British Columbia Budget Report 2017 Update

On September 11, 2017, Finance Minister Carol James tabled the province’s fiscal budget update. 

The Budget 2017 update contains several tax measures affecting individuals and corporations.

Highlights

  • Surplus of $246 million estimated for 2017-18
  • Surplus projected for the next 2 years
  • Medical Services Plan (MSP) premiums cut in half for households earning less than $120,000
  • No change announced to 2017 personal tax rates but new top personal tax bracket introduced for 2018
  • Corporate tax rate on small business cut by 0.5%

Personal Tax Measures

Personal income tax rates

A change to personal tax rates was announced effective for 2018. There were no changes for 2017. 

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

Personal Combined Federal/Provincial Top Marginal Rates

 

2017

2018

Interest and regular income

47.70%

49.80%

Capital gains

23.85%

24.90%

Eligible dividends

31.30%

34.19%

Non-eligible dividends

40.95%

43.41%

A new top personal income tax bracket is introduced effective for the 2018 and subsequent years.  

The income threshold for the new top bracket will be set at $150,000 in 2018.   Taxable income exceeding $150,000 will be subject to a provincial income tax rate of 16.8% from its current rate at 14.7%. 

2017 British Columbia Personal Tax Rates

Bracket

Pre-budget

Proposed Rates

 

2017

2018

 

$0 - $38,898

5.06%

5.06%

5.06%

 

$38,899 to $77,797

7.70%

7.70%

7.70%

 

$77,798 to $89,320

10.50%

10.50%

10.50%

 

89,321 to $108,460

12.29%

12.29%

12.29%

 

$108,461 to $150,000

14.70%

14.70%

14.70%

 

Above $150,000

14.70%

14.70%

16.80%

 

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 and education 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 above).

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 three tax brackets using a 15% dividend tax credit are 32.76%, 36.27% and 40.95%.

Dividend Tax Credit Rate for Eligible Dividends Increased

British Columbia provides a dividend tax credit to prevent double taxation of dividend income that has already been taxed at the corporate level. 

The factor used to calculate the British Columbia dividend tax credit rate on eligible dividends in increased from 36 and 6/19 to 43 and 11/19 as a consequential amendment resulting from the change to the general corporate income tax rate (as described above).  
The change to the dividend tax credit rate on eligible dividends is effective for the 2019 and subsequent tax years.

Low Income Climate Action Tax Credit Increased

Effective April 1, 2018, the maximum annual low income climate action tax credit is increased to $135 per adult from $115.50, and to $40 per child from $34.50, with single parent families continuing to receive the adult amount for the first child in the family. 

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.

Elimination of the BC Back to School Tax Credit

The non-refundable BC back-to-school tax credit is eliminated for the 2017 and subsequent year. The credit was introduced for the 2016 year.

The credit was 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.  

Elimination of the Children’s Fitness, Children’s Equipment and Children’s Arts Tax Credit

The children’s fitness tax credit, children’s fitness equipment tax credit and children’s arts tax credit are eliminated effective for the 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 confirmed on budget day and confirmed in the budget update, 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 update confirmed the reduction of the BC small business corporate income tax rate to 2% effective April 1, 2017.

As a result, B.C.’s corporate income tax rates effective January 1, 2017 remain 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

General Corporate Income Tax Rate Increased to 12%

The general corporate income tax credit rate is increased to 12% from 11% effective January 1, 2018.

Corporate Income Tax Rates — As of January 1, 2018

 

British Columbia

Combined Federal and British Columbia

General

12% (11% - 2017)

27% (26% - 2017)

M&P

12% (11% - 2017)

27% (26% - 2017)

Small business*

2.0% (2.0% - 2017)

12.5% (12.5% - 2017)

* on first $500,000 of active business income

Phase-Out of Preferential Tax Rates for Credit Unions Restored

This budget update cancels the phase-out and restores the full provincial preferential income tax treatment for credit unions effective January 1, 2017.

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 5-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

  • 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 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 2018.

Provincial Sales Tax

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

The budget update confirmed that the provincial sales tax on taxable electricity will be phased out.

Effective on a date to be specified by regulation, the tax rate on electricity is reduced to 3.5% from 7% of the purchase price.

Once the legislation receives Royal Assent, the government intends to provide at least one month of notice before the change takes effect.  

Effective 1 April 2019, electricity is fully exempt from provincial sales tax.

Other Measures (Not Related to Tax)

Carbon Tax Act

Effective 1 April 2018 carbon tax rates are increased by $5 per tonne of carbon dioxide equivalent emissions annually until rates are equal to $50 per tonne of carbon dioxide equivalent emissions on 1 April 2021.

Part 2 of the Carbon Tax Act is repealed. Following the budget update, the requirement to prepare the Carbon Tax Report and Plan will no longer apply.

In addition, this means the Carbon Tax Act will no longer require that revenue measures be introduced to offset carbon tax revenues. This will allow the government to spend carbon tax revenues on measures that reduce emissions. 

Property Transfer Tax Act

The budget update confirmed that 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

The budget update confirmed that effective for 2018, medical services plan (MSP) premiums are reduced by 50% for all households.

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. 

With these changes, single individuals and single parents will save up to $450 per year and couples will save up to $900 per year.

Small Business Venture Capital Act

Equity tax credit budget increased

The budget update confirmed that 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 on a date to be specified by regulation, 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 on a date specified by regulation, 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. 

Once the legislation receives Royal Assent, the government intends to provide at least one month of notice before this change takes effect. 

Home Owner Grant Act

Threshold for home owner grant phase-out increased

As announced on January 10, 2017, 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.

International Business Activity Act

Effective September 12, 2017, international business activities no longer qualify for personal and corporate tax refunds.

(Source: BC Government)

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