British Columbia’s (BC) Finance Minister, Katrine Conroy, tabled the British Columbia 2023 Budget and Fiscal Plan (the 2023 budget) on Feb. 28, 2023. The 2023 budget focuses on affordable housing, growing a clean economy, and delivering aid to families to help offset the impact of global inflation and rising costs of living. The 2023 budget’s three-year fiscal plan predicts declining deficits, with a projected $4.2-billion deficit in 2023-24.
British Columbia Budget 2023
Income tax measures
The 2023 budget proposes increases to various tax credits confirming the government’s commitment to supporting taxpayers. As such, no changes were proposed to BC personal or corporate income taxes.
Income-tested renter’s tax credit
Due to increased costs in the rental market, the 2023 budget proposes to introduce a new renter’s tax credit. The credit will provide up to $400 annually to renters starting in 2024. The amount of the credit will be income-based and will provide the most support to households with moderate and low incomes. Households that make less than $60,000 per year will be able to claim the full credit amount, while households that earn as much as $80,000 per year will receive a partial amount.
Even though the 2023 budget does not provide details on how to apply for the proposed renter’s tax credit, it does state that the credit will be based on adjusted income calculated from amounts reported on renters’ 2023 tax returns. It will be important for BC taxpayers to ensure their returns are filed on time to receive this credit.
BC family benefit
The BC family benefit provides a tax-free monthly payment to families with children under the age of 18. Effective July 2023, due to global inflation and increases to the cost of living, the 2023 budget proposes to increase the monthly BC family benefit by 10% and add a new annual supplement for lower-income single parent families.
In order to receive the BC family benefit, caregivers with children under the age of 18 should complete their tax returns on time and ensure their children are registered for the federal Canada child benefit as this will register them for the BC family benefit as well.
Climate tax credit
The 2023 budget proposes to further increase the climate tax credit due to inflation and the increase in carbon tax. As a result, a two-parent household could receive up to $900, whereas a single-parent household could receive up to $447.
For British Columbians with lower incomes, the credit can assist in offsetting the expense associated with the carbon tax.
Interactive digital media tax credit
The interactive digital media tax credit (IDMTC) is a refundable tax credit for eligible registered corporations that develop interactive digital media products in BC after Aug. 31, 2010, and before Sept. 1, 2023. The IDMTC is calculated as 17.5% of eligible salary and wages incurred in a given tax year. Some examples of interactive digital media products include video games, educational software and edutainment products. The 2023 budget proposes to extend the credit by five years to August 31, 2028.
The extension of this program will enable corporations engaged in the interactive digital media sector to cover costs that may not be covered under the scientific research and experimental development (SR&ED) program.
Production services tax credit
The production services tax credit is a refundable corporate income tax credit for accredited production companies that produce accredited film or video productions in BC. The credits are available to both domestic and foreign producers and there is no Canadian content requirement.
For production companies that incurred their first eligible accredited labour expenditure between July 1, 2020, and Feb. 21, 2022, the current rules require them to obtain an accreditation certificate from Creative BC within 60 days of incurring their first accredited BC labour expenditure. The 2023 budget proposes to allow these companies to claim accredited BC labour expenditures up to 120 days prior to the certification form submission date, regardless of how late the form was filed.
Companies engaged in film or video production in BC should be mindful of the timeline to file the certification form. Although the new proposed measures are meant to provide relief, production companies may be unable to claim tax credits for accredited BC labour expenditures incurred more than 120 days prior to filing the certification form.
Other tax measures
The carbon tax was first introduced back in 2016 to combat carbon pollution, aiming to tax businesses that pollute excessively. Since April 2022, the carbon tax rate has been set at $50 per tonne of carbon dioxide equivalent emissions (CO2e). Effective April 1, 2023, carbon tax rates will increase annually by $15 per tonne of CO2e until reaching $170 per tonne in 2030. Qualifying commercial greenhouse growers can claim a point-of-sale reduced carbon tax for purchases of natural gas and propane used for heating and generating CO2 for increased crop productivity.
The point-of-sale reduced tax applies to greenhouse growers who grow vegetables, fruits, bedding plants, flowers, ornamental plants, tree seedlings or nursery landscape plants. To qualify, greenhouse growers must:
- Grow the crops identified above and generate gross revenues of $20,000 or more in the previous 12 months; and,
- Have a reasonable estimate that revenues will be $20,000 or more during the next 12 months.
Additionally, effective April 1, 2024, large emitters will be exempt from tax imposed under the Carbon Tax Act. These emitters will instead be subject to a made-in-BC output-based pricing system (OBPS), under which they will pay for emissions that exceed performance-based emissions limits.
BC consumers should expect to see an increase in carbon tax rates owing each year for the foreseeable future.
Provincial sales tax
The 2023 budget proposes numerous changes to the tax treatment of various provincial sales tax (PST) items, including:
- Effective March 1, 2023, automated external defibrillators (AEDs) are exempt from PST. In addition, kits containing AEDs, and parts and services for AEDs, including pads, are exempt from PST. This exemption encourages a greater supply of AEDs in BC.
- Effective July 1, 2023, the rules regarding the tax collection obligations of online marketplace facilitators and online marketplace services will be amended. These changes will clarify how to apply the rules and make it easier for businesses to meet their PST obligations. An online marketplace service includes services provided by a marketplace facilitator to a marketplace seller. Such services may include advertising or promotions, storage, or services facilitating a marketplace seller’s sale of goods, software, or other taxable services through the online marketplace. Under the current rules, online marketplace sellers must pay PST on online marketplace services that are (a) provided in BC, (b) in respect of accommodation in BC, or (c) provided to marketplace sellers located in BC selling goods or services consumed in BC. The 2023 budget proposes to amend and clarify the rules such that online marketplace services are taxable even when an online marketplace facilitator provides the service to facilitate the sale or provision of non-taxable services.
- Effective July 1, 2023, heated tobacco products are no longer included in the definition of vapour products. This change makes a temporary correction permanent, meaning that heated tobacco products will continue to be subject to tobacco tax as well as PST.
- Effective April 1, 2013, clarifications have been added that, for PST purposes, the federal goods and services tax does not form part of the taxable purchase price of goods brought or sent into BC for use.
- Effective Sep. 1, 2022, clarifications have been added that, for PST purposes, the federal luxury tax imposed under the Select Luxury Items Tax Act does not form part of the taxable purchase price or lease price.
Numerous clarifications have been added for PST purposes to help address uncertainty in how PST interacts with various other taxes. Additionally, online marketplace facilitators should be aware that they may now need to charge PST on their services to facilitate the sale or provision of non-taxable services.
Property transfer tax
In an effort to encourage more available housing, the BC government is introducing relief for property transfer tax for certain newly built rental buildings. Effective for transactions occurring on or after Jan 1. 2024, new purpose-built rental buildings will be exempt from the 2 per cent excess tax charged on residential property worth over $3 million. Purpose-built rental buildings are non-stratified and held as a rental, on a monthly basis or longer, for at least 10 years. Additionally, the residential portion of the building must be entirely available for rental and comprise of at least four apartments.
Taxpayers interested in investing in large rental properties in BC can enjoy property tax relief on certain acquisitions of newly built rental properties.