On February 20th, 2018, British Columbia Finance Minister Carole James announced the 2018 British Columbia Budget. No increases in existing income tax rates were announced. Summarized below are highlights of some of the measures contained in the Budget.
Property Transfer Tax Measures
Property Transfer Tax Rate on the Value of Residential Properties Above $3 million Increased
Effective February 21, 2018, a further tax rate of 2% is applied to the fair market value of the residential component of a taxable transaction that exceeds a threshold of $3 million. The total rate of tax on the part of the residential component above the threshold is 5%, which is made up of the existing 3% rate on the fair market value of taxable transactions above $2 million plus the new 2% rate on the portion of the fair market value of the residential component above $3 million.
Additional Property Transfer Tax Rate for Foreign Purchasers Increased and Area Expanded
Effective February 21, 2018, the additional property transfer tax rate for foreign purchasers is increased from 15% to 20%. Furthermore, the tax is expanded to the Capital Regional District, the Regional District of Okanagan, the Fraser Valley Regional District and the Regional District of Nanaimo. Transitional rules apply to these new areas that may exempt eligible property transactions entered into prior to February 21, 2018.
Transfers of Principal Residences Exempted in Certain Bankruptcy Cases
Effective for transactions that occur on or after February 21, 2018, transfers of a bankrupt's principal residence from a trustee in bankruptcy to the bankrupt or the bankrupt's spouse or former spouse are exempt from Property Transfer Tax. Prior to this new rule, such transactions were only exempt if no consideration was exchanged.
Other Property Transfer Tax Measures
The Property Transfer Tax Act is amended to enhance administration and information sharing.
- The limitation period for property transfer tax assessments is extended to six years;
- Additional information is collected on property transfer tax returns, including tax identification numbers for those using bare trusts;
- An administrative monetary penalty for non-compliance is introduced;
- The general anti-avoidance rule is extended to the entire Act; and
- Access for tax administrators to additional information on property transactions, including information in a multiple listing service database, is enabled.
Income Tax Measures
Infirm Dependent Credit and Caregiver Credit Replaced with a New B.C. Caregiver Credit
The new B.C. Caregiver Credit is effective for 2018 and replaces the Infirm Dependent Tax Credit and the Caregiver Credit. This new non-refundable credit parallels the Canada Caregiver Credit and is available to individuals who care for an eligible adult relative who is dependent on the caregiver because of a mental or physical infirmity. The maximum credit amount is $4,556 per infirm dependent for 2018, providing a benefit of up to $230.53, and is indexed to inflation for future years.
Education Tax Credit
The B.C. Education Tax Credit will be eliminated effective for the 2019 and subsequent tax years. Any unused amounts carried forward from years prior to 2019 will remain available to be claimed in 2019 and in subsequent years.
British Columbia Mining Flow-Through Share Tax Credit
The British Columbia Mining Flow-Through Share Tax Credit is extended to the end of 2018.
Farmers' Food Donation Tax Credit
The Farmers' Food Donation Tax Credit is extended to the end of 2019.
Interactive Digital Media Tax Credit
The Interactive Digital Media Tax Credit is extended until August 31, 2023.
Book Publishing Tax Credit
The Book Publishing Tax Credit is extended until March 31, 2021.
Film Incentive B.C. Tax Credit Expanded to Scriptwriting
Effective for expenditures incurred on or after February 21, 2018, the Film Incentive B.C. Tax Credit is expanded to include scriptwriting expenditures on B.C. labour incurred by a corporation prior to the completion of the final script stage of the production. Prior to this change, only scriptwriting expenditures incurred after the final script stage were eligible for the tax credit.
Provincial Sales Tax Measures
Exemption Expanded to all types of Avalanche Airbag Backpacks
Effective April 1, 2018, the exemption for avalanche airbag backpacks is expanded to include all avalanche airbag backpacks.
Online Accommodation Platforms Enabled to Register as Collectors
Effective on a date to be specified by regulation, online accommodation platforms are enabled to register as collectors, and to collect and remit PST and the municipal and regional district tax on accommodation.
Use of Municipal and Regional District Revenues for Affordable Housing Initiatives Allowed
Effective on a date to be specified by regulation, municipal and regional district tax revenue collected by municipalities, regional districts and eligible entities, such as tourism-focused non-profits, can be used to fund affordable housing initiatives. Currently, funds can only be used for tourism marketing, programs and projects.
Software Provided in Optional As-Needed Maintenance Agreements Clarified as Taxable
Retroactive to April 1, 2013, the legislation is amended to clarify that software provided in optional as-needed maintenance agreements is taxable.
Luxury Surtax Rates on Passenger Vehicles Over $125,000 Increased
Effective April 1, 2018, passenger vehicles valued at $125,000 or more are subject to higher PST rates as follows:
- Valued at $125,000 to $149,999.99 – rate increased from 10% (12% for private sales or gifts) to 15%
- Valued at $150,000 and above – rate increased from 10% (12% for private sales or gifts) to 20%
The rate applies to both new and used passenger vehicles.
Home Owner Grant
The property value threshold for the full home owner grant is increased to $1.65 million for the 2018 tax year, from $1.6 million in 2017. For properties valued above the $1.65 million threshold, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold.
Legislation will be introduced in 2018 that will impose a speculation tax on residential property located in B.C. This new tax will target foreign and domestic home owners who do not pay income tax in B.C., including those who leave their homes vacant. Satellite families – households with high worldwide income that pay little income tax in B.C. – will also be subject to the tax, which will be effective for the 2018 and subsequent tax years.
Up-front exemptions will be available for most principal residences, qualifying long-term rental properties and certain special cases and the majority of homeowners in B.C. will be exempt from this tax.
For persons who do not qualify for up-front exemptions but who pay income taxes in B.C., a non-refundable income tax credit will be available to provide relief. If unused, this credit can be carried forward to future years.
This new Speculation Tax will initially apply to the Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts and in the municipalities of Kelowna and West Kelowna. In 2018, the tax rate will be $5 per $1,000 of assessed value and in 2019, the tax rate will rise to $20 per $1,000 of assessed value.
Employer Health Tax
Legislation will be introduced in 2018 to implement an employer health tax on employers' payroll starting in the 2019 calendar year. This new tax will not apply to employers with payroll under $500,000. For employers with payroll between $500,000 and $1.5 million, the tax rate will phase in gradually until it reaches 1.95% at $1.5 million in total payroll. Employers with payroll over $1.5 million will pay the maximum rate of 1.95% on their total payroll.
Medical Services Plan
Effective January 1, 2020, Medical Services Plan ("MSP") premiums will be eliminated. A 50% reduction in premiums was announced during last year's Budget Update, effective January 1, 2018. Once MSP premiums have been eliminated, single individuals will realize annual savings of up to $900 and families will realize annual saving of up to $1,800.
For more information on the 2018 British Columbia Budget, please visit the Government of British Columbia website at the following address:
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