British Columbia 2020 Budget Dispatch - Wolters Kluwer Canada

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                        February 18, 2020
                        Wolters Kluwer Canada Editorial

Wolters Kluwer Canada

British Columbia 2020 Budget
Dispatch

Wolters Kluwer Canada

Date: February 18, 2020

Disclaimer

Readers are urged to consult their professional advisers prior to acting on the basis of material in the Dispatch

Copyright

© 2020 Wolters Kluwer Canada Limited. All Rights Reserved.

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Content

1        BUDGET 2020: A BALANCED PLAN TO KEEP B.C. MOVING FORWARD                   4

2        TAX MEASURES                                                               5
2.1      Income Tax Act                                                             5
2.2      Provincial Sales Tax Act                                                   5
2.3      Carbon Tax Act                                                             6
2.4      Motor Fuel Tax Act                                                         6
2.5      Tobacco Tax Act                                                            7
2.6      Home Owner Grant Act                                                       7
2.7      Property Transfer Tax Act                                                  7
2.8      Ports Property Tax Act                                                     7
2.9      Assessment Act                                                             8
2.10     School Act                                                                 8
2.11     Taxation (Rural Area) Act                                                  8
2.12     Mineral Tax Act                                                            8
2.13     Various Acts and Regulations                                               9

3        OTHER MEASURES                                                             10

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1   BUDGET 2020: A BALANCED PLAN TO KEEP B.C.
    MOVING FORWARD
“We know that people work hard to build a good life for themselves and their
family. And in turn, people deserve an economy that works hard for them… By
delivering good, stable jobs in all corners of the province. By building a connected
and resilient network of communities. And by recognizing that a prosperous
future means a clean future. To do that, we need an economy that works for
people. When people thrive, our economy thrives.”
— Carole James, Minister of Finance

British Columbia Finance Minister Carole James presented Budget 2020: A
Balanced Plan to Keep B.C. Moving Forward (“Budget 2020”) on February 18,
2020.

The Minister forecast total government revenue at $60.6 billion in 2020-2021,
$62.4 billion in 2021-2022, and $64.2 billion in 2022-2023. Total expenses over
the three-year fiscal plan are forecast at $60.1 billion for 2020-2021, $61.9 billion
for 2021-2022, and $63.5 billion in 2022-2023. Budget 2020 includes an annual
forecast allowance of $300 million in each of the three years of the fiscal plan.
Budget 2020 also includes a contingencies allocation of $600 million in 2020-2021
and $400 million per year in 2021-2022 and 2022-2023. Budget 2020 projects
surpluses of $227 million in 2020-2021, $179 million in 2021-2022, and $374
million in 2022-2023.

A number of tax measures were announced in Budget 2020, including a new top
personal income tax bracket. Highlights of this and related measures are outlined
below.

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2 TAX MEASURES

2.1   Income Tax Act

Personal Income Tax Rate of 20.5% on Taxable Income Over $220,000
Effective January 1, 2020, a new top personal income tax bracket is introduced
effective for the 2020 and subsequent tax years. Taxable income exceeding
$220,000 will be subject to a provincial personal income tax rate of 20.5%; this
increases the rate of tax from 16.8%. Consequential to the increase, the
charitable donation tax credit for individuals is increased to 20.5% for donations
over $200 in respect of the individual’s income subject to the new 20.5% tax rate.

Training Tax Credits
The training tax credits are extended for three years to the end of 2022.

Farmers’ Food Donation Tax Credit
The farmers’ food donation tax credit is extended for three years to the end of
2023.

Production Services Tax Credit Pre-Certification Notification
Effective July 1, 2020, corporations intending to claim the production services tax
credit must notify the certifying authority of their intent within 60 days of first
incurring an expenditure eligible for the tax credit.

Film Incentive B.C. and Production Services Tax Credit Certification Fees
Effective February 19, 2020, the accreditation certificate fee for the production
services tax credit is increased to $10,000. Other amounts for the Film Incentive
B.C. and production services tax credit are set at historical levels.

2.2   Provincial Sales Tax Act

Exemptions for Certain Beverages (soft drinks/pop)
Effective July 1, 2020, carbonated beverages that contain sugar, natural
sweeteners, or artificial sweeteners no longer qualify for the exemption for food
products for human consumption. For administrative ease, provincial sales tax
will also apply to all beverages that are dispensed through soda fountains, soda
guns, or similar equipment, along with all beverages dispensed through vending
machines (except vending machines wholly dedicated to dispensing beverages
other than sweetened carbonated beverages, such as coffee or water machines).

Registration Requirements
Effective July 1, 2020, new registration requirements apply. Canadian sellers of
goods, along with Canadian and foreign sellers of software and
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telecommunication services, will be required to register as tax collectors if
specified B.C. revenues exceed $10,000. Additionally, all Canadian sellers of
vapour products will be required to register if they cause vapour products to be
delivered to B.C. consumers.

Exemptions for Pollution Control and Waste Management Machinery and
Equipment
Effective February 19, 2020, the exemptions for machinery and equipment
purchased or leased by qualifying manufacturers and resource industry
businesses for use in pollution control or waste management are amended to
eliminate restrictions regarding the location at which the machinery and
equipment is used.

Exemption for Electric Aircraft
Effective February 19, 2020, electric aircraft are exempt from provincial sales tax.
In addition, a refund is added for provincial sales tax paid on or after February 19,
2020, in relation to non-electric aircraft obtained for the purpose of converting
the aircraft to operate solely on electricity, as well as for provincial sales tax paid
on parts and related services obtained for this purpose.

Refund for Real Property Contractors Working Outside B.C.
Effective February 19, 2020, real property contractors who perform value-added
work to goods and then install those goods into real property outside B.C. can
apply for refunds of the provincial sales tax paid on those goods.

2.3   Carbon Tax Act

Carbon Tax Rates Aligned with Federal Carbon Pricing Backstop Rates
Effective April 1, 2020, the B.C. carbon tax rates for 2020 and 2021 are aligned
with the federal carbon pricing backstop methodology where applicable. As part
of this alignment, the current B.C. rates for shredded and whole tires are also
being replaced with a new category for “combustible waste”. Combustible waste
includes tires in any form, asphalt shingles as a new taxable combustible, and any
prescribed material, substance, or thing. The new rates will be available on the
Ministry of Finance’s website. The B.C. carbon tax rates will be reviewed as part
of the federal government’s review of the Pan-Canadian Framework on Clean
Growth and Climate Change in 2022.

2.4   Motor Fuel Tax Act

Refund Rates for International Fuel Tax Agreement Licensees
Effective April 1, 2020, the refund rates for International Fuel Tax Agreement
licensees are adjusted to reflect the alignment of the carbon tax with the federal
carbon pricing backstop methodology.
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2.5   Tobacco Tax Act

Tax Rate for Heated Tobacco Products
Effective April 1, 2020, a default tax of 29.5 cents per heated tobacco product is
introduced. For specific heated tobacco products, this default can be changed by
regulation. A heated tobacco product is a product that contains tobacco and is
designed to be heated, but not combusted, in a tobacco heating unit to produce a
vapour for inhalation. A dealer who intends to sell or use a new heated tobacco
product that has not yet been authorized by the director for sale or use in B.C.
will be required to inform the director of this intent no later than 90 days before
the intended first sale or use of the heated tobacco product. Dealers that
currently sell heated tobacco products in B.C. will be required to inform the
director of their intent to continue to make those heated tobacco products
available for sale in B.C. by no later than April 30, 2020.

2.6   Home Owner Grant Act

Threshold for Home Owner Grant Phase-Out
As announced on January 3, 2020, the threshold for the phase-out of the home
owner grant is decreased to $1,525,000 from $1,650,000 for the 2020 tax year.
For properties above the threshold, the grant continues to be reduced by $5 for
every $1,000 of assessed value in excess of the threshold.

2.7   Property Transfer Tax Act

Exemption from Additional Property Transfer Tax for Certain Canadian-
Controlled Limited Partnerships
Effective on a date to be specified by regulation, a new exemption from
additional property transfer tax will be introduced for qualifying Canadian-
controlled limited partnerships. This exemption will treat Canadian-controlled
limited partnerships in a manner more consistent with Canadian-controlled
corporations and will ensure that new housing developments are treated
similarly regardless of whether the development is being undertaken by a
Canadian-controlled corporation or Canadian-controlled limited partnership.

2.8   Ports Property Tax Act

Municipal Tax Rate Flexibility
Beginning in the 2020 tax year, municipalities will have flexibility to create a
distinct municipal tax rate for designated port properties when the municipal
major industry tax rate is below the upper tax rate threshold. Municipal tax rate
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caps for designated port property under the Act remain at $27.5 per $1,000
generally and $22.5 per $1,000 for new investment. Further, a unique municipal
tax rate for designated port property cannot be higher than the municipality’s
2017 major industry tax rate.

2.9   Assessment Act

Port Land Valuation
Effective for the 2021 property tax year, the Port Land Valuation Regulation
under the Assessment Act will be amended to increase the annual land valuation
from CPI inflation to CPI inflation plus 1 percentage point.

2.10 School Act

Provincial Residential Class School Property Tax Rates
The long-standing rate-setting policy is that average residential class school
property taxes, before application of the home owner grant, increase by the
previous year’s provincial inflation rate. This rate-setting policy will continue in
2020. Tax rates will be set in the spring.

Provincial Non-Residential Class School Property Tax Rates
A single provincewide school tax rate is set for each of the non-residential
property classes. Consistent with long-standing policy, the rates for 2020, except
for the rate for the industrial property classes, will be set so that non-residential
class school tax revenue increases by inflation plus tax on new construction. Tax
rates will be set in the spring.

2.11 Taxation (Rural Area) Act

Provincial Rural Area Property Tax Rates
The long-standing rate-setting policy that average residential rural property taxes
increase by the previous year’s provincial inflation rate will continue for 2020.
Non-residential rural area property tax rates will be set so that total non-
residential rural area tax revenue will increase by inflation plus tax on new
construction. Tax rates will be set in the spring.

2.12 Mineral Tax Act

New Mine Allowance
Effective on a date to be specified by regulation, the new mine allowance is
extended for five years to the end of 2025.

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2.13 Various Acts and Regulations

Technical Amendments
— The Income Tax Act is amended:
   • effective January 1, 2016, to allow employees to reimburse their
       employers any overpaid amount net of B.C. income tax withheld;
   • effective on royal assent, to clarify that corporations may not claim the
       political contributions tax credit; and
   • effective for taxation years beginning after February 18, 2020, the
       deadline to claim the Film Incentive B.C. and the production services tax
       credit is reduced to 18 months.

— Amendments will be made to the Provincial Sales Tax Act to clarify:
   • effective March 1, 2020, the application of the luxury surtax rates to the
     dealer use formula;
   • effective on a date to be specified by regulation, provisions related to
     multi‑jurisdictional vehicles;
   • effective February 19, 2020, rules for when taxable and exempt goods are
     sold or leased together;
   • effective February 19, 2020, the taxable treatment of leases of
     coin‑operated machines and garbage and similar bins; and
   • effective February 19, 2020, the tax treatment of related services
     provided by a lessor of goods.

— Effective on royal assent, the Property Transfer Tax Act is amended to clarify
the calculation of partial principal residence exemptions in cases where the land
is greater than 0.5 hectares in area or the property includes non-residential
improvements.

— Effective on royal assent, amendments to the Carbon Tax Act, Employer Health
Tax Act, Forest Act, Home Owner Grant Act, Income Tax Act, Insurance Premium
Tax Act, International Business Activity Act, Land Owner Transparency Act,
Logging Tax Act, Mineral Tax Act, Motor Fuel Tax Act, Property Transfer Tax Act,
Provincial Sales Tax Act, Speculation and Vacancy Tax Act, and Tobacco Tax Act,
and effective on a date to be specified by regulation, amendments to the Carbon
Tax Regulation, Motor Fuel Tax Regulation, Net Profit Royalty Regulation, and
Petroleum and Natural Gas Royalty and Freehold Production Tax Regulation
provide the Minister the authority to further delegate appeal decisions.

— Effective May 1, 2020, the Land Tax Deferment Act is amended to centralize
the program administration within the Ministry of Finance and enable electronic
applications.

— Home owner grant administrators will work with local governments on the
centralization of the administration of the home owner grant.

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3 OTHER MEASURES

Other measures announced in Budget 2020 include:
   • The new B.C. Access Grant, which complements the Canada Student Grant
       for Full-time Students, ensures B.C. students receive up to $4,000 per year
       for educational programs under two years and $1,000 (plus up to $3,000
       of the Canada Student Grant) for programs two years and over;
   • Funding for a public inquiry into money laundering; and
   • Increased earning exemptions for people and families receiving income or
       disability assistance.

This Dispatch Letter and other official 2020-2021 Budget documents will be
included on IntelliConnect and with the next DVD.

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