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Highlights of the 2014 British Columbia Budget 

Tax News Flash
Tax News Flash
Tax News Flash

Highlights of the 2014 British Columbia Budget

 

February 18, 2014

 

No. 2014-10

Today British Columbia Finance Minister Michael de Jong delivered the province’s 2014 budget. The budget anticipates a surplus of $175 million for the current year, $184 million for 2014-15, $206 million for 2015-16 and $451 million in 2016-17.

 

The budget does not include any general corporate or personal income tax rate changes. However, the budget phases out the provincial preferential income tax treatment for credit unions, extends the British Columbia Scientific Research and Experimental Development Tax Credit for an additional three years, and proposes a two-tier tax on income from liquefaction of natural gas.

 

Highlights of tax measures announced in the budget are summarized below.

 

Business tax

 

Corporate income tax preference for credit unions phased out

 

The budget phases out the provincial preferential income tax treatment for credit unions over five years, beginning in 2016. Under the federal and provincial income tax rules, credit unions received preferential corporate income tax treatment by way of a lower tax rate on a portion of their income. The federal government previously announced that it would phase out its preferential income tax treatment for credit unions over five years beginning in 2013.

 

Scientific Research and Experimental Development Tax Credit

 

The budget extends the British Columbia Scientific Research and Experimental Development Tax Credit for an additional three years (to September 1, 2017). The credit is available to eligible taxpayers that undertake eligible research and development activities in the province.

 

Film tax credit extended

 

The budget extends the Film and Television Production Regulation to include the Capital Regional District for purposes of the Distant Location Tax Credit. This measure is effective for productions with principal photography beginning on or after February 19, 2014. This extension applies to both the Production Services Tax Credit and the Film Incentive B.C. tax credit.

 

Corporate income tax rates

 

No changes to corporate taxes were announced. As a result, B.C.’s corporate income tax rates effective January 1, 2014 remain as follows:

 

Corporate Income Tax Rates — As of January 1, 2014

 

British Columbia

Combined Federal and British Columbia

General

11%

26%

M&P

11%

26%

Small business*

2.5%

13.5%

* on first $500,000 of active business income

 

Personal tax

 

Medical Services Plan premiums

 

The budget increases Medical Services Plan (MSP) premiums by approximately 4% as of January 1, 2015, resulting in new premiums of:

 

  • $72.00 per month for single persons
  • $130.50 per month for two-person families
  • $144.00 per month for families of three or more persons.

 

The budget notes that taxpayers receiving premium assistance will not be affected by the increase, effective January 1, 2015, with more details to be announced later in 2014.

 

Personal income tax rates

 

No changes to personal tax rates were announced. As a result, B.C.’s personal income tax rates effective January 1, 2014 remain as follows:

 

Personal Combined Federal/Provincial Top Marginal Rates

 

2014 and 2015

Interest and regular income

45.8%

Capital gains

22.9%

Eligible dividends

28.7%

Non-eligible dividends

38.0%

 

Liquified Natural Gas Taxes

 

The budget proposes a two-tier tax on income from liquefaction of natural gas (LNG) at facilities in British Columbia. The provincial government intends to introduce income tax legislation later this year to implement a tax rate of 1.5% that would apply at the commencement of production and a second rate of up to 7% that would apply once capital investment costs in the facility have been deducted.

 

Provincial Sales Taxes

 

Exemption for settler’s effects

 

The budget extends the exemption for certain tangible personal property brought, sent or delivered into British Columbia by a new resident to include tangible personal property that enters British Columbia within one year from the date the individual becomes a resident of British Columbia. The extension is effective February 19, 2014.

 

Purchase price of packaged accommodation and meals

 

The budget clarifies the rules for accommodation providers that only sell packages of accommodation, meals and services for a single price. Effective February 19, 2014, the purchase price of that accommodation in a package, regardless of the type of services provided or the type of the accommodation provider, is the lesser of 15% of the total value of the consideration accepted by the accommodation provider, or $100 per day. However, there is no change in price if the accommodation is only sold with meals, or the accommodation is sold with meals and services but is also available separately.

 

Multi-jurisdictional vehicle exit tax

 

Under the budget changes, the multi-jurisdictional vehicle exit tax is only payable when a vehicle, previously licensed under a licence to which a prorating agreement applies, is licensed for use solely within British Columbia. This measure is effective April 1, 2013.

 

The budget notes that a person who has paid the multi-jurisdictional vehicle exit tax in circumstances other than where the vehicle was licensed for use solely within British Columbia will be entitled to a refund of the exit tax.

 

 Technical measures

 

The budget includes some technical amendments to the Provincial Sales Tax legislation in various areas including:

 

  • Various exemptions and refunds
  • Taxation of leases
  • The original purchase price of certain passenger vehicles subject to the 1-3% surtax
  • The purchase price of software purchased with qualifying educational programs for a single price
  • Tax payment agreements
  • The taxation of tangible personal property used to improve real property
  • Various other administrative matters.

 

The amendments also expand voluntary registration to include out of province businesses.

 

Other Measures

 

Tobacco tax

 

The budget increases tobacco tax by 32 cents per pack, or $3.20 a carton, effective April 1, 2014.

 

Property transfer tax

 

Many British Columbians buying their first home will pay less Property Transfer Tax, as the Province is increasing the threshold for the first-time homebuyers program for registrations on or after February 19, 2014 to $475,000 from $425,000, an exemption that can save the purchaser up to $7,500 when buying their first home.

 

Home Owner Grant

 

The budget decreases the threshold for the phase-out of the Home Owner Grant to $1.1 million (from $1.295 million) for the 2014 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. This threshold ensures that at least 93.8% of homeowners (down from 95%) are eligible for their full grant.

 

Property tax deferment

 

The budget allows eligible homeowners to defer property taxes when their property becomes subject to an easement, statutory right of way or similar interest. Currently, eligible homeowners can defer property taxes until the home is sold, transferred to a new owner or becomes part of an estate, if they meet a minimum equity requirement. However, homeowners must repay the deferred taxes is required if the property becomes subject to an easement, statutory right of way or similar interest. This measure, effective on Royal Assent, applies as long as the homeowner continues to meet the minimum equity requirements of the program.

 

University property

 

The budget confirms that university property (i.e. land and improvements) leased to a college affiliated with the university is exempt from property taxation so long as it is held for college purposes. The exemption, effective on Royal Assent, will apply retroactively for the 2014 taxation year.

 

Port property

 

The budget extends the municipal tax rate caps on designated port property and new improvements to after 2018. This measure is intended, to remove the condition that new improvements must be added to an assessment roll before 2019, and to extend the provisions for compensation to municipalities.

 

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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 18, 2014. 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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