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Tax Insights from Tax Services Issue 2015-18 2015 British Columbia budget: Tax highlights February 18, 2015 In brief On February 17, 2015, British Columbia’s Minister of Finance, the Honourable Michael de Jong, presented the province’s budget. The budget does not change corporate tax rates. Certain business tax credits were extended or enhanced, including entertainment and media industry tax incentives, training tax credits, the small business venture capital tax credit and the BC Mining Flow-Through Share Tax Credit. As expected, the province’s top personal income tax rate will decline in 2016. Starting 2015, a new tax credit for fitness equipment purchased for children will be available, but Medical Services Plan premiums will increase. This Tax Insights discusses these and other tax initiatives introduced in the budget. It also considers the upcoming referendum for the proposed Metro Vancouver Congestion Improvement Tax (page 4). In detail 2014 and 2015 BC Combined federal + BC General and M&P income 11% 26% active business income to $500,000 2.5% 13.5% investment income 11% 45.67% Business tax measures Corporate income tax rates BC’s budget does not change corporate income tax rates, which are outlined in the table to the right. Entertainment and media tax credits The budget extends and/or enhances the following entertainment and media tax credits: BC interactive digital media tax credit – extended three years to August 31, 2018 Canadian-controlled private corporations (CCPCs) Digital animation or visual effects (DAVE) tax credit – expanded to apply to eligible post-production expenditures for productions if principal photography begins after February 28, 2015 BC training tax credits As previously announced, the BC training tax credits, which are available to BC apprentices and their employers, are extended by three years to December 31, 2017. www.pwc.com/ca/taxinsights Tax Insights Small business venture capital tax credit The budget provides a one-year increase of $3 million to the small business venture capital tax credit program. This will allow for up to $10 million in additional equity financing for qualifying new corporations in 2015. Personal tax measures Personal income tax rates and brackets The budget confirms that, in 2016, the provincial personal income tax rate on taxable incomes above $150,000 will drop from 16.8% to 14.7% – the rate that was in effect in 2013 – fulfilling the government’s promise that the 2.1 percentage point increase would apply for 2014 and 2015 only. The rate reduction is reflected in the table below. Top combined federal/BC rates 2014 2015 2016 Ordinary income & interest 45.80% 43.70% Capital gains 22.90% 21.85% eligible 28.68% 25.78% noneligible 37.99% 35.51% Canadian dividends BC tax reduction credit Starting 2015, the BC tax reduction credit is enhanced, by increasing: the tax reduction credit to $432 (from $412) the phase-out threshold to $19,000 (from $18,327) the phase-out rate to 3.5% (from 3.2% in 2014) of net income 2 As a result, BC taxpayers with taxable incomes of up to approximately $19,000 will pay no provincial income tax in 2015. Children’s fitness equipment credit Starting 2015, parents can claim a new non-refundable children’s fitness equipment tax credit equal to 50% of the BC children’s fitness credit amount claimed for their children. Therefore, the new credit will provide an additional benefit of up to $12.65 per child. Receipts for equipment purchases are not required. BC training and education savings grant As previously announced, starting in August 2015, parents or guardians can apply at participating financial institutions for the BC training and education savings grant – a one-time payment of $1,200 for every BC resident child who: is born after 2006 is six years old, and has a registered education savings plan established on his or her behalf BC early childhood tax benefit As previously announced, starting April 1, 2015, the BC early childhood tax benefit will provide eligible families up to $55 per month ($660 annually) for each child under six. The benefit will start to phase out when net family income is $100,000 and will be eliminated when it reaches $150,000. It will be administered through the Canada child tax benefit system. BC education coaching tax credit Teachers and teaching assistants who perform at least ten hours of extracurricular coaching activity in the year can claim a new tax credit that provides up to $25.30 per eligible taxpayer. The credit is available for the 2015, 2016 and 2017 tax years, at which time it will be reviewed. Home owner grant The threshold for the phase-out of the home owner grant will remain at $1,100,000 for 2015. The grant is reduced by $5 for every $1,000 in assessed value exceeding this threshold. Medical Services Plan Effective January 1, 2016, Medical Services Plan maximum monthly premiums will increase for: single individuals – by $3 to $75 two-person families – by $5.50 to $136 families of three or more – by $6 to $150 Premium assistance will be enhanced to ensure those receiving assistance will be unaffected. Child support payments Starting September 1, 2015, child support payments will be fully exempt from income assistance calculations (in respect of government income and disability assistance programs). Tax credit for farmers The government will explore options to give farmers credit for donations of agricultural goods to help those in need. pwc Tax Insights Mining industry sales tax is paid in another jurisdiction in respect of the other tangible personal property, and there is no eligibility for a refund, credit or rebate The budget confirms the following previously announced measures. Mining incentives The following mining incentives have been extended: BC Mining Flow-Through Share Tax Credit – by one year to December 31, 2015 New Mine Allowance – by four years to December 31, 2019 Mine permit fees Mine permit fees will be introduced, but will not be imposed on exploration companies. Provincial sales tax (PST) measures Taxation of tangible personal property Starting February 18, 2015, the use of tangible personal property includes using tangible personal property that is brought, sent or delivered into British Columbia to make other tangible personal property that is then transported outside of the province to fulfill a contract for improvements to real property situated outside of British Columbia. A tax refund will be made for tax paid on tangible personal property: purchased in British Columbia, or brought, sent or delivered into British Columbia that is used to make other tangible personal property that is then transported outside of British Columbia to fulfill a contract for improvements to real property situated outside of the province if: pwc Exemption for lift chairs Effective February 18, 2015, a lift chair designed to facilitate standing up or sitting down will be exempt from PST if sold on a medical practitioner’s prescription. Multijurisdictional vehicle tax The tax payable on multijurisdictional vehicles licensed after 2014 will be calculated using: a set travel ratio for each jurisdiction for new fleets, and the actual travel ratio for existing fleets hotel rooms) provided in British Columbia, unless there is a specific exemption. A 2% MRDT also applies, in the same way as the 8% PST, on behalf of municipalities, regional districts and eligible entities to sales of short-term accommodation provided in participating areas of British Columbia. The MRDT rate will increase to 3% if an application by a municipality, regional district or eligible entity has been approved by regulation. Property tax rates In 2015, British Columbia will continue to apply its longstanding rate-setting policies for: residential school property taxes non-residential school property taxes residential rural property taxes non-residential rural property taxes PST registration obligations Starting September 1, 2015, persons located outside of British Columbia (whether in or outside of Canada) that in the ordinary course of business: accept orders for taxable goods from a location in British Columbia sell or provide taxable goods to a person in British Columbia, and hold inventory in British Columbia at the time those goods are sold must register for PST before the sale. Voluntary registrations will be accepted before September 1, 2015, after which late registration penalties may apply. Municipal and Regional District Tax (MRDT) rate on accommodations Carbon tax and motor fuel tax Obligations related to fuel imported by ship The obligations of collectors, retail dealers and purchasers for fuel imported by ship into British Columbia are amended to further streamline the compliance burden on importers. Due date for natural gas returns Natural gas returns in respect of tax payable on natural gas used in a stationary internal combustion engine during a month will be due the last day (extended from the 15th day) of the following month. Generally, 8% PST applies to sales of short-term accommodation (such as 3 Tax Insights Coloured fuel Effective July 1, 2015, the authorized uses of coloured fuel will include use in a locomotive. Also, effective July 1, 2015, purchasers of coloured fuel in certain circumstances will be required to: pay the clear fuel tax rate on the purchases, and collect tax at that rate unless a completed certificate (form will be available soon) is obtained from the purchaser (at or before sale). However, the purchaser may be eligible for a refund of the difference between the tax paid and the coloured fuel tax that would have been payable if the coloured fuel was used for an authorized use. The penalties for purchasing or using coloured fuel for an unauthorized purpose is set at three times the tax payable if the fuel is not coloured to a maximum of $1,000 per taxpayer, and an additional penalty of up to a maximum of $1,000 per vehicle. 4 Further, the budget provides clarification concerning refunds of security for deputy collectors and retail dealers in respect of coloured fuel. Tobacco tax Security scheme Effective February 18, 2015, security is payable on tobacco that a wholesale dealer has brought or sent into British Columbia. Also, the application of the security scheme for wholesale and retail dealers has been clarified. Green initiatives The budget provides $22 million over three years for an incentive program for the cement industry to produce cement in a cleaner manner. Over the five-year program, the province will offer up to $27 million in conditional incentives to encourage cement producers to meet or beat new emissions intensity benchmarks. In addition, the Clean Energy Vehicle Incentive Program and a fuelling/charging infrastructure program will be reintroduced to provide incentives to British Columbians to make clean and green transportation choices. Other energy efficiency and conservation initiatives will also be implemented. Metro Vancouver mail-in referendum: Metro Vancouver Congestion Improvement Tax Not mentioned in the budget – If approved in a mail-in referendum to be held from March 16 to May 29, 2015, a new 0.5% Metro Vancouver Congestion Improvement Tax would apply on most goods and services that are: subject to the PST, and sold or delivered within the Metro Vancouver region, increasing the general PST rate from 7% to 7.5%, within the Metro Vancouver Region, on these goods and services. Details of the tax, which would fund the Mayors’ Transportation and Transit Plan, are being developed. pwc Tax Insights Let’s talk For a deeper discussion of how these tax measures affect you or your business, please contact: Bill Holms +1 (604) 806 7052 william.holms@ca.pwc.com Zaheer Jamal +1 (604) 806 7221 zaheer.jamal@ca.pwc.com James Capobianco +1 (604) 806 7788 james.n.capobianco@ca.pwc.com Ted Bell (Green Initiative) +1 (604) 806 7705 ted.bell@ca.pwc.com 2015 budgets: PwC will keep you up-to-date on tax changes in Canada's federal and provincial budgets. Go to www.pwc.com/ca/budget © 2015 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved. PwC refers to the Canadian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for5 pwc further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisers.
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