The B.C. Government released the 2019 Budget on February 19, 2019. There were no personal or corporate tax rate changes in the Budget, but the Budget did contain enhancements to some tax credits and provided some clarification on new measures like the BC Employer Health Tax and the Speculation and Vacancy Tax.

Income Tax Measures

Corporate Income Tax Updates

No corporate tax rates changes were announced in the 2019 B.C. Budget.

The corporate tax rates for 2018 and 2019 are as follows:

	2018			2019
	Small business tax rate	General corporate tax rate	Small business tax rate		General corporate tax rate
Federal	10.00%	15.00%	9.00%		15.00%
B.C.	2.00%	12.00%	2.00%		12.00%
Combined Federal & B.C.	12.00%	27.00%	11.00%		27.00%

 

Personal Income Tax Update

No personal tax rates changes were announced in the 2019 B.C. Budget.

The combined federal and B.C. top marginal tax rates for 2018 and 2019 are as follows:

	2018	2019
Ordinary income, interest income	49.80%	49.80%
Capital gains	24.90%	24.90%
Eligible dividends	34.20%	31.44%
Non-eligible dividends	43.73%	44.63%

 

Mining allowance

The new mining allowance is extended for one year to the end of 2020.

BC Mining Flow-Through Share Tax Credit / Mining Exploration Tax Credit

The budget proposes to make permanent:

Farmers’ Food Donation Tax Credit

The budget proposes to extend the farmers’ food donation tax credit by one year to the end of 2020. This credit available to individuals and corporations that carry on the business of farming and donate a qualifying agricultural product to a registered charity that provides food to those in need or helps to operate a school meal program. The credit is 25% of the fair market value of the qualifying agricultural product and must be claimed in the same year as the charitable donation tax credit is claimed for the particular donation.

Training Tax Credits

The budget proposes to extend the training tax credit for one year to the end of 2019. The training tax credit provides refundable income tax credits for employers who employ apprentices enrolled in apprenticeship programs administered through the Industry Training Authority.

Pension Tax Credit

Effective for 2015 and subsequent years, the pension tax credit is expanded to apply to retirement income security benefits paid to veterans.

Tax on Split Income

• Effective for 2018 and subsequent years:
  • the disability tax credit can be applied in calculating the tax on split income;
  • Split income can be included in the income threshold for calculating the medical expense tax credit.

Small Business Venture Capital Tax Credit

The budget proposes to enhance the small business venture tax credit program as follows:

• Effective for 2019 and subsequent years, the annual tax credit that can be claimed is increased from $60,000 to $120,000.
• Effective February 20, 2019:
  • The maximum amount that eligible business corporations can raise through the program is increased from $5 million to $10 million;
  • Advanced commercialization is added as an eligible business activity, but limited to businesses outside Metro Vancouver Regional District and Capital Regional District;
  • Eligible small businesses and eligible business corporations can engage in activities related so scaling up their business after two years in the credit program;
  • Companies are eligible for a reduction in reimbursement to the government if they exit the program after two years;
  • Share transfers are permitted to a Tax-Free Savings Account and equity purchases within a Tax-Free Savings Account are eligible for tax credits.
• Effective March 2, 2019, investments in convertible equity issued by an eligible business corporation can qualify for a tax credit.

Sales Tax Measures

Provincial Sales Tax (PST)

Effective on royal assent, when a principal uses an agent to make a sale or lease, or when a billing agent is used to collect payments, the principal and agent can jointly designate a single party to be responsible for the tax collection, reporting and remittance obligations. Where sales are made by auction, an auctioneer acting as agent is automatically designated as the party responsible for collecting, reporting and remitting tax unless the parties jointly elect to assign the obligations to the principal.

Other Measures

Medical Service Plan (MSP)

The 2019 Budget will implement the 2018 Budget proposal eliminate Medical Service Plan (MSP) premiums effective January 1, 2020.

The MSP premiums will be replaced with an employer health tax which comes into effect on January 1, 2019, with the following rate structure:

• Businesses with a payroll of more than $1.5 million will pay a rate of 1.95% on their total payroll;
• Businesses with a payroll between $500,000 and $1.5 million will pay a reduced tax rate;
• Businesses with a payroll under $500,000 will not pay the tax;
• Charities and non-profit organizations will be required to pay the tax if their payroll at a particular branch or location exceeds $1.5 million. A requirement to register exists if the total payroll of the charity or NPO exceeds $1.5 million, even if it is exempt because no one location has payroll in excess of $1.5 million.

Enhancement to income and disability assistance

Effective April 1, 2019, income and disability assistance rates will increase by $50 per month.

B.C. Child Opportunity Benefit

The budget proposes to replace the current Early Childhood Tax Benefit (“ECTB”) with a new B.C. Child Opportunity Benefit effective October 1, 2020 for parents with children under the age of 18.

The maximum annual benefits for families with a family net income that is less than $80,000 are:

• $1,600 for the first child;
• $1,000 for the second child; and
• $800 for each subsequent child under 18.

The benefit is reduced when family net income exceeds $25,000 and begins to be phased out if family net income exceeds $80,000.   The $25,000 and $80,000 threshold amounts will be indexed to inflation in future years.

Parents will be eligible for the B.C. Child Opportunity Benefit if the child is registered for the Federally-administered Canada Child Benefit program.

Elimination of Interest on Student Loans

As of February 19, 2019, interest will no longer accrue on new and existing student loans provided through the British Columbia Student Loan Program.

Technical Amendments

Speculation and Vacancy Tax (“SVT”)

Effective retroactive to November 27, 2018, the SVT is amended to clarify that:

• the exemption for property that is uninhabitable due to a natural disaster or hazardous condition applies when the property is rendered uninhabitable at the end of a calendar year;
• the tax due date of additional tax as a result of the SVT assessment due to a consequential assessment under another act is the later of 30 days after the SVT assessment or the annual tax due date.

D&H Group LLP continues to keep you informed of changes (and proposed changes) that can affect you and your business. D&H Group LLP is an eighty person firm with over 50 years’ experience in providing clients with sound professional advice. Operating throughout British Columbia and Western Canada, D&H Group LLP can also service national and international clients in cooperation with out affiliates: BHD association, a national association of independently owned accounting firms, and the International Association of Practicing Accountants Worldwide, which has over 130 offices located throughout the world.

The material contained in this and other newsletters is not intended to be advice on any particular matter. Readers are cautioned not to act on the basis of any matter contained in the Business Reports without first considering appropriate professional advice specific to their situation. We would be pleased to provide further information and address any questions that our readers may have.

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