credit of 20% of their BC flow-through mining expenditures. 

The expiry date for the BC MFTS tax credit was December 31, 2015. 

Today’s budget proposes to extend the expiry date for the BC MFTS tax credit to the end of 2016.

Mining Exploration Tax Credit

The mining exploration tax credit is available to both individuals and corporations that undertake mining exploration in the province.  

This credit is calculated as 20% of eligible BC mining exploration expenditures, or 30% if exploration is in the mountain-pine-beetle-affected area. 

The budget proposes to extend this tax credit for an additional 3 years to the end of 2019. 

According to the BC government website, the budget also proposes to amend the filing deadline to require the claim for the credit to be filed within 18 months after the end of the tax year.  

The amendment to the filing deadline is proposed to be effective for tax years ending on or after January 1, 2017.

Medical Services Plan Premiums

Effective January 1, 2017, medical services pan (MSP) premiums will increase approximately 4% with a maximum increase of $3 per month for an adult.

However, the calculation of MSP premiums will no longer include children. This change will ensure all children are treated the same, regardless of family composition.   

This measure will provide a significant benefit to single parent families, who will pay up to $72 per month less than they will pay in 2016.

The premium rate payable by couples will be set at twice the MSP rate for a single adult. 

This change will ensure adults pay the same maximum premium rate regardless of family composition. Currently couples pay less than twice the amount paid by single adults. 

This change will result in a $14 per month increase in premiums for couples, in addition to the 4% increase.

Finally, effective January 1, 2017, MSP premium assistance is enhanced. 

The income thresholds up to which a household receives full premium assistance is increased by $2,000.

Partial premium assistance is enhanced for all households paying partial premiums and the income threshold at which a household starts to pay full premiums is increased by $12,000. 

A single adult receiving premium assistance will see their premium reduced by up to $27 per month compared to 2016 rates, which a couple with two children will see their premium reduced up to $54 per month.

Corporate Tax Measures

Corporate Income Tax Rates

No changes to corporate taxes were announced. As a result, B.C.’s corporate income tax rates effective January 1, 2016 remain as follows:

Corporate Income Tax Rates — As of January 1, 2016

 

British Columbia

Combined Federal and British Columbia

General

11%

26%

M&P

11%

26%

Small business*

2.5%

13%

* on first $500,000 of active business income

Note: As a result of scheduled decreases in the federal small business income tax rate, the combined federal and British Columbia small business rate will decrease to 12.5% on January 1, 2017, 12% on January 1, 2018 and 11.5% on January 1, 2019

Farmer’s Food Donation Tax Credit

Effective February 17, 2016, the budget introduces a new non-refundable farmer’s food donation tax credit which will apply for the 2016 through 2018 tax years, after which the credit will be reviewed.

The credit will be available to corporations and individuals that carry on the business of farming and donate qualifying agricultural products to a registered charity that provides food to those in need or assists in operating a school meal program.

The credit will be worth 25% of the fair market value of the products donated and must be claimed in the same year as the charitable donation tax credit or deduction is claimed for the donation.

Production Services Tax Credit & Film Incentive BC Tax Credit

As announced on June 26, 2015, the regional and distant location tax credits for animation productions are clarified to ensure the credits are based on the amount of eligible labour expenditures incurred in the regional or distant location areas.  

The change applies to both the production services tax credit and the film incentive BC tax credit for animation productions where principal photography begins after June 26, 2015.

Estates and Trusts

Taxation of Estates and Trusts

The budget provides that recent federal changes to the taxation of estates and trusts are to be paralleled.

Effective for tax years ending after 2015, graduated personal income tax rates will only apply to trusts that are “graduated rate estates” or “qualified disability trusts”.

The combined top marginal personal income tax rate of 47.70% will apply to all other trusts and estates in British Columbia.

Provincial Sales Tax

Provincial Sales Tax – Farmer Exemptions

Effective February 17, 2016, the list of items qualifying for exemption from provincial sales tax acquired by qualifying farmers solely for farm purpose is expanded to include telescopic handlers, skid steers and polycarbonate greenhouse panels.

To qualify for the exemption, polycarbonate greenhouse panels must be purchased in a quantity of at least 500 square meters.

Other Measures (Not related to tax)

Property Transfer Tax Act

Effective February 17, 2016 newly constructed homes with a value of up to $750,000 will be exempt from property transfer tax where purchased for use as a principal residence with a partial exemption provided for homes between $750,000 and $800,000.

At the same time, the property transfer tax rate will be increased to 3% on the portion of a property’s value in excess of $2 million.

The budget also announces that amendments will be made to the Property Transfer Tax Act to require certain disclosure requirements by purchasers of real property that will come into effect in the spring of 2016.

Individual purchasers who are not Canadian citizens or permanent residents of Canada will be required to disclose their citizenship.

Corporate purchasers will be required to disclose the citizenship of any director who is not a Canadian citizen or permanent resident of Canada.

Where property is acquired by a bare trust, the names, addresses and citizenship of settlors and beneficiaries of the trust must be disclosed.

Carbon Tax and Motor Fuel Tax

The budget introduces exemptions from carbon tax and motor fuel tax that will replace refunds of security in qualifying circumstances, effective March 1, 2016.

A collector will be exempt from having to collect security on the sale of fuel in British Columbia if the fuel is sold to a person who is exempt from the requirement to pay security in respect of that fuel.

A deputy collector will be exempt from having to pay security on fuel bought in British Columbia if the fuel is to be sold outside British Columbia by the deputy collector and the fuel is to be removed from British Columbia:

  • By the person who sold the fuel to the deputy collector
  • By a person acting on behalf of the person who sold the fuel to the deputy collector
  • By a common carrier where the contract with that carrier to remove the fuel has been entered into at the time the deputy collector buys the fuel, or
  • In prescribed circumstances

Small Business Equity Tax Credit

Commencing in 2016 the budget for the small business venture capital tax credit is increased by $5 million, $3 million of which will be for direct investments in eligible new corporations.

This allows for up to $16.7 million annually in additional equity financing for qualifying corporations.

Home Owner Grant

The budget confirms a measure announced January 5, 2016 that the threshold for the phase-out of the home owner grant is increased to $1.2 million from $1.1 million for the 2016 tax year.

The home owner grant reduces the amount of property tax individuals pay for their principal residence.

This grant is available to qualifying homeowners that pay property taxes to a municipality or to the province if they live in a rural area.

Tourist Accommodation Relief

Effective for the 2017 tax year, the reduction in assessed value for eligible short-term accommodation property located outside municipalities is increased.

The maximum reduction in assessed value is increased from $150,000 to $500,000 while the assessed value at which the phase-out of the benefit begins is increased from $2 million to $4 million.

How British Columbia Compares

The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to February 16, 2016.

 

 

2016 Corporate Tax Rates

 

 

Top 2016 Personal Rates

General
%

M&P
%

Small Business
%

2016 Prov. Sales Tax

B.C.

47.70

26.00

26.00

13.50

7.00

Alta.

48.00

27.00

27.00

13.50

-

Sask.

48.00

27.00

25.00

12.50

5.00

Man.

50.40

27.00

27.00

10.50

8.00

Ont.

53.53

26.50

25.00

15.00

8.00(4)

Qué.

53.31

26.90

26.90

18.50(2)

9.975(5)

N.B.

53.30

27.00(1)

27.00(1)

14.50

8.00(4)(6)

N.S.

54.00

31.00

31.00

13.50

10.00(4)

P.E.I.

51.37

31.00

31.00

15.00

9.00(4)

N.L.

48.30

29.00

20.00

13.50

8.00(4)

Yukon

48.00

30.00

17.50

13.50(3)

-

N.W.T.

47.05

26.50

26.50

14.50

-

Nunavut

44.50

27.00

27.00

14.50

-

 

  1. The general corporate tax rate will increase to 14%, resulting in a combined federal/provincial rate of 29%, effective April 1, 2016.
  2. Quebec provides a rate reduction for manufacturing SMEs.  Where certain conditions are met, the maximum reduction available is 4%, for a combined rate of 14.5%.  Note that a lessor reduction may be available to certain manufacturing SMEs where not all conditions are met.
  3. The tax rate for M&P profits eligible for the small business deduction is 12%.
  4. As part of the HST (combined rates are 15% in Nova Scotia and 14% in Prince Edward Island and 13% in Ontario, New Brunswick (see note 6) and Newfoundland & Labrador).
  5. The QST system is harmonized with the GST, though two separate tax systems remain – the GST and the amended QST.
  6. The provincial portion of the HST will increase to 10%, resulting in a combined HST rate of 15%, effective July 1, 2016.
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