On September 17, 2020, Premier John Horgan and Minister of Finance Carole James released a COVID-19 economic recovery plan for British Columbia. “Stronger BC for Everyone: BC’s Economic Recovery Plan” is a wide-ranging proposal designed to help the province recover from the ongoing effects of the COVID-19 pandemic. The plan includes measures to improve health care, stimulate job creation, shore up local community infrastructure and essential services, and provide support to businesses still reeling from the financial impact of the pandemic.
Relying on extensive public consultations and touting better-than-expected economic indicators, the economic recovery plan is likely a prelude to the 2021 provincial budget—provided that the NDP government can secure a victory in the snap election that it called for October 24.
The proposed economic recovery plan includes a few significant tax and funding initiatives, as described below.
PST Rebate on Select Machinery and Equipment
To help businesses recover from the financial effects of COVID-19, the government has announced the introduction of a provincial sales tax (PST) rebate on select machinery and equipment. This temporary program will allow corporations to recover any PST incurred on qualifying machinery and equipment between September 17, 2020 and September 30, 2021.
All incorporated businesses are eligible to apply for the PST rebate. However, the rebate is not available to the following entities:
- Charities and non-profit corporations (excluding incorporated businesses owned by them);
- Federal and provincial crown corporations, as well as local government corporations;
- Hospitals, regional health boards, and community health councils; and
- Schools, school boards, universities, and business, trade, or vocational schools.
The exclusion from eligibility also applies to agents of any of the entities listed above (but only to the extent that the PST is paid in the capacity as agent).
The government notes that unincorporated entities, such as sole proprietorships, might want to consider incorporating to take advantage of the program. However, only PST paid in relation to machinery and equipment acquired after incorporation will be eligible for the rebate.
Eligible Machinery and Equipment
The government will rely on the existing capital cost allowance (CCA) classes under Schedule II to the federal Income Tax Regulations to determine which capital assets will qualify for the rebate. To be eligible, a specific property must:
- fit into CCA class 8, 10, 12, 16, 43, 43.1, 43.2, 46, 50, 53, 54, or 55;
- be obtained substantially (in this case, more than 90%) for the purpose of gaining or producing income; and
- not be otherwise excluded from the program.
As a result, most machinery and equipment, including appliances, furniture, computer equipment, software, and tools, will be eligible for the rebate program. The province has indicated that vehicles (other than qualifying zero-emission vehicles), goods to be installed as improvements to real property, and goods acquired for resale in certain situations are specifically excluded from the program. Furthermore, software and goods (excluding leased goods) must be considered capital assets to qualify for the rebate.
The rebate process under this temporary program will be different than the one currently in place for PST refunds. Full details are expected to be released in advance of April 21, 2021, but corporations will be able to submit up to two rebate applications: the first from April 1 to September 30, 2021; and a second starting on October 1, 2021, but no later than March 31, 2022. Businesses must retain documentary evidence of PST payment in support of rebate applications.
Repayment of a portion of the PST rebate received may be required where:
- a credit or refund for the purchase or lease of goods or software associated with the rebate is later obtained;
- qualifying leased goods are not used substantially for the purpose of gaining or producing income during a rental period for which the rebate has been paid; or
- at any point within two years of paying PST, an eligible item is not used substantially for the purpose of gaining or producing income.
Transitional rules will also be used to exclude certain transactions straddling the start or end date of the program from rebate eligibility.
Further information on British Columbia’s PST rebate on select machinery and equipment can be found at:
Increased Employment Incentive Tax Credit
As part of its recovery plan, the government is proposing to introduce an “Increased Employment Incentive” tax credit for employers in British Columbia. This refundable tax credit will be available to all private-sector employers in British Columbia, including some charities and non-profit organizations. Public institutions, such as municipalities, schools, and hospitals, will not be eligible for the new credit.
To qualify for the tax credit, employers must increase their British Columbia remuneration for low to medium income employees during the last quarter (i.e., October to December) of 2020. The tax credit will be calculated at 15% of the amount by which an employer’s qualifying remuneration exceeds its base remuneration in British Columbia.
The base remuneration will be determined using data for the quarter ending September 30, 2020. It will include amounts paid to each eligible employee in British Columbia with a maximum weekly remuneration of $1,129.33 (with proration for partial weeks). An employer’s qualifying remuneration will be the total amount paid to eligible employees (using the same criteria as for base remuneration) during the quarter ending December 31, 2020.
Additional details on the Increased Employment Incentive tax credit can be found on the province’s website at:
The economic recovery plan also includes a package of new government funding initiatives, including:
- Business recovery grants of up to $30,000 for small and medium businesses;
- Special funding up to $40,000 for eligible tourism businesses;
- An “Agritech” grant program; and
- A new $500 million strategic investment fund for businesses in British Columbia.
Further details on these programs are expected to be released after the provincial election.
For further information on British Columbia’s economic recovery plan, visit the province’s website at:
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.