On February 18, 2014, Finance Minister Michael de Jong announced British Columbia’s 2014 budget. “Balanced Budget 2014” contains forecasted surpluses for the next three years, including an estimated surplus of $184 million for 2014-2015. Consistent with last year’s budget, the province continues to follow its principle of not spending more than it collects from taxpayers. Additionally, the Minister indicated that the expected surpluses will allow for new spending to create job growth, foster investment, help families build for the future, and strengthen support for those in need.
Included in this year's budget are several interesting tax changes which have been summarized below.
Provincial Sales Tax Measures
Settler’s Effects Exemption Expanded
New residents of British Columbia are exempt from paying provincial sales tax (“PST”) on tangible personal property (i.e., goods) brought into the province for their personal (i.e., non-business) use. This exemption has been expanded to include tangible personal property that enters the province within one year from the date the individual becomes a new resident of British Columbia. This amendment is effective starting on February 19, 2014. Note that certain other criteria for the exemption are unchanged, such as the requirement for the goods to have been owned by the individual for at least 30 days prior to that person becoming a resident of British Columbia.
Accommodations Sold with Meals and Services for a Single Price
The budget announced that, where an accommodation provider only sells accommodations, meals and services together for a single price, the purchase price of the accommodation is the lesser of: 15% of the total value of the consideration (i.e., the price) accepted by the accommodation provider; and $100 per day. This special rule now applies regardless of the type of services provided or who provides the accommodation. This change is effective February 19, 2014.
In addition, retroactive to April 1, 2013, clarifications will be made to ensure that items provided free to guests (e.g., soap, shampoo, lotion, sewing kits, pens, paper, disposable cups, etc.) or for guest use (e.g., towels, robes, etc.) are not considered to be sold or leased when provided with a sale of accommodation. In particular, PST does not apply to goods provided by an accommodation provider as part of an accommodation purchase if:
- the main purpose of the contract with the customer is for the supply of accommodation;
- there are no separate charges for the goods; and
- the total price for the accommodation, including any goods supplied, is not significantly different from the price that would have been charged if the goods had not been provided.
Note that the accommodation provider remains responsible for the payment of PST on these items.
Clarifications on Multi-jurisdictional Vehicle Exit Tax
The multi-jurisdictional vehicle exit tax has been changed, retroactive to April 1, 2013, so that it is only payable when a vehicle, previously considered a multi-jurisdictional vehicle (i.e., where a prorating agreement applied), is licensed for use solely within British Columbia. A refund may be available where the exit tax has been paid on a vehicle that was not licensed solely for use within the province.
In addition, a clarification has been made to ensure that the requirement to self-assess PST applies when an exempt trailer becomes taxable. Typically, trailers obtained for use solely with multi-jurisdictional vehicles are exempt from PST. However, if such trailers are subsequently used with vehicles that are not multi-jurisdictional vehicles, PST must be self-assessed based on a depreciated value of the purchase price or lease payments, as applicable, at the time the change in use occurs. This clarification is also retroactive to April 1, 2013.
Additional Technical Changes
This year’s budget also announced a number of technical amendments designed to improve the administration of the PST. Highlights of these measures include:
- changes and clarifications to the exemptions available for energy and energy conservation, farmers, boats, production machinery and equipment, related services, school supplies, software and telecommunication services;
- clarification of the original purchase price of a vehicle subject to the 1% to 3% surtax to be the total purchase price of the vehicle, excluding GST, fees paid to the Insurance Corporation of British Columbia, manufacturer’s rebates, and the cost of certain modifications for persons with disabilities;
- moving certain defined terms to the Provincial Sales Tax Actfrom the regulations, including “band”, “First Nation Individual” and “parents’ advisory council”;
- exempting contractors from PST, in certain situations, on goods acquired to fulfil a contract to supply and install affixed machinery or improvements to real property situated in British Columbia;
- expansion of voluntary registration to include out of province businesses;
- clarifying the application of tax to vehicles brought into British Columbia, where the vehicle is registered in either British Columbia or another jurisdiction; and
- changes to the taxation of leases.
Many of these technical changes have been reflected in revised or newly released Provincial Sales Tax (PST) Bulletins. Further information on these changes will be provided in Tax Developments posted to the Ryan Canada website in the coming days.
Carbon and Motor Fuel Tax Measures
As required under the Carbon Tax Act, the government has reviewed the carbon tax and its impact on British Columbia residents. This review covered all aspects of the tax, including the impact of personal income tax rate cuts proposed in this year’s budget.
The government reported that it achieved revenue-neutrality in respect of the carbon tax for 2012/2013. Based on revised revenue and tax reduction estimates, personal and business tax revenue reduction measures exceed the carbon tax collected by $260 million. In addition, estimates for 2013/2014 project that personal and business tax revenue reductions will exceed the $1.212 billion in projected carbon tax revenue by $20 million. In light of the projected revenue neutrality, carbon tax rates will remain the same at $30 per tonne of carbon dioxide equivalent emissions.
Generally, a vendor that sells fuel in British Columbia for the first time after it is manufactured or imported into the province must be appointed as a collector under the Motor Fuel Tax Act and/or Carbon Tax Act. However, where a vendor is not appointed as a collector, it may be assessed a penalty equal to the amount of security that should have been paid as a collector appointed under the legislation.
Going forward, in order to facilitate compliance, the Ministry is authorized to appoint vendors as collectors retroactively, up to four years from the first day of the month in which the vendor’s first sale of fuel in British Columbia after its manufacture or importation occurred. The budget also noted that the penalty provisions will be adjusted to reflect situations in which vendors are appointed as collectors retroactively.
In addition, the budget indicates that clarifications will be made to ensure that the assessment of interest under the carbon and fuel tax legislation is consistent with that under the Provincial Sales Tax Act.
Tobacco Tax Measures
Effective April 1, 2014, the tax rate on cigarettes will increase from $44.60 to $47.80 per carton of 200 cigarettes. Similarly, the tax rate on loose or fine-cut tobacco will increase from 22.3 cents to 23.9 cents per gram. There is no change to the tax rate on cigars, which is currently 90.5% of the taxable or retail price, to a maximum of $7 per cigar.
Wholesale and retail dealers will be required to submit an inventory return for tobacco held in inventory as of midnight on March 31, 2014. A security equal to the new tax rate must be paid for any tobacco received on or after April 1, 2014, regardless of the invoice date.
Further information on British Columbia's 2014 budget may be found on the province's web site at: