British Columbia Budget Report 2018 | FBC, Canada's Farm & Small Business Tax Specialist

British Columbia Budget Report 2018

British Columbia Budget Report 2018

On 20 February 2018, British Columbia Finance Minister Carole James tabled the province’s fiscal 2018–19 budget. The budget contains several tax measures affecting individuals and corporations. 

The minister anticipates a surplus of $219 million for 2018-19, and projects surpluses for each of the next two years.

Highlights

  • New child care program that makes care effectively free for some low-income families, and offers modest subsidies for others based on income
    (There’s no mention of when, or even if, government will meet its $10-a-day child care election promise.)
  • Immediate increase to the foreign buyer tax from 15% to 20%, and an expansion to Kamloops, Kelowna, Greater Victoria and the Fraser Valley
  • Elimination of Medical Services Plan premiums by 2020 to be replaced by a payroll health tax for businesses
  • $6.2 billion over 10 years to create 33,700 affordable housing units

Personal Tax Measures

Personal Income Tax Rates

The budget does not include any changes to personal income tax for 2018. 

Note: There were no changes for 2017 as well.  As a result, B.C.’s personal income tax rates effective January 1, 2018 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% 34.20%
Non-eligible dividends 40.95% 43.73

The 2017/2018 British Columbia personal tax rates are summarized as follows:  

2017/2018 British Columbia Personal Tax Rates
2017 Bracket Rate 2018 Bracket Rate
$0 - $38,898 5.06% $0 – 39,676 5.06%
$38,899 to $77,797 7.70% 39,677 to $79,107 7.70%
$77,798 to $89,320 10.50% 79,354 to $91,107 10.50%
89,321 to $108,460 12.29% $91,108 to $110,630 12.29%
$108,461 to $150,000 14.70% $110,631 to $150,000 14.70%
Above $150,000 14.70% Above $150,000 16.80%

British Columbia Non-Refundable Tax Credits

The government confirmed today that personal tax credits for 2018 will be indexed by 1.020%.

The maximum tax credit amounts and actual BC tax credits for 2017 and 2018 are set out below.

British Columbia Non-Refundable Tax Credits
  2017 2018
Maximum Amount BC Tax Credit Maximum Amount BC Tax Credit
Basic Personal Amount $10,208 517 $10,412 527
Spousal Amount 8,740 442 8,915 451
Eligible dependant amount 8,740 442 8,915 451
Age amount 4,578 232 4,669 236
Infirm dependant amount 4,467 226 4,556 231
CPP Contributions 2,564 130 2,594 131
EI Contributions 836 42 858 43
Pension income amount 1,000 51 1,000 51
Disability amount 7,656 387 7,809 395
Disability supplement 4,467 226 4,556 231
Tuition and education amounts Variable Variable Variable Variable
Adoption expenses 15,669 793 15,905 805
Medical expenses Variable Variable Variable Variable
Medical expenses (other dependants) N/A N/A N/A N/A
Caregiver amount 4,467 226 4,556 231
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%

Medical Services Plan Premiums

Effective 1 January 2020, Medical Services Plan premiums will be eliminated.

Single individuals will see annual savings of up to $900 and families will see annual savings of up to $1,800 once the Medical Services Plan premiums are eliminated.

Personal Tax Credits

Caregiver Tax Credit & the Infirm Dependant Tax Credit
Effective for 2018 and subsequent tax years, the caregiver tax credit and the infirm dependant tax credit are replaced with a new British Columbia caregiver credit.  

The non-refundable British Columbia caregiver credit parallels the Canada caregiver credit announced in the 2017 federal budget.

The British Columbia caregiver credit is available to British Columbians who care for an eligible adult relative who is dependent on the caregiver because of a mental or physical infirmity.

The caregiver is not required to live with the dependant in order to claim the credit.

The maximum British Columbia caregiver credit amount is $4,556 per infirm dependant for 2018, providing a benefit of up to $230.53, and is indexed to inflation for future years.

Individuals caring for an infirm spouse or common-law partner are eligible for the greater of the British Columbia caregiver credit or the spousal tax credit, and individuals who are single and caring for an infirm adult relative are eligible for the greater of the British Columbia caregiver credit or the eligible dependant tax credit.

BC Education Tax Credit Eliminated

The British Columbia education tax credit is eliminated effective for the 2019 and subsequent tax years.

Unused British Columbia education amounts carried forward from years prior to 2019 remain available to be claimed in 2019 and subsequent tax years.

Corporate Tax Measures

Corporate income tax rates

No changes are proposed to the corporate tax rates or the $500,000 small-business limit.  

British Columbia’s 2018 and 2019 corporate tax rates are summarized as follows: 

Corporate Income Tax Rates — As of January 1, 2018
  British Columbia Combined Federal and British Columbia
General *** 12% 27%
M&P 12% 27%
Small business*, ** 2.0% 12%
* on first $500,000 of active business income

* British Columbia reduced its small-business rate from 2.5% to 2.0% effective 1 April 2017.
** On 24 October 2017, the federal government tabled a notice of ways and means motion to implement reductions in the small-business corporate income tax rate, which were announced on 16 October 2017. The federal small-business rate is reduced from 10.5% to 10.0% effective 1 January 2018 and will be further reduced to 9.0% effective 1 January 2019.
*** British Columbia increased its general corporate tax rate from 11.0% to 12.0% effective 1 January 2018.

Corporate Income Tax Rates — As of January 1, 2019
  British Columbia Combined Federal and British Columbia
General 11% 27%
M&P 11% 27%
Small business* 2.0% 12%
* on first $500,000 of active business income

Employer Health Tax

In 2018, the government will introduce legislation to implement an employer health tax on employers’ payrolls starting in the 2019 calendar year.

The employer health tax will not apply to employers with payroll under $500,000.  

Employers with payroll over $1.5 million will pay the maximum rate of 1.95% on their total payroll.

For employers with payroll between $500,000 and $1.5 million, the tax rate will phase in gradually until it reaches 1.95% at $1.5 million in total payroll.

Other Tax Credits

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, 2017.  As announced on budget day today, the expiry date for the BC MFTS tax credit is extended to December 31, 2018.

Film Incentive BC Tax Credit is expanded

The Film Incentive BC tax credit is expanded to include scriptwriting expenditures on British Columbia labour incurred by a corporation prior to the completion of the final script stage of the production effective for expenditures incurred on or after 21 February 2018.

The Interactive Digital Media Tax Credit

The interactive digital media tax credit is extended for 5 years to August 31, 2023.

The Farmer’s Food Donation Tax Credit

The farmer’s food donation tax credit is extended for 1 year to the end of 2019.

The Book Publishing Tax Credit

The Book Publishing Tax Credit is extended for 3 years to March 31, 2021.

Provincial Sales Tax

Avalanche Airbags

The exemption for avalanche airbag backpacks is being expanded to include all avalanche airbag backpacks effective 1 April 2018.

Online Accommodation

Effective on a date to be specified by regulation, the Provincial Sales Tax Act and regulations will be amended to enable online accommodation platforms to register as collectors, and to collect and remit provincial sales tax and the municipal and regional district tax on accommodation.

By registering as a collector, the online platform will relieve its hosts from the obligation to register.

Municipal and Regional District Tax

Effective on a date to be specified by regulation, revenue from the municipal and regional district tax collected by municipalities, regional districts and eligible entities, such as tourism-focused nonprofits, can be used to fund affordable housing initiatives. Currently, funds can only be used for tourism marketing, programs and projects.

Software

Effective retroactive to 1 April 2013, the Provincial Sales Tax Act will be amended to clarify that provincial sales tax applies to software provided under optional as-needed maintenance agreements.

Luxury Surcharge on Passenger Vehicles

Effective 1 April 2018, the luxury surcharge on passenger vehicles is increased.

The rate on passenger vehicles with a purchase price from $125,000 to $149,999 is increased to 15% from 10%, and the rate on passenger vehicles with a purchase price of $150,000 and above is increased to 20% from 10%.

The general rate on private sales is also increased to 15% from 12% on passenger vehicles with a purchase price from $125,000 to $149,999, and to 20% from 12% on passenger vehicles with a purchase price of $150,000 and above.

The rates apply to sales of both new and used passenger vehicles.

Tax Payment Agreements

Effective on Royal Assent, services will be permitted to be included in Tax Payment Agreements between the Province and interjurisdictional railways.
This will allow for simplified remittance of tax on services. Previously, only goods and software were included in Tax Payment Agreements.

Retailers Operating on Cruise Ships

Effective retroactive to 1 April 2013, retailers operating on cruise ships in BC waters are not required to collect provincial sales tax on sales made during the course of scheduled sailings.

Other Measures

(Not related to tax)
 

Motor Fuel Tax & Carbon Tax

The refund rates for International Fuel Tax Agreement licensees are increased to reflect annual increases in the carbon tax each 1 April from 2018 through to 2021.

This will ensure International Fuel Tax Agreement licensees only pay carbon tax on fuel they use in BC.

Effective 1 April 2018, marine diesel fuel used in interjurisdictional cruise ships and ships prohibited from coasting trade under the Coasting Trade Act is exempt from motor fuel tax.

This exemption parallels the existing exemption from carbon tax for these ships.

Effective 1 April 2018, the motor fuel tax rates on clear gasoline and clear diesel in the Capital Regional District are increased to 5.5 cents per litre from 3.5 cents.

Effective retroactive to 18 February 2014, refiner collectors that acquire fuel for retail sale from other refiner collectors are exempt from the requirement to pay security on that fuel, and a refund is provided for security paid by refiner collectors on fuel purchased in BC and sold to another refiner collector.

Property Transfer Tax Act

Effective 21 February 2018, a further tax rate of 2% is applied to the fair market value of the residential component of a taxable transaction that exceeds a threshold of $3 million.

The rate of tax on the part of the residential component above the threshold is a total of 5%, made up of the existing 3% on the fair market value of taxable transactions above $2 million and the new 2% rate on the portion of the fair market value of the residential component above $3 million.
 
Effective 21 February 2018, the additional property transfer tax payable by foreign entities and taxable trustees on taxable residential property transfers is increased to 20% from 15%.

In addition, the tax is expanded to the Capital Regional District, the Regional District of the Central Okanagan, the Fraser Valley Regional District and the Regional District of Nanaimo.

For these newly added areas, there are transitional rules that may exempt eligible property transactions entered into before 21 February 2018.
There are no transitional rules for transactions in Metro Vancouver.
 
Effective for transactions that occur on or after 21 February 2018, transfers of a bankrupt’s principal residence from a trustee in bankruptcy to the bankrupt or the bankrupt’s spouse or former spouse are exempt from tax.

New Speculation Tax

The government will introduce legislation in 2018 to impose a speculation tax on residential property in British Columbia.

The new annual property tax will target foreign and domestic home owners who do not pay income tax in British Columbia, including those who leave their homes vacant.  

So called “satellite families” who have high worldwide income but pay little income tax in British Columbia will also be captured by the tax. The tax will be effective for the 2018 and future tax years.

Upfront exemptions will be available for most principal residences, qualifying long-term rental properties and certain special cases.

A non-refundable income tax credit will also be introduced to offset the new tax.

This will provide relief for persons who do not qualify for an upfront exemption, but who pay income taxes in British Columbia.  

The income tax credit can be carried forward to future years.

The new tax will initially apply to the Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts and the municipalities of Kelowna and West Kelowna. In 2018, the tax rate will be $5 per $1,000 of assessed value.  In 2019, the tax rate will rise to $20 per $1,000 of assessed value.

Tobacco Tax Act

Effective 1 April 2018, the tax rate on cigarettes is increased to 27.5 cents per cigarette from 24.7 cents (to $55 from $49.50 per carton of 200 cigarettes).

The tax rate on loose tobacco (tobacco in a form other than cigarettes or cigars) is increased to 37.5 cents from 24.7 cents per gram.

Home Owner Grant Act

As previously announced, the property value threshold for the full home owner grant is increased to $1.65 million for the 2018 tax year, up from $1.6 million in 2017.

For properties valued above the threshold, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold.

School Tax

Effective for the 2019 tax year and subsequent tax years, a province-wide increased school tax is introduced on high-valued properties in the residential class, including detached homes, stratified condominium or townhouse units and most vacant land.

The increased tax applies to the portion of a residential property’s taxable assessed value that exceeds $3 million.

In the case of a mixed-use property, only the residential portion of the property’s taxable assessed value above $3 million is subject to the tax.

A tax rate of 0.2% applies to the portion of residential assessed value that exceeds $3 million but does not exceed $4 million, and a tax rate of 0.4% applies to the portion of residential assessed value that exceeds $4 million.

The tax will be administered through the existing school tax system, with municipalities and the Province’s Surveyor of Taxes responsible for tax collection.

Administration, Enforcement & Revenue Sharing

Effective on Royal Assent, the Property Transfer Tax Act is amended to:

  • Increase the limitation period for property transfer tax assessments to six years to match the limitation period for the additional property transfer tax
  • Enable additional information to be collected on property transfer tax forms, including tax identification numbers for transferees through bare trusts
  • Introduce administrative penalties for non-compliance
  • Extend the general anti-avoidance rule to the entire Act
  • Enable tax administrators to access additional information on property transactions, including information in a Multiple Listing Service (MLS) database.

Effective on a date to be specified by regulation, the Carbon Tax Act, Motor Fuel Tax Act and Provincial Sales Tax Act are amended to allow for a fee to be charged to taxpayers to recover costs associated with out-of-province audits.

Effective for transactions entered into on or after 21 February 2018, or a series of transactions that is completed on or after 21 February 2018, the Income Tax Act is amended to introduce a reportable transaction rule.

The rule parallels the federal reportable transaction rule for income tax, and requires taxpayers and their advisors to proactively disclose certain avoidance transactions to the Canada Revenue Agency.

Effective 21 February 2018, the Income Tax Act’s general anti-avoidance rule is changed to parallel the federal general anti-avoidance rule and to ensure that any misuse or abuse of a provision in another act that the Income Tax Act relies on will be subject to the rule.

Effective on Royal Assent, the Income Tax Act and Land Tax Deferment Act are amended to allow for information sharing between the two Acts.

Effective on Royal Assent, the Income Tax Act and the Logging Tax Act are amended to no longer require the Lieutenant Governor-in-Council to pre-approve information sharing agreements entered into under these Acts.
 
(Source: BC Government)

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