On March 2, 2010, the B.C. Budget entitled “Building a Prosperous British Columbia” was tabled. The Budget is targeted at enhancing vital public services, refocusing government spending to eliminate the deficit, and providing a range of initiatives to stimulate economic growth. Highlights of the tax measures proposed are set out below.
There are no proposed changes to corporate tax rates. Previously announced general corporate tax rate cuts are maintained at 10.5% from January 1, 2010 and 10% from January 1, 2011. The small business tax rate remains at 2.5%, and the small business income threshold was raised from $400,000 to $500,000 on January 1, 2010.
New measures include:
- Three measures for film and television productions with principal photography beginning after February 2010, as follows:
- An increase to the B.C. labour expenditures cap for the Film Incentive B.C. tax credit from 48% to 60% of total production costs;
- An increase to the basic Production Services tax credit from 25% to 33%; and
- An increase to the Digital Animation and Visual Effects tax credit from 15% to 17.5%;
- A new B.C. Interactive Digital Media tax credit at 17.5% of B.C. labour employed in the development of qualifying interactive digital media (using at least two of text, sound and images) for qualifying projects beginning after August, 2010; and
- The repeal of the amendments to the Corporation Capital Tax Act to introduce a financial institutions minimum tax effective April 1, 2010.
There are no proposed changes to personal tax rates. A B.C. harmonized sales tax (HST) credit will be introduced for low and modest income taxpayers. As well, the B.C. mining flow-through share tax credit is extended to the end of 2013.
Transition to the HST
The previously announced imposition of the HST will replace the 7% provincial sales tax on July 1, 2010, with certain transitional rules. The budget proposes a number of measures in furtherance of the harmonization, including:
- Elimination of the 8% Hotel Room Tax. (Note that the additional hotel room tax program will be extended beyond June 30, 2011 for eligible entities to raise revenue for tourism marketing);
- Introduction of a provincial credit for the provincial component of HST payable on residential energy;
- Introduction of point of sale rebates for the provincial component of HST payable on motor fuels, books, children-sized clothing and footwear, children’s car seats and booster seats, children’s diapers and feminine hygiene products; and
- Elimination of the PST and the multijurisdictional vehicle tax as of July 1, 2010. Provincial tax on the private sales of vehicles, boats and aircraft will continue, but at 12%.
International Financial Activity (“IFA”) Program
The IFA program provides tax refunds of provincial tax paid by B.C. corporate taxpayers on qualifying income from international financial activities. The result is that B.C. corporate taxpayers are only subject to federal income tax on certain qualifying activities.
The IFA program will be expanded to include the following new types of international businesses:
- Digital media publishing and distribution;
- Certification and trading of carbon credits, and
- Clean technology.
In addition, qualifying IFA activities will include prescribed management and administration services of prescribed investment funds from September 1, 2010. The legislation will make it clear that income related to the licensing of a qualified patent will be included in IFA income.
A new category of specialist is introduced for executive specialists, replacing IFA related to management services, which is repealed. This new category of specialists is for key-decision makers who were previously non-residents of Canada and earn at least $250,000 annual wages.
There is also a new category for specialists in administrative support and back-up office services. They have similar requirements to the executive specialists, but with a minimum $100,000 annual wage requirement.
Finally, the Budget will also modify the B.C. personal income tax refund to registered specialists including the new categories for executive specialists and administrative support and back-up office services specialists. Effective March 3, 2010, the refund is changed to 100% in the first two years, 75% in the third year, 50% in the fourth year, and 25% in the fifth year.