2016 B.C. Budget Overview

The B.C. Government released its Provincial Budget on Tuesday, February 16, 2016. Minister of Finance Michael de Jong projected a surplus of $ 377 million in the 2015/2016 fiscal year, followed by surpluses of $ 264 million in 2016/2017, $ 287 million in 2017/2018, and $ 373 million in 2018/2019. The following is a summary of the income tax, sales tax, property transfer tax, and certain other measures contained in the Budget.


Income Tax Measures

Corporate Income Tax Updates

Due to the changes in federal corporate tax rate for small businesses enacted in the past, the combined federal and provincial corporate tax rate will decrease to 13.0% for income eligible for the small business deduction, and the combined rate will increase to 49.67% for investment income earned in a corporation and not distributed to a shareholder by way of taxable dividends.

The provincial general income tax rate will remain at 11%; the small business income tax rate will remain at 2.5%. The combined federal and B.C. rate will remain at 26% for business income not eligible for the small business deduction.

Personal Income Tax Updates

Due to the recently announced changes in federal personal income tax rate, the combined federal and B.C. top marginal tax rate will increase to 47.70% for the 2016 year. This is the net effect of the federal personal income tax rate increasing to 33% from 29% and the B.C.’s top personal tax rate decreasing back down to 14.7% from 16.8%. Furthermore, the combined federal and B.C. top marginal tax rate for eligible dividends and non-eligible dividends will increase to 31.30% and 40.61%, respectively.

BC Mining Flow-Through Share Tax Credit/BC Mining Exploration Tax Credit

The budget extends:

  • the mining flow-through share tax credit to the end of 2016; and

  • the mining exploration tax credit to the end of 2019

BC Tax Reduction Credit Enhanced

Effective for the 2016 tax year, the budget increases:

  • the credit phase-out threshold to $ 19,400 (from $ 19,000); and

  • the credit phase-out rate to 3.56% of net income (from 3.50%)

Accordingly, BC taxpayers with taxable incomes of up to approximately $ 19,400 will pay no provincial income tax in 2016.


BC Seniors’ Home Renovation Tax Credit

The B.C. seniors home renovation tax credit assists individuals 65 and over with the cost of certain permanent home renovations to improve accessibility or help a senior be more functional or mobile at home.

This refundable personal income tax credit is expanded to persons with disabilities who are eligible to claim the federal disability tax credit on eligible expenditures made on or after February 17, 2016.

New Farmers’ Food Donation Tax Credit

Effective February 17, 2016, this new non-refundable tax credit is available to individuals and corporations that carry on the business of farming and donate a qualifying agricultural product to a registered charity that provides food to those in need or helps to operate a school meal program. The credit is 25% of the fair market value of the qualifying agricultural product and must be claimed in the same year as the charitable donation tax credit is claimed for the particular donation.


Trusts and Estates

Parallel to the federal changes to the taxation of trusts and estates, the top BC marginal personal income tax rate of 14.7% will apply to all trusts and estates in BC for the taxation year ending December 31, 2015, except for trusts that are “graduated rate estates” or “qualified disability trusts”.

Medical Services Plan Premium Increase

Effective January 1, 2017, all children will be exempted from MSP premiums and MSP premiums for adults will increase by approximately 4%. Maximum monthly premium rates will increase by:

  • $ 3.00 per month, to a total of $ 78, for single persons,

  • $ 6.00 per month, to a total of $ 156, for two person families and

  • $ 6.00 per month, to a total of $ 156, for families of three or more persons.

Reduced premium assistance is available to the following individuals or low-income families:

  • Single adult earning up to $ 42,000

  • Couple earning up to $ 45,000

  • Senior couple earning up to $ 51,000

  • Single parent with two children earning up to $ 48,000

  • Couple with two children earning up to $ 51,000


Sales and Property Tax Measures

Property Transfer Tax Rates

Effective February 17, 2016, the property transfer tax rate will increase to 3% on the portion of a property’s fair market value in excess $ 2 million. The new property transfer tax rates are as follows:

  • 1% on the first $ 200,000;

  • 2% of the fair market value between $ 200,001 to $ 2 million, inclusive; and

  • 3% on the portion of the fair market value greater than $ 2 million.

The Newly Built Home Exemption

An exemption is introduced on newly-constructed homes with a fair market value of up to $ 750,000, with a partial exemption available up to $ 800,000. The purchaser must be a Canadian citizen or a permanent resident of Canada who moves into the purchased home within 92 days of the date of purchase and use it as a principal residence of a minimum of one year after the move-in date.

The purchaser does not have to be a first-time home buyer. However, the existing First Time Home Buyer’s Program cannot be claimed with the Newly Built Home Exemption for the same purchase of real estate property.

Disclosure Requirement

Effective spring of 2016, purchasers of all real estate properties, including individuals, all directors of corporations, and settlors and beneficiaries of bare trusts, who are not Canadian citizens or permanent residents of Canada, will be required to disclosure their country of citizenship at the time of transfer. Subsequent to the purchase transaction, there is no obligation to disclose any changes in beneficial ownership.

Home Owner Grant Phase-out Threshold

The Homeowner Grant reduces the property tax payable on an individual’s (or a family unit’s) principal residence. Only properties that have a fair market value that was below the threshold qualify for the grant.

The threshold for the phase-out of the Home Owner Grant increased to $ 1,200,000 for the 2016 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.


Other Tax Measures

Small Business Venture Capital Tax Credit Increased

The budget increases the small business venture capital tax credit by $ 5 million, $3 million of which will be for direct investments in eligible new corporations, thereby allowing for up to $ 16.7 million in additional equity financing for qualifying new corporations in 2016.

 

D&H Group LLP continues to keep you informed of changes (and proposed changes) that can affect you and your business. D&H Group LLP is an eighty person firm with over 50 years’ experience in providing clients with sound professional advice. Operating throughout British Columbia and Western Canada, D&H Group LLP can also service national and international clients in cooperation with out affiliates: BHD association, a national association of independently owned accounting firms, and the International Association of Practicing Accountants Worldwide, which has over 130 offices located throughout the world.

The material contained in this and other newsletters is not intended to be advice on any particular matter. Readers are cautioned not to act on the basis of any matter contained in the Business Reports without first considering appropriate professional advice specific to their situation. We would be pleased to provide further information and address any questions that our readers may have.

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