Stay informed as Canada’s provinces and territories unveil their 2026 budgets. RSM Canada's tax team explores the key tax, economic and industry considerations proposed in these budgets—and highlights what they could mean for businesses and individuals.
Read our commentary on four provincial budgets—Alberta, British Columbia, Quebec and Ontario—as they are released.
Industrials key takeaway
B.C. proposed aligning measures related to mining and scientific research—including eligible expenditures —with federal changes and administration.
Life sciences key takeaway
To support its life sciences sector, B.C.’s government will explore a patent box regime to provide tax incentives on income earned from intellectual property.
Real estate key takeaway
Measures to increase the housing supply in B.C. include an increase to the speculation and vacancy tax rate and expanded exemptions for purpose-built rentals.
British Columbia’s 2026 budget and fiscal plan (B.C. Budget 2026) proposed measures intended to limit spending and raise revenue after the government projected a provincial record-breaking deficit.
The budget, delivered by provincial Finance Minister Brenda Bailey, expanded on previously announced measures as the province confronts stagnant economic growth and high cost of living. Its proposals also align with those from the 2025 federal budget that encourage innovation, advancement in life sciences and industrial development.
B.C.’s government will increase the personal income tax rate applicable to the lowest tax bracket from 5.06 per cent to 5.60 per cent, effective for the 2026 taxation year and beyond. This increase will apply to the first $50,363 of taxable income and will first appear on pay cheques after July 1, 2026 when payroll withholding is updated.
The province also outlined its proposal to raise the basic personal income tax credit rate from 5.06 per cent to 5.60 per cent. This adjustment will partially offset the effects of the personal income tax rate increase by enhancing basic non‑refundable income tax credits. This change is effective for 2026 and beyond.
Although typically indexed to inflation, B.C. Budget 2026 proposed freezing personal income tax brackets and non-refundable tax credits—such as basic personal amount, age amount and disability amount—at 2026 values for the 2027 to 2030 taxation years. Indexation will resume in 2031.
These anticipated changes will result in modest tax increases for most individuals with an average additional tax bill of $76 in 2026. Despite this, B.C. is still expected to have the lowest income tax rate among all provinces for individuals earning less than $149,000 a year.
The B.C. tax reduction credit is a non-refundable credit for low-income individuals. The full credit amount is available to taxpayers earning less than $25,570 for 2026 and is reduced at a rate of 3.56 per cent for income above this threshold.
To further offset the changes to B.C.’s lowest personal income tax rate, the budget proposed increasing the maximum tax reduction credit by $115 to $690, effective for the 2026 taxation year.
The budget also proposed pausing indexation for 2027 through 2030.
The budget proposed a new income-tested children and youth disability supplement under B.C.’s family benefit program.
This supplement would provide up to $6,000 annually per eligible dependent; eligibility would be based on a family’s entitlement to the federal disability tax credit.
If approved, the additional payment would be delivered monthly alongside the province’s existing family benefit starting July 1, 2027.
B.C. Budget 2026 introduced a temporary refundable investment tax credit for Canadian-controlled private corporations that make eligible investments in buildings, machinery and equipment used for manufacturing and processing in the province—subject to certain exclusions.
The credit is 15 per cent of eligible investments up to $2 million for a maximum credit of $300,000.
This incentive is available for eligible investments made on or after April 1, 2026 and before April 1, 2031, after which the rate will reduce by 2.5 percentage points every year until it is fully phased out for investments made after March 31, 2036.
The 2026 budget amended B.C.’s scientific research and experimental development (SR&ED) tax credit to align with recent changes to the federal SR&ED program changes announced in the 2024 fall economic statement and the 2025 federal budget. These amendments are effective for taxation years that began on or after Dec.16, 2024.
This tax credit is intended to encourage corporations to invest in research and development that supports innovation, productivity and long-term growth in the province.
The amendments will:
The budget also expanded access to the refundable SR&ED tax credit to eligible Canadian public corporations with the goal of supporting small- and medium-sized businesses as they scale.
In an effort to offer a greater degree of certainty for businesses making longer-term R&D investments in B.C., the budget removed the SR&ED tax credit’s previous sunset date of Aug. 31, 2027.
B.C. Budget 2026 indicated that the provincial government will explore the possibility of adopting a patent box regime for the life sciences sector to encourage innovation.
A patent box regime would provide a tax incentive on income derived from qualifying intellectual property. This could lower taxes on profits generated from R&D developed and patented in the province.
The province intends to consult with stakeholders and the federal government to assess whether such a regime could accelerate commercialization and support growth in B.C.’s life sciences industry—including research firms, testing and medical laboratories, and manufacturers of medical devices, diagnostics, pharmaceuticals, radiopharmaceuticals and related products.
B.C.’s 2026 budget included a clarification regarding its mining exploration tax credit.
Regarding this incentive, expenses incurred for the purposes of determining the quality of a mineral resource in Canada do not include costs related to assessing the resource’s economic viability or engineering feasibility, effective Nov. 4, 2025.
This aligns the provincial tax credit with changes to its federal counterpart announced in the 2025 federal budget.
B.C. Budget 2026 proposed the following amendments aimed at streamlining and updating certain industry incentives:
B.C. will implement significant changes to its provincial sales tax (PST) effective Oct. 1, 2026, including expanding the tax base and removing several long‑standing exemptions.
Professional services expansion
PST will now apply to several professional services that were previously non-taxable. These include accounting and bookkeeping services, architectural, engineering and geoscience services, rental property and strata management services, commissions on non‑residential real estate transactions, and security and private investigation services.
PST on architectural, engineering and geoscience services will apply to 30 per cent of the purchase price of the services subject to the tax.
These changes bring B.C.’s framework in line with how similar services are taxed in provinces like Manitoba and Saskatchewan.
Businesses providing these services must register to collect and remit PST and ensure invoicing, contracts and systems are updated. Purchasers should anticipate higher non‑recoverable tax costs and consider the effects on project budgets and service procurement.
Elimination of consumer exemptions
B.C. will also eliminate PST exemptions for clothing patterns, yarn, natural fibres, synthetic thread and fabric used to make or repair clothing. Exemptions for clothing and footwear repair services will also be removed, but basic laundry services will remain exempt.
These changes remove exemptions for goods and services that were once considered essential but are no longer widely used.
The province will also remove PST exemptions for basic cable television, toll‑free telephone services and residential landline services to align the tax treatment of traditional communication services with digital and streaming alternatives. Retailers and service providers will need to update point‑of‑sale and billing systems, while consumers should expect PST to apply to goods and services that were previously exempt.
B.C. Budget 2026 expanded the property transfer tax exemption for purpose‑built rental buildings, effective Jan. 1, 2025, by allowing units to be leased for up to 24 months before the first taxable transaction without losing eligibility. Previously, leasing units prior to sale could disqualify a project from exemption.
Qualifying purchases will still benefit from exemptions to both the additional 2 per cent property transfer tax on the residential portion above $3 million and the general property transfer tax for transactions occurring between Jan.1, 2025, and Dec. 31, 2030.
To qualify, properties must be newly built, non‑stratified, used entirely for long‑term rental for at least 10 years and contain a minimum of four rental units.
The province’s speculation and vacancy tax rate for foreign owners, untaxed worldwide earners and others will increase from 3 per cent to 4 per cent starting Jan. 1, 2027. The higher rate applies to declarations based on property use in the 2027 calendar year and later, with no effect on 2026 filings.
RSM contributors
Clara Pham, Partner
Gautam Rishi, Partner
Farryn Cohn, Sr. Manager
Simon Townsend, Sr. Manager
Dhaval Mehta, Sr. Manager
Alannah Young, Sr. Manager
Sigita Bersenas, Manager
Cassandra Knapman, Manager
Patricia Contreras, Sr. Manager
Chetna Thapar, Manager
Mamtha Shree, Sr. Associate
Elizabeth Ojesekhoba, Sr. Associate
Kevin Hans, Sr. Associate
Jim Niazi, Associate
Ruby Lai, Associate
Benjamin Wilson, Associate
Anuj Patel, Intern
The Real Economy Blog was developed to provide timely economic insights about the middle market economy. It is offered as a complement to RSM’s macroeconomic thought leadership, including the quarterly The Real Economy Canada.
Middle market organizations, which make up the “real economy,” are too big to be small and too small to be big. They have distinct challenges and opportunities around resources, labour, technology, innovation, regulation and more.
