Canadian tax alert British Columbia budget highlights

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Cori Quinn
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Canada Tax February 16, 2016 Canadian tax alert 2016-2017 British Clumbia budget highlights BC Minister f Finance, Michael de Jng, presented the 2016-2017 BC budget this afternn.

1 Canada Tax February 16, 2016 Canadian tax alert British Clumbia budget highlights BC Minister f Finance, Michael de Jng, presented the BC budget this afternn. It was the gvernment s furth cnsecutive balanced budget. The prvince is frecasting a surplus f $377 millin at the end f and is prjecting mdest surpluses in the next three years. Minister de Jng reiterated his gvernment s Budget 2015 message f restraint in spending as part f the gvernment s nging cmmitment t disciplined and prudent fiscal planning. The key features f the budget plan nted tday were: Strng ecnmic grwth in the prvince, especially relative t ther prvinces in Canada; Reductin in direct perating debt, with an verall increase in debt due t spending n infrastructure; and Increased supprt fr lw incme families, senirs and rural develpment. In recgnitin f the relatively strng ecnmic grwth in BC (with estimated GDP grwth at between 2.4% and 2.6% fr 2015) and cntinued budget surpluses, the gvernment is intrducing a $100 millin prsperity fund designed t benefit future generatins f BC residents thrugh gradual debt repayment and investment in infrastructure. Previusly cnceived as a means t preserve wealth generated frm BC s burgening Liquefied Natural Gas (LNG) industry, the gvernment has chsen t initiate the fund despite delays in expected revenue frm LNG prjects in BC. The gvernment des nt include revenue frm LNG prjects in its fiscal plan thrugh fiscal

2 Taxatin measures annunced in the budget can be bradly described as measures t: Achieve scial plicy bjectives; and Strengthen and grw the BC ecnmy. Hwever, the verall net impact f the tax measures is relatively mdest fr the and fiscal years. Tax measures t achieve scial plicy bjectives The targeted tax measures relating t scial plicy bjectives fcus primarily n husing affrdability and the cst f living fr lw incme families and senirs. Prperty transfer tax rules adjusted Mdificatins t the Prperty Transfer Tax Act are expected t shift the burden f the prperty transfer tax t higher-value prperties: Effective February 17, 2016, an exemptin fr newly cnstructed hmes is intrduced: Newly cnstructed hmes used as a principal residence by a Canadian citizen r permanent resident will generally be exempt frm prperty transfer tax fr prperties with a value f up t $750,000. A partial exemptin is available fr hmes valued at up t $800,000. Hmes with a value in excess f $800,000 are subject t the standard prperty transfer tax regime. Effective February 17, 2016, a third tier f prperty transfer tax is intrduced. The current tiers f 1% n the first $200,000 in value and 2% n $200,000 t $2 millin in value cntinue t apply. A third tier f 3% n the value in excess f $2 millin has been intrduced. The gvernment expects that the additinal revenue frm the third tier f prperty transfer tax will ffset the cst f the newly cnstructed hme exemptin. The gvernment plans t intrduce significant data cllectin initiatives n transferees, including requirements fr transferees t disclse their citizenship. Bare trustees will be required t disclse citizenship infrmatin n settlr and beneficiaries f the trust. Crpratins will be required t disclse citizenship infrmatin n its directrs. The new disclsure requirements are expected t cme int effect in spring Medical services plan (MSP) premiums adjusted Due t rising healthcare csts, the gvernment will cntinue its planned increase f MSP premiums in and Hwever, mdificatins t the Medicare Prtectin Act are expected t shift the burden f medical services premiums away frm single-parent families and nt ther BC taxpayers. Effective January 1, 2017: Premiums will generally be increased by 4% r $3 per mnth per taxpayer. The calculatin f MSP premiums will n lnger include children. Cuples will pay twice the MSP premium rate paid by single adults.

3 Hme wner grant threshld increased The threshld fr the phase-ut f the hme wner grant is increased t $1.2 millin frm $1.1 millin fr the 2016 taxatin year. The grant is reduced by $5 fr every $1,000 f assessed value in excess f the threshld. Farmers fd dnatin tax credit intrduced Effective February 17, 2016, a new nn-refundable farmers fd dnatin tax credit is intrduced. This is available t individuals and crpratins that carry n the business f farming and dnate a qualifying agricultural prduct t a registered charity that prvides fd t thse in need r helps t perate a schl meal prgram. The amunt f the credit will be equal t 25% f the fair market value f the qualifying agricultural prduct and must be claimed in the same year that a charitable dnatin tax credit is claimed fr that dnatin. Other measures Effective fr the 2016 tax year, the BC senirs hme renvatin tax credit (wrth up t $1,000, calculated as 10% f eligible expenditures) is extended t persns with disabilities wh are eligible t claim the federal disability tax credit. Effective fr the 2016 tax year, the BC tax reductin credit is enhanced frm $19,000 t $19,400. The phase-ut rate is als increased t 3.56% frm 3.50%. The BC gvernment will parallel the federal gvernment s graduated rate estates and qualified disability trusts rules fr tax years ending after December 31, Estates and testamentary trusts were previusly generally subject t tax at the marginal tax rates available t individuals fr the life f the trust. Rules intrduced federally generally limit this beneficial treatment fr trusts and estates t the first three taxatin years f the testamentary trust r estate. This measure ensures the prvincial tax plicy will be cnsistent with the federal plicy. Measures t strengthen and grw the BC ecnmy The gvernment has pted t use direct spending f apprximately $143 millin n ecnmic and cmmunity initiatives, such as municipal transfer payments t small cmmunities (the rural dividend ), highway maintenance, yuth skills training and ther initiatives. Tax measures t invest in the BC ecnmy fcus n extending r enhancing familiar direct and indirect tax credits and incentives, having a relatively nminal impact n the BC ecnmy verall. Nevertheless, certain significant targeted tax measures are highlighted belw. Mining The BC mining flw-thrugh share tax credit is extended t the end f The mining explratin tax credit is extended fr an additinal three years t the end f Turism Effective fr the 2017 tax year there is increased assessment relief fr turist accmmdatin in rural areas. The maximum reductin in assessed value fr eligible

4 shrt-term accmmdatin prperty lcated utside municipalities is increased frm $150,000 t $500,000. Furthermre, the assessed value at which the phase-ut f the benefit begins is increased frm $2 millin t $4 millin. Other The small business venture capital tax credit budget is increased by $5 millin, which the gvernment expects will facilitate up t $16.7 millin annually in additinal equity financing fr qualifying crpratins. The gvernment hinted that it will mve t limit grwth in film tax credits in the future as the industry is bming due t exchange rate mvement. Exchange rate mvement has caused the net cst t a prducer spending $100 n BC labur t decrease frm USD$58 t USD$40. Film tax credits are expected t cst the BC gvernment apprximately $500 millin in Other measures Carbn and mtr fuel tax Effective March 1, 2016, an exemptin frm paying security is prvided fr a cllectr selling fuel t a persn wh is exempt frm the requirement t pay security n the fuel. Als, there is an exemptin fr deputy cllectrs frm paying security in mst circumstances if the fuel bught in BC is t be sld utside f BC and remved frm BC. Prvincial sales tax (PST) Effective February 17, 2016, the Prvincial Sales Tax Act will be updated t prvide that telescpic handlers, skid steers and plycarbnate greenhuse panels btained by qualifying farmers fr use slely fr a farm purpse are exempt frm the PST. Cmmissin n Tax Cmpetitiveness A new Cmmissin n Tax Cmpetitiveness will review all prvincial taxes in rder t cnsider ways t mdernize and imprve them in light f the changing nature f BC s ecnmy. The review will expressly nt cnsider a return t the harmnized sales tax. Please nte that Delitte is prepared t prvide accessible frmats and cmmunicatin supprts upn request. We welcme yu t dwnlad ur new mbile APP Delitte tax@hand ios Andrid BlackBerry

5 Yur dedicated team: Natinal Heather Evans Canadian Managing Partner, Tax Albert Baker Natinal Tax Plicy Leader British Clumbia Clin Erb Tax Directr f Operatins cerb@delitte.ca Janice Rper Partner, Tax jrper@delitte.ca Delitte Bay Adelaide Centre, East Twer 22 Adelaide Street West, Suite 200 Trnt, ON M5H 0A9 Canada This publicatin is prduced by Delitte LLP as an infrmatin service t clients and friends f the firm, and is nt intended t substitute fr cmpetent prfessinal advice. N actin shuld be initiated withut cnsulting yur prfessinal advisrs. Yur use f this dcument is at yur wn risk. Delitte, ne f Canada's leading prfessinal services firms, prvides audit, tax, cnsulting, and financial advisry services. Delitte LLP, an Ontari limited liability partnership, is the Canadian member firm f Delitte Tuche Thmatsu Limited. Delitte refers t ne r mre f Delitte Tuche Thmatsu Limited, a UK private cmpany limited by guarantee, and its netwrk f member firms, each f which is a legally separate and independent entity. Please see fr a detailed descriptin f the legal structure f Delitte Tuche Thmatsu Limited and its member firms. Delitte LLP and affiliated entities. T n lnger receive s abut this tpic please send a return t the sender with the wrd Unsubscribe in the subject line.

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