February 19, 2013
Today British Columbia Finance Minister Michael de Jong delivered the province’s 2013 budget. The budget increases both corporate and personal tax rates.
The budget accelerates last year’s provisional 1% increase in the B.C. general corporate tax rate to 11% (from 10%). The increase will now take effect April 1, 2013, one year earlier than previously announced. The small business corporate income tax rate will remain at 2.5%.
For individuals with income above $150,000, the budget introduces a new top tax rate. This tax increase is described as a temporary measure effective for two years beginning January 1, 2014. As a result, the top marginal B.C. income tax rate will increase to 16.8% (from 14.7%).
The budget does not contain any new information about the implementation of the new provincial sales tax (PST) in B.C. effective April 1, 2013.
According to the budget, the government anticipates a deficit of $1,228 million in 2012/13. The government is projecting surpluses of $197 million in 2013/14, $211 million in 2014/15 and $460 million in 2015/16. The projections include a forecast allowance totaling $750 million and a Contingencies Vote allocation of $675 million over the three-year plan.
Highlights of tax measures in the budget are noted below.
Corporate income tax
The provincial general income tax rate will be increased to 11% (from 10%) effective April 1, 2013. This increase was originally announced in the 2012 provincial budget as a provisional temporary measure effective April 1, 2014. The new rate of 11% is permanent. Thus, the combined federal and B.C. rate will be 26% (up from 25%). The government stated that the small business income tax rate will remain at 2.5%.
Industrial School Property Tax Credit
The province currently offers a school property tax credit that reduces school taxes payable on class 4 (major industry) and class 5 (light industry) properties by 60%. For major industries, including sawmills, pulp mills and mines, the credit will remain unchanged. For light industry classifications, the credit will be scaled back beginning in 2013. The value of the credit will decline from 60% to 30% in 2013, falling to zero in 2014.
Natural gas royalties
The budget introduces a minimum 3% royalty for all natural gas wells that qualify for the Deep Well Royalty Credit Program and the termination of the Summer Drilling Credit Program.
Personal income tax
A new temporary top personal income tax bracket is introduced for the 2014 and 2015 taxation years. The Minister indicated a sunset clause will be embedded in the legislation to ensure this rate will only apply for two years. The income threshold for the new top bracket will be set at $150,000 in 2014.
Taxable income in excess of this threshold will be subject to a provincial income tax rate of 16.8%. This change will increase the rate of tax by 2.1%. Thus, the combined federal and B.C. top marginal tax rate will be 45.8% (up from 43.7%).
|Combined Federal/Provincial Top Marginal Rates|
||2012 and 2013
||2014 and 2015|
|Interest and regular income
Medical services plan premiums
Medical Services Plan (MSP) Premiums will increase by approximately 4% as of January 1, 2014 to:
- $69.25 per month for single persons
- $125.50 per month for two-person families
- $138.50 per month for families of three or more persons.
Also effective January 1, 2014, premium assistance is enhanced to ensure those receiving assistance will not be affected by the increase. Details to be announced later in 2013.
The budget confirms the announcement on January 2, 2013 that the threshold for the phase-out of the homeowners grant is increased from $1.285 million to $1.295 million for the 2013 tax year. For properties valued over $1.295 million, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold.
B.C. Training and Education Savings Grant
A one-time grant of $1,200 will be paid to a child’s Registered Education Savings Plan. The grant will be paid once the child turns six years old. The child’s parents must apply for the grant before the child reaches the age of seven. In order to qualify for the grant, the child must have been born January 1, 2007 or later and be resident in B.C. at the time the grant application is made.
B.C. Early Childhood Tax Benefit
The government is introducing a refundable child tax credit at the provincial level. The maximum benefit will be $55 per month per child under the age of six. The maximum benefit will be available to families with family net income of less than $100,000. The benefit will phase out starting at $100,000 and will be fully phased out at $150,000 of family net income. The program is effective April 1, 2015.
Tobacco Tax Act
As previously announced, the tobacco tax rates will be adjusted on April 1, 2013 to coincide with the elimination of the HST. As a result, the tax rate on cigarettes is increased from $37.00 to $42.60 per carton of 200 cigarettes, the tax rate on fine-cut tobacco is increased from 18.5 cents per gram to 21.3 cents per gram, and the tax rate on cigars in increased from 77% to 90.5% of the sale price. The maximum tax imposed on cigars is increased from $6 to $7 per cigar.
This budget provides for a further tax rate increase. The tax rate on cigarettes is increased from $42.60 to $44.60 per carton of 200 cigarettes, and the tax rate in fine-cut tobacco is increased from 21.3 cents to 22.3 cents per gram, effective October 1, 2013.
Property Transfer Tax Act
The transfer of a deceased person’s family farm currently qualifies for exemption from property transfer tax if the deceased owned, used and was farming the land immediately before death.
Effective on Royal Assent, the Act is amended to expand the exemption to include a family farm owned by the deceased that was, immediately before the deceased’s death, used and farmed by one or more of the deceased, the deceased’s family members, or a family farm corporation.
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We can help
Your KPMG adviser can help you assess the effect of the tax changes in this year’s British Columbia budget on your personal finances or business affairs, and point out ways to take advantage of their benefits or ease their impact. We can also keep you abreast of the progress of these proposals as they make their way into law and help you bring any concerns you may have to the attention of the B.C. Ministry of Finance.
Information is current to February 19, 2013. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.
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