Articles

The British Columbia 2010 provincial budget was tabled on March 2, 2010. This budget focuses on three areas to help sustain the province’s road to economic recovery – support of vital public services that British Columbians rely on, a refocus in government spending to advance the government’s pledge to return to balanced budgets, and initiatives to stimulate and sustain economic growth. The provincial deficit is projected to be $1.7 billion in 2010/11, $945 million in 2011/12, and $145 million in 2012/13. The government reaffirmed its commitment to return to balanced budgets by 2013/14.

Highlights of tax changes in the budget are set out below.

Business Tax Changes

Production Credits and the new Digital Media Credit

As announced on February 3, 2010, a new tax credit has been introduced for digital media, and enhancements to the provincial film tax credits have been made:

• The basic Production Services Tax Credit rate is increased to 33% (from 25%), effective March 1, 2010.
• The Film Incentive BC tax credit rate of 35% to qualifying BC labour expenditures cap is increased to 60% (from 48%), effective March 1, 2010.
• The Digital Animation or Visual Effects tax credit is increased to 17.5% (from 15%), effective March 1, 2010.
• The new B.C. Interactive Digital Media Tax Credit, will be 17.5% of qualifying BC labour expenditures, effective September 1, 2010. 

International Financial Activity Program

The International Financial Activity Program, which offers incentives to companies conducting specific international busines, will be expanded to include the following new activities that qualify for tax reductions:

• Digital media publishing and distribution;

• Certification and trading of carbon credits; and
• Clean technology.

Effective September 1, 2010, qualifying international activities are amended to include prescribed management and administrative services of prescribed investment funds. International financial business income will also be amended to include all income relating to the licensing of a qualifying patent.

International Financial Activity Specialists Refunds

To attract non-resident specialists, personal income tax refunds of up to five years are available for eligible International Financial Activity Program participants. Effective March 3, 2010, an eligible specialist must earn wages of at least $100,000 annually to qualify. BC personal tax refunds will be 100% in the first two years of eligibility, 75% in the third year, 50% in the fourth year, and 25% in the fifth year.

Introduction of Executive Specialist, Repeal of Management Services

A new category of specialist, the Executive Specialist, is introduced to replace the existing international financial activity related to management services. An Executive Specialist can be a key decision maker of the program participant; they must be non-resident and earn wages of at least $250,000 annually. Rates of refunds for five years applicable to international financial activity specialists also apply to Executive Specialists.

Lending Activities Restricted

Effective March 3, 2010, qualifying lending activities are restricted to arm’s length parties.

Corporation Capital Tax Act

The financial institutions minimum tax, effective April 1, 2010, has been eliminated.

Personal Tax Changes

Property Tax Deferral Program for Families with Children

Beginning July 1, 2010, homeowners with children under the age of 18 and have at least 15 per cent equity in their homes, subject to eligibility requirements, have the option to defer all or part of their provincial and local property taxes until a change in ownership occurs. Interest on deferred taxes will be charged at the prime lending rate of interest.

Northern and Rural Home Owner Benefit

Beginning 2011, British Columbians living outside the Greater Vancouver, Fraser Valley, and Capital Regional Districts may be eligible to receive a benefit of up to $200 over and above the Home Owner Grant.

B.C. Mining Flow-Through Share Tax Credit

As announced on January 21, 2010, the provincial tax credit for mining flow-through is extended for an additional three years, to the end of 2013.

Medical Services Plan Premiums

Effective January 1, 2011, Medical Services Plan premiums will increase as follows:

• $60.50 per month for single persons (increase of $3.50 per month.)
• $109.00 per month for two person families (increase of $7.00 per month.)
• $121.00 per month for families of three or more persons (increase of $7.00 per month.)

B.C. HST Credit

A new B.C. HST Credit, a maximum annual tax credit of $230 per family member, has been introduced to help low and modest income individuals and families with the harmonized sales tax (HST.) Effective July 2010, the credit will be paid together with the existing federal Goods and Services Tax Credit payment and the BC Low Income Climate Action Tax Credit payment.

Carbon Tax and Motor Fuel Tax

Vendor Penalty

Effective March 3, 2010, vendors who sell fuel in British Columbia without being appointed as a collector as required,  will be penalized at a maximum of twice the amount of security the vendor would have been required to pay had the vendor been appointed as a collector.

Propane Moved to Security Scheme

Effective July 1, 2010, propane will be included in the security scheme that already applies to most other fuels to minimize government administration and compliance costs for collecting the tax on the government’s behalf.

Kerosene Tax Rate

Effective July 1, 2010, the carbon tax rate for kerosene is increased to 5.22 cents per litre (from 5.08 cents per litre.)

HST Transition

The budget introduces the following in the transition of the PST to the HST, effective July 1, 2010:

• Legislation of the TransLink parking tax and administration of the tax is transferred to the South Coast British Columbia Transportation Authority Act and TransLink, respectively.
• A transitional PST refund will be provided on construction materials purchased by June 30, 2010 and used on or after July 1, 2010 for residential improvements or repair.
• A transitional PST refund will be provided for eligible business purchases paid for after October 14, 2009 and before May 1, 2010 that are delivered or performed on or after July 1, 2010 and used exclusively in the course of commercial activities.
• The 8% Hotel Room Tax is eliminated. However, the additional hotel room tax program will be extended beyond June 30, 2011 for eligible entities to raise revenue for tourism marketing.
• A provincial credit will be introduced for the provincial component of HST payable on residential energy.
• Point of sale rebates will be introduced for the provincial component of HST payable on motor fuels and other items.
• The PST and the multijurisdictional vehicle tax will be eliminated as of July 1, 2010.  Provincial tax on the private sales of vehicles, boats and aircraft will continue, but at 12%.

About Wolrige Mahon LLP

Wolrige Mahon LLP Chartered Accountants, based in Vancouver, British Columbia, provides a full spectrum of business services including valuations, litigation support, tax and information technology, in addition to our exceptional audit, review and small business advisory services. We are an independent member of Baker Tilly International, a network of independent accountancy and business services firms throughout the world. Still, we remain small enough to maintain a very personal atmosphere.

As an independent firm with international representation, we offer the best of both worlds. We have the resources to provide full service to our clients, yet we don't report to a head office thousands of miles away. This also means that we chart our own course, according to our own objectives and those of our clients. Every staff member matters at Wolrige Mahon and each member has a voice and an opportunity to make a difference.