On February 20, 2018, Finance Minister Carole James tabled the BC government’s 2018-19 budget. The first full budget presented by the province’s new government aims “to put people first and make life more affordable for British Columbians”. The budget outlines the government’s overall strategy for increasing affordability for BC residents, with a primary emphasis on the need for affordable housing solutions and the demand for more access to affordable childcare.
Budget 2018 projects a modest surplus of $219 million for 2018-19, with further surpluses projected for the next couple of years:
Below are highlights of some of the key tax measures introduced in the budget.
Corporate income tax rates – corporate income tax rates remain unchanged.
Employer Health Tax (EHT) – beginning January 1, 2019, employers with payroll of more than $500,000 will pay a new Employer Health Tax (EHT). The EHT is meant to help fund the eventual elimination of the Medical Services Plan. The EHT will not apply to employers with payroll below $500,000.
The government will introduce legislation in 2018 that will include rules on the frequency of instalment payments and will define how payroll amounts are to be aggregated among associated businesses before applying deductions and tax rates.
Film incentive BC tax credit – effective for expenditures incurred on or after February 21, 2018, the film incentive BC tax credit is expanded to include scriptwriting expenditures on BC labour incurred by a corporation prior to the completion of the final script stage of the production.
Tax credit extensions – the following extensions to existing tax credits were announced in the budget:
Personal income tax rates – no new changes to personal tax rates were introduced. But as previously announced, beginning 2018, taxable income above $150,000 will be subject to a provincial personal income tax rate of 16.8%, up from 14.7%.
Medical Services Plan (MSP) – effective January 1, 2020, MSP premiums will be eliminated. Once eliminated, single individuals will see annual savings of up to $900 and families will see annual savings of up to $1,800.
BC education tax credit – as of January 1, 2019, the BC education tax credit will be eliminated. Any unused credits carried forward from years prior to 2019 can be claimed in 2019 and later years.
New BC caregiver credit – effective for 2018 and subsequent tax years, a new BC caregiver credit will replace the existing caregiver tax credit and the infirm dependent tax credit. The maximum BC caregiver credit amount is $4,556 per infirm dependent for 2018, providing a benefit of up to $230.53 (indexed to inflation thereafter). The new credit will not require the dependant to live with the caregiver.
Property Transfer Tax (PTT) rates – effective February 21, 2018 the budget will increase the provincial PTT to 5% (from 3%) on residential property values above $3 million. The rates on residential property below $3 million remain unchanged.
The additional PTT applicable to foreign purchasers of residential properties will also increase to 20% from 15% effective February 21, 2018. The area in which this tax applies is also expanded to include the Capital Regional District, the Regional District of Central Okanagan, the Fraser Valley Regional District and the Regional District of Nanaimo. Transitional rules may exempt eligible property transactions entered into before February 21, 2018, unless the transaction is in Metro Vancouver.
For transactions that occur on or after February 21, 2018, the budget also states that transfers of a bankrupt’s principal residence from a trustee in bankruptcy to the bankrupt or the bankrupt’s spouse or former spouse will be exempt from tax.
Speculation tax – beginning in 2018, a new speculation tax on residential property in BC will be imposed at a rate of $5 per $1,000 of assessed value. This tax will rise to $20 per $1,000 of assessed value in 2019 and will initially apply to the Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts and the municipalities of Kelowna and West Kelowna.
Up-front exemptions for most principal residences, qualifying long-term rental properties and certain special cases will be available. To offset the new property tax and provide relief to individuals who may not otherwise qualify for an up-front exemption, a non-refundable income tax credit will be introduced. The income tax credit can be carried forward for future years.
Home owner grant – as announced on January 3, 2018, the property value threshold for the full home owner grant will increase to $1.65 million for 2018 (from $1.6 million in 2017). The grant is reduced by $5 for every $1,000 in assessed value exceeding this threshold.
School tax – effective for 2019 and subsequent tax years, the provincial school tax on most residential properties with an assessed value in excess of $3 million will increase to 0.2%. For residential properties with an assessed value in excess of $4 million, a tax rate of 0.4% will apply.
Provincial sales tax – luxury surtax rates on passenger vehicles over $125,000 increased. Effective April 1, 2018, for passenger vehicles with a purchase price of $125,000 to $149,999 rates increase to 15% from 10% and for vehicles with a purchase price greater than $150,000 rates increase to 20% from 10%.
Tobacco tax – effective April 1, 2018, the tobacco tax rate on cigarettes will increase to 27.5 cents per cigarette (from 24.7 cents) and to $55 per carton of 200 cigarettes (from $49.40). The tax rate on loose tobacco will also increase to 37.5 cents from 24.7 cents per gram.
The above summary does not include all of the provisions of the 2018 Budget so we encourage you to contact your financial advisor should you require further guidance.