British Columbia Budget Report 2017

On February 21, 2017, Finance Minister Michael de Jong presented the province’s fifth successive balanced budget. With a provincial election scheduled for May 9th, this will be the last budget before the election.

Highlights

  • Surplus of $1.46 billion forecast for 2016-17
  • Surplus of $295 million estimated for 2017-18
  • Surplus of $244 million estimated for 2018-2019
  • Medical Services Plan (MSP) premiums cut in half for households earning less than $120,000
  • No changes announced to personal tax rates.
  • Corporate tax rate on small business cut by 0.5%

The surplus reported for the 2016-17 fiscal year is $1.46 billion, which is much higher than the surplus of $264 million predicted in last year’s budget.

The provincial economy is expected to grow by 2.1% in both 2017 and 2018. This comes off of strong estimated growth of 3% for 2016.

Personal Tax Measures

Personal Income Tax Rates

No changes to personal tax rates were announced. 

B.C.’s personal income tax rates effective January 1, 2017 remain as follows:

Personal Combined Federal/Provincial Top Marginal Rates

 

2016

2017

Interest and regular income

47.70%

47.70%

Capital gains

23.85%

23.85%

Eligible dividends

31.30%

31.30%

Non-eligible dividends

40.61%

40.95%

British Columbia Non-Refundable Tax Credits

The government confirmed today that personal tax credits for 2017 will be indexed by 1.018%. The maximum tax credit amounts and actual BC tax credits for 2016 and 2017 are set out below.

British Columbia Non-Refundable Tax Credits

 

2016

2017

Maximum Amount

BC Tax Credit

Maximum Amount

BC Tax
Credit

Basic Personal Amount

$10,027

507

$10,208

517

Spousal Amount

8,586

434

8,740

442

Eligible dependent amount

8,586

434

8,740

442

Age amount

4,497

228

4,578

232

Infirm dependent amount

4,388

222

4,467

226

CPP Contributions

2,544

129

2,564

130

EI Contributions

955

48

836

42

Pension income amount

1,000

51

1,000

51

Disability amount

7,521

381

7,656

387

Disability supplement

4,387

222

4,467

226

Tuition amounts

Variable

Variable

Variable

Variable

Adoption expenses

15,255

772

15,669

793

Medical expenses

Variable

Variable

Variable

Variable

Medical expenses (other dependents)

N/A

N/A

N/A

N/A

Caregiver amount

4,349

220

4,467

226

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%

Dividend Tax Credit Rate for Ineligible Dividends Decreased

The British Columbia dividend tax credit rate on ineligible dividends is decreased from 17% to 15% as a consequential amendment resulting from the change to the small-business corporate income tax rate (as described below). 

The change to the dividend tax credit rate on ineligible dividends is effective for the 2017 and subsequent tax years.

The post-budget rates on non-eligible dividends recalculated for the top 3 tax brackets using a 15% dividend tax credit are 32.76%, 36.27% and 40.95%.

Non-Refundable Volunteer Firefighter and Search and Rescue Volunteer Tax Credit

As announced on February 11, 2017, a new non-refundable volunteer firefighter and search and rescue volunteer tax credit was introduced.  

The tax credit is available to British Columbians who provide at least 200 hours of volunteer service to either a volunteer fire department, an eligible search and rescue organization or a combination of both. The credit amount is $3,000, providing a tax benefit of up to $151.80 per eligible taxpayer.

The tax credit is available for the 2017 and subsequent taxation years.

BC Back to School Tax Credit

A new non-refundable BC back-to-school tax credit was introduced. The credit is available to individuals with school-aged children (five to 17 years of age).  

The tax credit amount is $250 per child, providing a tax benefit of up to $12.65 per child.

The credit is available for the 2016, 2017 and 2018 tax years, after which the credit will be reviewed. 

Elimination of the Education Tax Credit

The education tax credit is eliminated effective January 1, 2018. Unused education amounts carried forward from years prior to 2018 remain available to be claimed in 2018 and subsequent tax years.

BC Mining Flow-Through Share Tax Credit is extended

The BC mining flow-through share (BC MFTS) tax credit allows individuals who invest in flow-through shares offered by a corporation conducting mining exploration in BC to claim non-refundable tax credit of 20% of their BC flow-through mining expenditures.

The expiry date of the BC MFTS tax credit was December 31, 2016.  As announced on January 23, 2017 and confirmed on budget day, the expiry date for the BC MFTS tax credit is extended to December 31, 2017.

Mining Exploration Tax Credit is expanded

The mining exploration tax credit is expanded to allow the costs of environmental studies and community consultations incurred after 28 February 2015 to be included in the calculation of the mining exploration tax credit.

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

Corporate Tax Measures

Corporate Income Tax Rates

The budget announced a reduction of the BC small business corporate income tax rate to 2% effective April 1, 2017.

B.C.’s corporate income tax rates effective January 1, 2017 are as follows:

Corporate Income Tax Rates — As of January 1, 2017

 

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 provincial small business income tax rate, the combined federal and British Columbia small business rate will decrease to 12.5% on April 1, 2017.

Corporate Income Tax Rates — As of April 1, 2017

 

British Columbia

Combined Federal and British Columbia

General

11%

26%

M&P

11%

26%

Small business*

2.0%

12.5%

* on first $500,000 of active business income

Phase-out of preferential tax rates for credit unions paused

This budget pauses the phase-out of the provincial preferential income tax treatment for credit unions pending the completion of the Financial Institutions Act and Credit Union Incorporation Act review.

Accordingly, for the 2017 tax year a credit union will continue to receive 80% of the full preferential tax treatment instead of having its value reduced to 60%, as was previously planned.

Prior to 2013, credit unions benefited from preferential federal and British Columbia provincial corporate income tax rates on a portion of their income.

In 2013, the federal government began a five-year phase-out of its preferential tax treatment. In 2014, British Columbia announced that the provincial preferential tax treatment for credit unions would be extended 3 years, after which it would be phased out over 5 years beginning in 2016.

Amendments to the interactive digital media tax credit

Effective 22 February 2017, qualifying BC labour employed in the development of “augmented reality and virtual reality” products will be eligible for the interactive digital media tax credit.

The tax credit is calculated as 17.5% of qualifying BC labour expenses.

Currently, to be eligible for the interactive digital media tax credit, a corporation’s principal business must be the development of interactive digital media products.

Effective for tax years that end on or after 22 February 2017, corporations that have annual qualifying BC labour expenses greater than $2 million do not need to meet this requirement.

Effective for tax years that end on or after 22 February 2017, interactive digital media corporations participating in the small-business venture capital program are eligible for the interactive digital media tax credit.

Boundary for regional film tax credits adjusted

For the purposes of the regional film tax credits, 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.

This change is effective for productions with principal photography beginning on or after 25 January 2017.

As a result, the regional film tax credits apply in all of the City of Langley and Township of Langley. This change applies to both the Film Incentive BC tax credit and the production services tax credit.

Extensions to Other Tax Credits:

The scientific research and experimental development (SR&ED) tax credit is extended to 31 August 2022.

The book publishing tax credit is extended for two years, to 31 March 2019.

The BC training tax credits are extended to the end of 2020.

Provincial Sales Tax

Phase-Out of Provincial Sales Tax on Electricity Purchases by Businesses

The provincial sales tax on taxable electricity will be phased out.

Effective 1 October 2017, the tax rate on electricity is reduced to 3.5% from 7% of the purchase price. Effective 1 April 2019, electricity is fully exempt from provincial sales tax.

Other Measures (Not Related to Tax)

Property Transfer Tax Act

Effective for registrations on or after 22 February 2017, the fair market value threshold for eligible residential property under the First Time Home Buyer’s Program is increased to $500,000 from $475,000.

The partial exemption continues and now applies to homes valued between $500,000 and $525,000.

With this change, eligible first-time home buyers can save up to $8,000 in property transfer tax on the purchase of their home.

Medicare Protection Act

Reduction of medical services plan premiums

Effective for 2018, medical services plan (MSP) premiums are reduced by 50% for households with annual net incomes up to $120,000.

To receive the 50% reduction, households will need to register to determine eligibility. Individuals and families currently receiving premium assistance will be automatically registered.

In addition, the income threshold at which households are fully exempt from MSP premiums is increased by $2,000.

Small Business Venture Capital Act

Equity tax credit budget increased.

Effective for 2017 and subsequent years, the budget for the small-business venture capital tax credit is increased to $38.5 million from $35 million.

This allows for up to $11.7 million in additional equity financing for qualifying corporations annually.

Motor Fuel Tax Act

Natural gas used as locomotive fuel exempted.

Effective 1 October 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 cent per litre tax on locomotive fuel.

The motor fuel tax exemption for natural gas used as locomotive fuel is consistent with the motor fuel tax exemptions for natural gas used in motor vehicles or used in a ship.

Tobacco Tax Act

Effective 1 October 2017, the tax rate on cigarettes is increased to $49.40 from $47.80 per carton of 200 cigarettes, and the tax rate on fine-cut tobacco is increased to 24.7 cents from 23.9 cents per gram.

Home Owner Grant Act

Threshold for home owner grant phase-out increased

The threshold for the phase-out of the home owner grant is increased to $1.6 million from $1.2 million for the 2017 tax year. For properties valued above the threshold, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold.

Taxation (Rural Area) Act

Provincial Rural Area Property Tax Rates Set

A single rural area residential property tax rate applies province-wide.

The longstanding rate-setting policy that average residential rural property taxes increase by the previous year’s provincial inflation rate will continue for 2017.

Consistent with this longstanding policy, non-residential rural area property tax rates will be set so that non-residential rural area tax revenue will increase by inflation plus tax on new construction.

The rates will be set when revised assessment roll data are available in spring 2017.

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 21, 2017.

 

 

2017 Corporate Tax Rates

 

 

Top 2017 Personal Rates

General
%

M&P
%

Small Business
%

2017 Prov. Sales Tax

B.C.

47.70

26.00

26.00

13.00(1)

7.00

Alta.

48.00

27.00

27.00

12.50

-

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(5)

Qué.

53.31

26.80

26.80

18.50(2)  

9.975(6)

N.B.

53.30

29.00  

29.00

14.00(3)

10.00(5)

N.S.

54.00

31.00

31.00

13.50

10.00(5)

P.E.I.

51.37

31.00

31.00

15.00

10.00(5)

N.L.

51.30

30.00

30.00

13.50

10.00(5)

Yukon

48.00

30.00

17.50

13.50(4)

-

N.W.T.

47.05

26.50

26.50

14.50

-

Nunavut

44.50

27.00

27.00

14.50

-

  1. The small business tax rate will decrease to 12.5% effective April 1, 2017.
  2. Quebec provides a rate reduction from the small business rate eligible manufacturing small and medium-size enterprises (SMEs).  Where certain conditions are met, the maximum reduction available is 4%, for a combined rate 14.5%.  Note that a lesser reduction from the small business rate may be available to certain manufacturing SMEs where some, but not all conditions are met.
  3. The small business tax rate will decrease to 13.5% effective April 1, 2017.
  4. The tax rate for M&P profits eligible for the small business deduction is 12%.
  5. As part of the HST (combined rates are 15% in New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland & Labrador and 13% in Ontario.
  6. The QST system is harmonized with the GST, though two separate tax systems remain – the GST and the amended QST.  The combined rate is 14.975%.

(Source: BC Government)

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