2022 British Columbia provincial budget tax highlights

On February 22, the B.C. government released their 2022 budget. The following are highlights of the key tax measures.

Personal tax measures

No personal income tax rate changes were announced in this year’s budget. The current personal combined income tax rates for 2022 are outlined below:

Corporate tax measures

No corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2022 are outlined below:

Tax credit measures

Clean buildings tax credit introduced

Effective February 23, 2022, a new temporary tax credit has been introduced for retrofits that improve the energy efficiency of multi-unit residential buildings with four or more dwellings and prescribed types of commercial buildings.

Taxpayers who improve the energy efficiency of the buildings to meet prescribed energy use targets after the retrofit is completed can receive a refundable tax credit of 5 per cent of eligible expenditures paid. Eligible expenditures must be made before April 1, 2025 and under a contract entered into after February 22, 2022.

Scientific research and experimental development tax credit extended

The scientific research and experimental development tax credit is extended for five years to August 31, 2027.

Training tax credits extended

The training tax credits are extended for two years to the end of 2024. An enhanced tax credit is available for First Nations individuals or persons with disabilities for all trade programs.

Shipbuilding and ship repair industry tax credit extended

The shipbuilding and ship repair industry tax credit is extended for two years to the end of 2024. An enhanced tax credit is available for First Nations individuals or persons with disabilities for eligible trade programs.

Equity tax credit budget for clean technology

The budget for the small business venture capital tax credit (personal and corporate) will be temporarily increased to $41 million (from $38.5 million), effective for the years 2022 to 2024. This $2.5 million increase is being allocated to investments in clean technology businesses.

Hydrogen exemption expanded

Effective Feb. 23, 2022, hydrogen fuel is classified as a Category 1 alternative motor fuel and is exempt from motor fuel tax provided that both:

• The hydrogen is purchased for use in an internal combustion engine vehicle; and
• The hydrogen is not produced by electrolysis using coal-generated electricity, unless the carbon dioxide emitted as a result of the process is captured and stored or captured and sequestered.

Provincial sales tax measures

Heat pumps

Effective April 1, 2022, heat pumps are exempt from provincial sales tax. If a heat pump is purchased before April 1, 2022 to fulfil a contract where the heat pump is affixed or installed into real property on or after April 1, 2022, the person who paid the provincial sales tax on the heat pump will be eligible to apply for a refund of that tax.

Fossil fuel heating equipment

Effective April 1, 2022, the provincial sales tax on a fossil fuel combustion system that heats or cools buildings or water is increased from 7 per cent to 12 per cent. Transitionally, fossil fuel combustion systems will generally be subject to an effective tax rate of 7 per cent where, in relation to contracts entered into before February 23, 2022, a fossil fuel combustion system is affixed or installed into real property on or after April 1, 2022. For contracts entered into on or after February 23, 2022, fossil fuel combustion systems will be subject to the 12 per cent rate if they are affixed or installed into real property on or after April 1, 2022.

Zero-emission vehicles

Effective February 23, 2022, used zero-emission vehicles are exempt from provincial sales tax. This exemption applies to sales of all used zero-emission vehicles from motor dealers, as well as private sales of used zero-emission vehicles that have been driven for at least 6,000 kilometres. The exemption is scheduled to end on February 22, 2027.

Effective February 23, 2022, the passenger vehicle surtax threshold for zero-emission vehicles is increased to $75,000 from $55,000. The increased surtax threshold is scheduled to end on February 22, 2027.

Tobacco exemption removed

Effective July 1, 2022, provincial sales tax is applied to tobacco.

Private vehicle sales

Effective October 1, 2022, tax on private sales of motor vehicles will be based on the greater of the reported purchase price and the average wholesale value of the vehicle. The measure will not apply for motor vehicles involved in a trade-in.

Marketplace facilitators

The budget requires businesses (“marketplace facilitators”) that facilitate sales or leases of certain goods, services or software for third parties through their online platform (including accepting payment from a consumer) to collect and remit PST on those sales and leases made in British Columbia, effective July 1, 2022. As a result, these marketplace facilitators will have to collect and remit tax on sales of taxable goods shipped from within Canada, taxable services (including short-term rentals and other taxable accommodation, but not including legal services), software and leases of goods made through their online platform, relieving the sellers of their obligation to collect and remit tax.

In addition, the budget requires marketplace facilitators to charge PST on marketplace facilitation services they provide to sellers, effective July 1, 2022.

The budget further notes that British Columbia is currently working to expand collection obligations to the sales of goods shipped from outside Canada to consumers in the province.

Other tax measures

Speculation and Vacancy Tax Act

The exemption for strata accommodation properties was set to expire at the end of the 2021 tax year, but it is now made permanent.

Effective for the 2021 tax year only, the exemption for hazardous or damaged residential property is expanded to apply to properties that were damaged by the floods in late 2021 in Abbotsford, Chilliwack and Mission. The exemption is temporarily expanded to allow properties in Abbotsford, Chilliwack and Mission to claim the exemption, even if the property was uninhabitable for less than 60 days, if the disaster prevented them from claiming another exemption under the Act. The exemption is available in the following calendar year after the damage occurs if the residence is still not inhabitable before March 1.

Next steps

Contact your Baker Tilly advisor to learn more about how we can help navigate the complexities of the Canadian tax system.