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Other Revenue Measures

Income Tax Act

Dividend Tax Credit Rates Reduced

Effective January 1, 2009, the provincial personal income tax dividend tax credit rates are reduced to reflect the one percentage point reduction in both the general and small business corporate income tax rates. The dividend tax credit rate applicable to enhanced dividends is reduced to 11 per cent from 12 per cent and the dividend tax credit applicable to ordinary dividends is reduced to 4.2 per cent from 5.1 per cent.

Film Tax Credits Extended for Five Years

As announced on October 19, 2007, the Production Services Tax Credit and Film Incentive BC tax credit are extended for five years to June and April 2013 respectively.

Basic Film Tax Credit Rates Increased for Two Years

As announced on January 25, 2008, the basic Film Incentive BC tax credit rate is increased to 35 per cent from 30 per cent and the basic Production Services Tax Credit rate is increased to 25 per cent from 18 per cent. These rates apply to qualifying BC labour expenditures incurred after December 31, 2007 and for new productions with principal photography beginning before January 1, 2010.

Regional Film Tax Credit Enhanced

Effective for productions with principal photography beginning after February 19, 2008, the regional film tax credit rates are increased for production activity in areas more distant from the Lower Mainland. Currently, the province provides additional credits for production activity in regions of the province outside a designated Vancouver area based on a labour-management agreed upon area called the Vancouver Zone. For purposes of the regional film tax credits, two regions will be defined that are outside the designated Vancouver area: the nearby region and the distant region.

The nearby region will extend from the designated Vancouver area north up to and including Whistler, east to include Hope and will include the Capital Regional District. The distant region will be the area of the province beyond the nearby region.

The regional credit rates for the nearby region will be the same as the previous regional credit rates of 12.5 per cent for Film Incentive BC and 6 per cent for the Production Services Tax Credit. The regional credit rates for the distant region will be 18.5 per cent for the Film Incentive BC tax credit and 12 per cent for the Production Services Tax Credit.

Definition of BC-based Individual Changed

Currently, a BC-based individual is defined for the entire length of a production based on the residency status of the individual in the calendar year that precedes the year principal photography begins. Effective for productions with principal photography beginning after February 19, 2008, a BC-based individual is a person who is resident in the province on December 31 of the year preceding the year for which the tax credit is claimed. This change will help a production that spans more than one year in the tax credit calculation.

Corporation Capital Tax Act

Existing Corporation Capital Tax Phased out and Replaced with a Financial Institution Minimum Tax

The existing corporation capital tax is phased-out over three years by reducing the tax rates by one-third effective April 1, 2008, one-third effective April 1, 2009 and eliminated effective April 1, 2010. The following table shows current rates and the phase-out schedule over the next three years.

Table 3.6.

Effective April 1, 2010, a minimum tax will apply to financial institutions that have net paid up capital in excess of $1 billion. The tax will be calculated as one per cent of BC paid up capital and a deduction for BC corporate income taxes paid will be allowed. This will ensure that large financial institutions pay a minimum amount of tax each year.

Tax Treatment of Non-equity Shares Clarified

The Act is amended to clarify that only non-equity shares of credit unions are to be excluded from the tax base for purposes of corporation capital tax liabilities. This change is effective January 1, 2001.

International Financial Activity Act

Definition of International Financial Business Amended

Effective February 20, 2008, the definition of international financial business is changed to include a substantial presence test. This change is made following consultations with taxpayers regarding the definition, which is critical to the program. The new definition of international financial business will include the following requirements:

  • the corporation carries on an active business; or
  • the corporation incurs a prescribed amount of expenditures for services rendered in BC in connection with international financial activities; and
  • the corporation has shares of a prescribed level.

Allowable Hedging Activities Clarified

Effective September 1, 2004, the Act is amended to clarify the inclusion of hedging activities for taxpayers.

Short Term Financial Instruments Allowed

Effective February 20, 2008, the Act is amended to allow non-securities corporations to trade in money market investments. These are generally short-term investments and include treasury bills issued by a government, commercial paper and bankers’ acceptances.

Management and Control Activities Allowed

Effective February 20, 2008, the Act is amended to allow management and control functions as eligible international financial activity. Management and control functions will be prescribed and will include, for example, human resource and strategic planning services.

Social Service Tax Act

Application of Tax to Tokens Provided by Registered Charities In Exchange for Donations Clarified

Effective February 20, 2008, registered charities that provide tangible personal property of nominal value (tokens or gifts such as pins, ribbons, plastic bookmarks etc.) in exchange for donations are not required to collect PST from donors. In these circumstances, registered charities are required to pay PST on the purchase of the tokens or gifts. This tax application to goods of nominal value does not apply to goods sold by charity-run thrift stores which must continue to collect tax on their sales, to items of more than nominal value provided to donors, or to items sold by or on behalf of charities for a fixed price.

Exemption Expanded for Catalysts and Direct Agents

Effective February 20, 2008, the PST exemption for catalysts and direct agents is expanded to include chemical substances that produce or modify a reaction that is essential for the processing or manufacture of a product for sale or lease. Reactions produced or modified by catalysts, direct agents and chemical substances may be physical or chemical in nature. The exemption no longer requires direct contact with the material being processed or manufactured. The exemption does not apply to substances:

  • used to maintain, lubricate or prolong the life of machinery;
  • added to a tailings or settling pond or to waste removed from the production process; or
  • used for testing.

To qualify as processing, the processing must be a series of operations or a complex operation that results in a substantial change in the form or other physical or chemical characteristics of the tangible personal property.

This exemption also does not include changes in state effected only by temperature or pressure changes (e.g. from ice to water).

This change fully implements a 2007 PST Review recommendation by building on the results of a 2007 British Columbia Court of Appeal decision.

Charity Funds Eligible for the Registered Charities Medical Equipment Refund Clarified

Effective February 21, 2007, the definition of charity funds is clarified to include bingo affiliation grants for purposes of the medical equipment refund available to registered charities or eligible hospital auxiliaries. As a result, registered charities and eligible hospital auxiliaries may apply for refunds of PST paid on medical equipment purchased with the charity’s or auxiliary’s bingo affiliation grants.

Exemption Provided for Diesel Vehicle Emission Control Devices

Effective February 20, 2008, an exemption from PST is provided for emission control devices for diesel vehicles that are verified to reduce particulate emissions by at least 20 per cent if purchased before January 1, 2009. Emission control devices for diesel vehicles that are verified to reduce particulate emissions by at least 50 per cent are exempt if purchased before April 1, 2011. Labour charges to install exempt emission control devices are also exempt.

Exemption Introduced for Samples of Prescription Optical and Dental Appliances

Effective February 20, 2008, prescription dental and optical appliances provided for promotional purposes to a dentist, optometrist, optician, or physician are exempt from PST. This parallels the tax treatment provided to pharmaceutical samples.

Trade-In Allowance for Out-of-Province Motor Vehicle Purchases Clarified

Effective February 20, 2008, the trade-in allowance is clarified to apply to purchases of motor vehicles from other Canadian jurisdictions for use in BC. The trade-in allowance allows purchasers to pay tax on the difference between the purchase price of the new vehicle and the value of the vehicle taken in trade. To qualify for the trade-in allowance on out of province purchases the trade-in vehicle must have been licensed in BC.

Formula to Calculate Tax Payable on Dedicated Telecommunications Services Clarified

Effective February 20, 2008, the application of PST to dedicated telecommunications services in BC is clarified by excluding distances to and from satellites to calculate the tax payable. With this clarification only the most direct land distance between originating and receiving transmitters is used to calculate the total distance.

Motor Fuel Tax Act

Locomotive Fuel Use in Vehicles Run on Rails Clarified

Effective February 20, 2008, the Act is amended to clarify that motor vehicles that also run on railway tracks are authorized to use locomotive fuel while traveling on the rails. Purchasers must self-assess and remit tax at the higher clear fuel tax rate for fuel used on highway.

Coloured Fuel Use in Crew Crummies Expanded

Effective February 20, 2008, crew crummies used by logging and mineral mining companies may use lower taxed coloured fuel when transporting contractors or agents as well as employees. This is consistent with longstanding administrative and industry practice.

Tax Refund Expanded for Persons with Disabilities

Effective February 20, 2008, the fuel tax refund for persons with disabilities is expanded to include persons with mental disabilities. To be eligible individuals must be certified by a medical practitioner as suffering from a permanent mental disability which precludes them from safely using public transit. Payments are made to guardians on behalf of eligible individuals.

Hotel Room Tax Act

Funding Increased for Tourism BC

Effective April 1, 2008, the proportion of the 8 per cent hotel room tax transferred to Tourism BC is increased to 3 percentage points from 1.65 percentage points.

Ports Property Tax Act

Ports Competitiveness Initiative Extended for 10 years

The ports competitiveness initiative under which property tax relief is provided to port operators is extended for ten years. The initiative includes a municipal tax rate cap of $27.50 per $1,000 of assessed value on existing ports facilities, a 10-year cap on municipal tax rates for new investment in ports facilities of $22.50 per $1,000 of assessed value, and an increase in annual base compensation to municipalities. Starting in 2009 compensation will be adjusted annually for inflation.

Property Transfer Tax Act

Fair Market Value Threshold for Eligibility under the First Time Home Buyers’ Program Increased

Effective for registrations after February 19, 2008, the fair market value threshold for eligible residential property under the First Time Home Buyers’ Program is increased to $425,000 from $375,000.

A proportional exemption is provided for principal residences that have a fair market value up to $25,000 above the new threshold.

Financing Requirements under the First Time Home Buyers’ Program Removed

Effective February 20, 2008 first time buyers are no longer required to have registered financing to be eligible for the exemption.

For first time buyers who bought a home prior to February 20, 2008, and were eligible for the exemption because they had a mortgage of at least 70 per cent, the requirements regarding the amount by which the mortgage may be reduced during the first year of ownership remain in place until midnight February 19, 2008. After February 19, 2008, a mortgage may be paid down by any amount without losing entitlement to the exemption.

Home Owner Grant Act

Threshold for Home Owner Grant Phase-out Increased

As announced on January 11, 2008, effective for the 2008 tax year, the threshold for the phase-out of the home owner grant is increased to $1,050,000 of assessed value from $950,000. This change ensures that more than 95 per cent of homeowners remain eligible for the full grant.

For properties valued above the threshold of $1,050,000, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold. The basic grant is eliminated for properties valued at $1,164,000 and above and for recipients of the additional grant, which is available to seniors, veterans and the disabled, it is eliminated for properties valued at $1,219,000 and above.

Grant Provided During an Extended Absence

A person who ceases to occupy their residence because of damage or destruction from fire, flood or other natural disasters during reconstruction or repair may claim the grant or the low-income grant supplement for up to two taxation years if:

  • the person occupied the residence as their principal residence before it was damaged or destroyed and intends to reoccupy it as their principal residence once it has been reconstructed or repaired;
  • the residence is unoccupied and is not rented or for sale during the absence; and
  • the person would have been eligible for a grant or a low-income grant supplement had the damaged or destroyed residence continued to be their principal residence during the absence.

A person who ceases to occupy their residence for any other reason, other than incarceration, may claim the grant for up to two taxation years if:

  • the person occupied the residence as their principal residence before the absence and received a grant or low-income grant supplement on the residence in the year before the absence;
  • the person intends to reoccupy the residence as their principal residence in the first taxation year after the last taxation year in which they claimed a home owner grant or low-income grant supplement as an absent owner;
  • the residence is occupied by a spouse or relative of the owner or is vacant during the absence;
  • the residence is not rented or for sale during the absence; and,
  • the person would have been eligible for a home owner grant or low-income grant supplement had the residence continued to be their principal residence during the absence.

Disability Portion of Additional Grant for Home Owners Expanded

Effective for the 2008 tax year, home owners may qualify for the additional grant if they construct a new residence that has design specifications that have been modified to meet their disability needs or those of their spouse or relative and the modifications impose a cost that exceeds $2,000.

The Home Owner Grant Act is Clarified

The following clarifications are made to the Act:

  • the definition of spouse is amended so that those who cohabit and live in a marriage-like relationship for a period of at least two years before they apply for a low-income grant supplement are considered spouses for purposes of the Act;
  • the Act is amended to clarify that:
    • if an individual has received a home owner grant or a low-income grant supplement in respect of a residence for a taxation year, neither they nor their spouse may claim a home owner grant or a low-income grant supplement in respect of another residence for that year; and
    • an individual may not claim a grant or a low-income grant supplement in respect of a residence for which their spouse has already claimed a grant or low-income grant supplement for a taxation year unless they claim a partial home owner grant or low-income grant supplement.
  • a permanent resident is defined to have the same meaning as in the Immigration and Refugee Protection Act (Canada). The conditions for eligibility under the Act are amended to clarify that the applicant must be a Canadian citizen or permanent resident and that they must be ordinarily resident in British Columbia; and
  • the conditions under which the spouse or relative of a deceased person may be eligible for the grant are amended to clarify that the deceased person must have been a Canadian citizen or permanent resident and must have occupied the residence as their principal residence at the time of death.

School Act

Provincial Residential School Property Tax Rates Policy Set

For the 2008 tax year, average residential school property taxes before application of the homeowner grant will be increased by the provincial inflation rate from the previous year. This rate setting policy has been in place since 2003.

Provincial Non-Residential School Property Tax Rates Policy Set

A single province-wide rate is set for each of the seven non-residential property classes.

In response to increases in assessed values, the rates for 2008, except for the rate for the major industry property class, will be set so that the change in total non-residential school tax revenue will be limited to inflation plus new construction. This adjustment to rates may differ by property class to reflect differences in relative changes in assessed values by class. The rates will be set when revised assessment roll data are available.

School Tax Rate for Major Industrial Property Reduced

Effective January 1, 2008, to reflect the competitive pressures facing British Columbia’s export oriented sectors, the provincial school tax rate on major industrial property will be reduced. Beginning in 2008, the rate will be reduced over two years to equal the business class rate.

This will provide a tax reduction of $12 million in 2008 and $24 million in 2009 and future years to British Columbia’s major industrial properties including pulpmills, sawmills, ports and mines.

Taxation (Rural Area) Act

Exemption and Temporary Grandparenting Provided for Camp Properties that were Previously Exempt

In response to a Property Assessment Appeal Board decision, effective for the 2009 tax year, an exemption is provided for eligible camps that are owned, held in trust for, or occupied by a charity registered under the Income Tax Act (Canada).

Camps that were exempt prior to the decision but that do not qualify under the new exemption will be exempt for the 2008, 2009 and 2010 tax years. This will provide owners of those properties time to consult with government regarding eligibility criteria for the exemption or to seek registered charity status to qualify for the exemption.

Provincial Rural Area Property Tax Rates Policy Set

A single provincial rural residential tax rate applies province-wide. For the 2008 tax year, the average residential provincial rural area taxes will increase by the 2007 provincial inflation rate.

Non-residential provincial rural tax rates will be set so that the change in total non-residential rural tax revenue will be limited to inflation plus new construction.

British Columbia Railway Act

Authority Provided for BC Rail to pay Grants in Lieu of School Tax to the Province

Effective for the 2007 and subsequent tax years, in keeping with government policy, British Columbia Railway Company may make an annual grant to the Surveyor of Taxes, on behalf of the province, equivalent to the taxes that the company would have paid under the School Act if it were subject to taxation.

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