Here’s what you need to know about the proposed BC tax changes announced this week.
On Tuesday, February 20 th , BC Finance Minister Carole James tabled the 2018 Provincial Budget, the first NDP budget since 2001. The 2018 Budget does not include any changes to personal or corporate income tax rates but does:
- Eliminate the Medical Services Plan premiums effective January 1 st , 2020
- Introduce a new Employer Health Tax effective January 1 st , 2019
- Introduce various housing-related measures including a new “speculation tax”, increase
and expand the Additional Property Transfer Tax (the foreign home buyers tax), increase
property taxes on residential homes over $3 million in value and bring in new rules and
regulations to better track changes in beneficial ownership, and
- Introduce an affordable child care benefit to help reduce the cost of childcare.
There is no indication in the 2018 Budget that property transfer tax is being considered for transfers of beneficial ownership of real estate; however, the documents indicate that the BC Government will be taking action to track information and now require developers to collect and report information about the assignment of pre-sale condos.
Business Tax Measures
Corporate income tax rates
The budget did not announce any changes to BC’s corporate income tax rates. As a result, BC’s corporate income tax rates will remain as follows:
|Corporate Income Tax Rates - As of January 1 st , 2018|
|BC||Combined (Federal and BC)|
|Small business 1||2%||12%|
1 For first $500,000 of taxable active business income
Employer Health Tax
In order to help fund the elimination of MSP premiums, the BC Government has announced a new Employer Health Tax (EHT) on employers with payrolls over $500,000 starting January 1 st , 2019. The EHT will be calculated as a percentage of payroll as follows:
|Annual BC Payroll||Annual Tax||Tax as a Percentage of
|$500,000 or less||$0||0.00%|
|Over $1.5 Million||$29,250 plus 1.95% of payroll over $1.5 Million||1.95%|
Prior to implementation of the EHT, further detail is to be provided by the BC Government concerning frequency of instalment payments and how payroll would be aggregated and computed amongst associated businesses.
Personal Tax Measures
Personal income tax rates
The budget did not announce any changes to BC’s personal income tax rates. As a result, BC’s top personal income tax rates will remain as follows for the 2018 year:
|Personal Top Marginal Rates (Income > $202,800)|
|Interest and regular income||49.80%|
Note: The tables shown above represent the combined Federal/BC Provincial personal tax rates.
Medical Services Plan
Following the 50% reduction in premiums effective January 1 st , 2018, MSP premiums will be entirely eliminated on January 1 st , 2020.
Affordable Child Care Benefit
While not delivering on the election promise of $10 a day daycare, the 2018 Budget does introduce a new benefit to be phased in over three years. The following table outlines the maximum benefit for different income levels and types of child care once fully phased in.
New Affordable Child Care Benefit by Care Type (2020/21) 1
|Gross Income||$0 to $44,999||$45,000 to $59,999||$60,000 to $79,999||$80,000 to $111,000|
|Type of Child Care 2||Maximum Monthly Benefit Amount||Taper Rate to Benefit 3||Benefit Amount 4||Taper Rate of Benefit|
|Licensed Group Infant||$1,250||$0.27||$910||$0.35|
|Licensed Group Toddler||$1,060||$0.23||$772||$0.30|
|Licensed Family Infant/Toddler||$1,000||$0.22||$728||$0.28|
|Licensed Group 3 years to School Age||$800||$0.17||$582||$0.23|
|Licensed Family 3 years to School Age||$800||$0.17||$582||$0.23|
|Licensed Group School Age||$420||$0.09||$306||$0.12|
|Licensed Family School Age||$420||$0.09||$306||$0.12|
|Licensed Care Surrounding School Day||$420||$0.09||$306||$0.12|
1 Benefit Amount in this table are for 2020/21, with some of the rate being lower in the first phase of implementation
2 Maximum Monthly Rates for other types of care (e.g. unlicensed care) are unchanged.
3 The Taper Rate indicates the amount the benefit is reduced for each additional dollar of gross income.
4 The benefit amount remains constant for each additional dollar of income between $60,000/year and $79,999/year
Other personal tax credit changes
- Effective January 1 st , 2018 the “infirm dependent credit and caregiver credit” is replaced with a new “BC caregiver credit” that will parallel the federal Canada caregiver credit. The new credit with a maximum benefit of $230.53 per year (indexed to inflation) will be available to BC residents caring for an eligible relative (either living with the relative or
not) with a mental or physical infirmity.
- Effective January 1 st , 2019 the BC Education tax credit has been eliminated. Unused carryforward amounts will remain available.
- The BC Mining Flow-Through Share Tax Credit has once again been extended to the end of 2019.
- Increase in the luxury surtax on passenger vehicles from 10% to 15% for purchases between $125,000 and $149,999 and from 15% to 20% for purchases over $150,000. This will be effective April 1st , 2018.
Real Estate Measures
Property Transfer Taxes
Effective February 21 st , 2018, Property Transfer Tax (PTT) charged on the value of residential properties over $3 Million will be increased from 3% to 5%. The PTT charged on property
values between $2 Million and $3 Million remains unchanged at 3%.
In addition, the 2018 Budget announced that the additional PTT that is currently charged to foreign purchasers of BC residential property will be increased from 15% to 20%. The area in BC to which the additional PTT applies will also be expanded to include certain areas outside of the Greater Vancouver Regional District (GVRD), including the Fraser Valley, Nanaimo, and the Central Okanagan Regional Districts. There may be certain transitional rules (no details supplied in the 2018 Budget) to exempt certain property transactions outside of the GVRD entered into prior to February 21 st , 2018.
The 2018 Budget introduces a new tax effective 2018 that will initially apply to Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts and the municipalities of Kelowna and
West Kelowna. In 2018, the tax rate will be $5 per $1,000 of assessed value on BC residential property (which will increase to $20 per $1,000 of assessed value in 2019). The aim of this new tax is to target foreign and domestic homeowners who do not pay income tax in BC. The BC Government has indicated that the majority of BC homeowners will be exempt as a result of an up-front exemption on most principal residences (and for certain long-term rental properties and other special cases – which was not detailed in the Budget) and a non-refundable income tax credit.
The BC Government has not proposed legislation as yet and there is an overall lack of clarity on how this new speculation tax will apply, what the exact criteria are to qualify for the up-front
exemption and what reporting requirements will be required. The 2018 Budget did outline that the following information will be collected and shared with the Canada Revenue Agency:
- Social insurance number;
- Household information;
- Information on worldwide income;
- Information relates to up-front exemptions; and
- Other information identified by the Ministry of Finance as useful for audit and enforcement purposes.
Beneficial Ownership of Real Estate
The 2018 Budget announced that steps will be taken for tracking the beneficial ownership information of real estate and assignment of pre-sale agreements. The BC Government plans on tabling legislation by July 1 st , 2019 which will include, among other items not yet announced, a requirement for BC companies to hold accurate and up to date information on beneficial owners in their own records office that will be available to law enforcement, tax and other authorities.
The 2018 Budget did not include any measures on applying a property transfer tax on the transfer of beneficial ownership of real estate; however, such measures may still be forthcoming
as more information is collected.
The BC Government further announced that it will start to require developers to collect and report comprehensive information about the assignment of pre-sale condo purchases, which will
be reported to a designated provincial office (yet to be determined). The stated intention for this requirement is to share information with tax authorities to support compliance with federal and
provincial taxes and to also be used to inform future housing and tax policies.
Home Owner Grant Act
For the 2018 tax year, the property value threshold for the full home owner grant is increased from $1.6 Million to $1.65 Million. The grant is reduced by $5 for every $1,000 of assessed
value in excess of this threshold.
For more information on how any of the proposed changes may impact you or your business, contact Rise Advisors.