2021 British Columbia budget
TAX ALERT |
British Columbia’s Finance Minister Selina Robinson delivered the 2021 Budget and Fiscal Plan on April 20, 2021. The budget was tabled with a deficit and a focus on financial recovery after the COVID-19 pandemic as well as protecting the health and safety of British Columbians.
Similar to the April 19, 2021 federal budget, BC will direct additional spending to youth job training and placements.
BUSINESS TAX MEASURES
The Budget focuses on stimulating the economy and supporting businesses through continuation or extensions of existing programs. No changes were proposed for BC corporate income taxes.
Continuing to invest in COVID related measures
The government will allocate $195 million in 2021/2022 to continue the Small and Medium Sized Business Recovery Grant Program. This program provides grants of $10,000 to $30,000 to small and medium sized BC businesses impacted by COVID-19 and an additional $5,000 to $15,000 to eligible tourism-related businesses.
The Budget also allocates $150 million to support the Increased Employment Incentive tax credit for private sector employers as announced under the Stronger BC Economic Recovery Plan. This tax credit applies to businesses that increased their fourth-quarter 2020 payroll over the third quarter, through hiring or compensation increases.
Although not mentioned in the Budget, the government recently announced a new grant, the Circuit Breaker Business Relief Grant to provide grants of $1,000 to $10,000 to hospitality and fitness businesses that had to partially or fully close to comply with the March 30, 2021 Provincial Health Officer orders.
Employer Health Tax Act
Effective March 30, 2021, the Employer Health Tax Act has been amended to provide administrative provisions in respect of the Increased Employment Incentive. The incentive provides a 15% refundable tax credit for employers who created new jobs for BC workers or increased payroll for existing low or middle-income employees over the fourth quarter of 2020.
Youth Employment Initiatives
To boost employment and economic recovery, the Budget is allocating $36 million in pandemic and recovery contingencies. $15 million will be allocated to expanding the Innovator Skills Initiative program that provides up to $10,000 in funding for businesses to hire a post-secondary student, or non-student youth who has completed industry-approved certification or training, into a technology or tech-enabled position.
Mining flow-through share tax credit
The BC mining flow-through share tax credit allows individuals who invest in flow-through shares to claim a non-refundable tax credit of 20% of renounced mining expenditures. In order to align with the temporary federal timelines due to COVID-19, the eligibility period for expenditures to qualify for the mining flow-through share tax credit is temporarily extended by 12 months.
The extension applies to flow-through share agreements entered into on or after March 1, 2018, and before 2021, when using the general rule. It also applies to agreements entered into in 2019 or 2020 when using the look-back rule.
Book publishing tax credit
The book publishing credit applies to corporations, and is refundable if the corporation is a Canadian Controlled Private Corporation that meets certain criteria.
As announced on March 10, 2021, the provincial government will extend the book publishing credit for five years until March 31, 2026.
- The Budget proposes to invest more funds into existing programs, as well as new initiatives to revitalize the economy. As such, businesses should take full advantage of the credits and programs that are available to them.
TAX AND INCENTIVE MEASURES FOR INDIVIDUALS
The Budget does not propose any changes to personal income tax rates. However, it continues to allocate funds for programs designed to support individuals through the pandemic.
BC Emergency Benefit for Workers
The Budget proposes to expand the eligibility for the Emergency Benefit for Workers to include self-employed individuals if they would have qualified for the Emergency Benefit for Workers or the Canada Emergency Response Benefit based on their gross income. This mirrors a federal change to the Canada Emergency Response Benefit.
Self-employed persons who may have been ineligible and received the benefit, are no longer required to repay the benefit. If the benefit has already been repaid, individuals can apply for reconsideration.
BC Recovery Benefit
The BC Recovery Benefit is a one-time payment of $1,000 for eligible families and single parents whose income is below $175,000, and up to $500 for eligible individuals whose income is below $87,500, the Budget proposes to continue to funding this benefit for British Columbians who have not yet applied.
Home Owner Grant
The grant reduces the amount of property tax payable for a principal residence and is not accessible by corporations or owners of rental properties.
As announced in Jan. 2021, the Budget confirms that the threshold for the phase-out of the homeowner grant is increased to $1.625 million from $1.525 million for 2021. For properties valued above the threshold, the grant is reduced by $5 for every $1,000 of assessed value that exceeds the threshold.
- The Budget provides more assistance to BC families by reducing property taxes and continuing benefit payments.
INDIRECT TAX MEASURES
Exemption for Electric Bicycles and Tricycles
Effective April 21, 2021, the Provincial Sales Tax (PST) exemption for bicycles has now been expanded to include electric bicycles and tricycles and related parts and services.
Electric bicycles and tricycles must meet several criteria to qualify for this exemption:
- Must have foot pedals or hand cracks that allow for human propulsion
- Tires to have a diameter of at least 350 millimeters
- Maximum motor power of 500 watt
- Limited to a motor-assisted top speed of 32 km/hour
Exemption for new resident’s effects temporarily expanded
Effective back to March 11, 2019, the existing one-year PST exemption for personal goods brought into BC by a new resident of the province has been extended to the earlier of January 2023 or one year following the end of the most recent quarantine order.
Grey market vehicles sales
The existing PST refund for motor vehicles purchased in BC and re-sold within seven days will be eliminated, due to concerns around the use of vehicles as potential money-laundering mediums. Any person that purchases a vehicle that is otherwise subject to PST, will be deemed to acquire it for personal use and not for resale purposes, unless the person provides evidence to the seller that they are registered for PST. The effective date for these changes will be announced in a future regulation.
Speculation and Vacancy Tax (SVT)
Two new SVT exemptions have been introduced to provide relief for certain organizations, starting with the SVT reporting year ending Dec. 31, 2020. Government agencies such as municipalities, regional districts and First Nations that own residential property through corporations, will qualify for an exemption from the SVT related to those residential properties.
Effective Nov. 27, 2018, the SVT exemption for residential properties held by a registered charity will be extended to cases where the title to the property is held by a trustee on behalf of the charity.
Due to the retroactive effective date of this amendment, there may be an opportunity for registered charities who own real property through a trustee of a trust to amend prior SVT returns to recover SVT previously paid.
Definition of beneficial owner amended
Effective Nov. 27, 2018, an individual whose interest in BC residential property is established due to being a trustee of a testamentary trust is no longer included in the definition of a beneficial owner for the purposes of the SVT. This change will generally affect BC seniors and spouses that are involved in life interest trusts related to estate planning.
Carbon Tax Act
Effective April 1, 2021, the rate increased to $45 per tonne of carbon dioxide equivalent emissions and will change to $50 per tonne on April 1, 2022, a one year delay from the original schedule of rate increases. This measure is projected to reduce planned carbon tax collections by $288 million in this fiscal year. The corresponding increase to the climate action tax credit for BC individuals and families is also delayed by one year.
Motor Fuel Tax Act
The eligibility for motor fuel tax refunds is expanded to include recipients of certain disability assistance, or a person that receives disability supplement from Indigenous Services Canada. Further, former Canadian Armed Forces personnel who medically retired with a 100% disability pension due to service related injuries, are now eligible for this rebate. This provides a maximum refund of $500 per year. The change will be effective April 20, 2021.
Tobacco Tax Act
Effective July 1, 2021, the tax on cigarettes, heated tobacco products (vaping products) and loose tobacco products will increase from 29.5 cents to 32.5 cents per cigarette. Heated tobacco products will also increase to 32.5 cents per heated tobacco product. Tax on loose tobacco will increase to 65 cents per gram to align taxes on this product with premade cigarettes.
- Budget 2021 introduces tweaks to existing indirect taxes as well as new exemptions to PST and SVT.
Thank you to the following contributors to this article:
Dan Beauchamp, Senior Director
Jordan Labrecque, Senior Associate
Sigita Bersenas, Project Coordinator