On April 20, 2021, Minister of Finance, Selina Robinson, presented the 2021 British Columbia budget. The primary focus of this year’s budget is on continuing to support residents throughout the remainder of the COVID-19 pandemic, with a view to building the foundation for a strong economic recovery – a common theme among budgets tabled in Canadian jurisdictions this spring. Indeed, projecting a deficit of approximately $9.7 billion for the current year, the budget allocates $900 million in new funding for pandemic response measures and touts a $3.5 billion spending increase on various infrastructure projects.
While many of the government’s current programs were previously announced in its Economic Recovery Plan last fall or earlier this year, the budget still includes several noteworthy tax changes and funding initiatives, as discussed below.
Provincial Sales Tax Measures
Exemption for Electric Bicycles and Tricycles
Bicycles and adult tricycles are generally exempt from British Columbia Provincial Sales Tax (BC PST). This year’s budget has expanded this exemption to include electric bicycles and tricycles, effective April 21, 2021. In addition, kits to convert conventional bicycles and tricycles into electric versions, and parts and services for electric bicycles and tricycles are exempt from BC PST.
To qualify for exemption, electric bicycles and tricycles must have:
- Pedals or hand cranks to allow for human propulsion;
- Wheels with a minimum diameter of 350 millimetres;
- A maximum motor power of 500 watts;
- A limitation on motor-assisted speed of 32 kilometres per hour;
- No combustion engine; and
- No design or marketing features that promote or give the appearance of a motorcycle, moped, or scooter.
Exemption for New Residents’ Effects Temporarily Expanded
New residents settling in British Columbia from other provinces or outside Canada are generally exempt from BC PST on personal items brought into the province within one year from the date they became residents. In light of travel restrictions and potential delays attributable to the COVID-19 pandemic, this year’s budget has temporarily extended the one-year deadline to provide more time for new residents to bring their vehicles and other personal goods into the province, making the exemption available to more individuals. The extended timeline applies to any individual that became a resident of British Columbia on or after March 11, 2019, with the new resident having until the earlier of January 1, 2023 and the date that is one year from the cancellation of the most recent British Columbia quarantine order to bring their personal effects into the province under the exemption.
Motor Vehicle Refund Eliminated
Currently, motor vehicle purchasers in British Columbia can purchase a vehicle, resell it within seven days, and then apply to obtain a refund of the BC PST paid on the initial purchase. The province has identified this “car-flipping” activity as a potential money laundering risk. Accordingly, this year’s budget proposes to eliminate the BC PST refund for motor vehicles resold within seven days of purchase. In addition, purchasers acquiring a motor vehicle in British Columbia will be deemed to have done so for personal use, unless they declare their intention to resell the vehicle at the time of purchase. These changes will become effective at a date to be determined by regulation.
The budget documents indicate that various technical amendments will be made to the Provincial Sales Tax Act to:
- Clarify that the general exemption for water does not apply where it is taxed as a soda beverage, retroactive to April 1, 2021;
- Make minor terminology changes to the provisions related to multijurisdictional vehicles (effective upon receiving Royal Assent);
- Confirm that agents are permitted to use a principal’s registration number when acting on the principal’s behalf (effective upon receiving Royal Assent);
- Clarify the registration threshold conditions for Canadian sellers of goods, as well as Canadian and foreign sellers of telecommunication services and software, retroactive to April 1, 2021; and
- Harmonize appeal procedures with the Court of Appeal Act to allow for the appeal of a Supreme Court of British Columbia decision without first obtaining leave of a justice of the Court of Appeal (effective upon receiving Royal Assent).
Tobacco Tax Measures
Tobacco tax rates will be increased, effective July 1, 2021, to the following:
- 32.5 cents (from 29.5 cents) per cigarette (to $65 from $59 per carton of 200 cigarettes);
- 65 cents (from 39.5 cents) per gram of loose tobacco; and
- 32.5 cents (from 29.5 cents) per heated tobacco product.
For these purposes, a “heated tobacco product” is defined as a product that contains tobacco and is intended to be heated, but not combusted, to produce an inhalation vapour.
Carbon and Motor Fuel Tax Measures
Delay of Carbon Tax Rate Increases
The budget notes that previously announced carbon tax rate increases have been delayed by one year. As a result, carbon tax rates increased to $45 per tonne of carbon dioxide equivalent emissions (CO2e) on April 1, 2021 (instead of $50 per tonne of CO2e, which will come into effect on April 1, 2022). The one-year deferral is intended to partially offset the economic impact of the pandemic on small businesses and families.
The planned increase to the corresponding climate action tax credit has also been delayed by a year.
Fuel Tax Refund for Persons with Disabilities Expanded
Persons with qualifying disabilities are eligible for a motor fuel tax refund of up to $500 per calendar year. Individuals who receive disability assistance or supplements under the Employment and Assistance for Persons with Disabilities Act currently qualify for this refund. This year’s budget has expanded eligibility for this refund, effective April 20, 2021, to include:
- Individuals paid disability assistance or a disability supplement from Indigenous Services Canada; and
- Recipients of a 100% disability pension resulting from service as a member of Her Majesty’s forces.
Property Tax Rates
In this year’s budget, the government announced that commercial property tax rates are expected to see significant increases in 2021, because of the elimination of the tax relief previously granted to owners in 2020.
The commercial property tax rate reduction introduced last year—achieved through a cut to the School Tax Rate—was not carried forward in this year’s budget. As a result, most commercial taxpayers can expect to see hikes of between 20% and 25% as the tax rates return to pre-pandemic levels, with the potential for further increases in certain cases.
Residential property owners will not be affected by this increase.
Government Funding Initiatives
As announced in its budget, British Columbia continues to prioritize investments to support businesses through the COVID-19 pandemic and incentives designed to facilitate the province’s economic recovery. Major investments announced include:
- $195 million to continue the Small and Medium-sized Business Recovery Grant program;
- $150 million for the StrongerBC Increased Employment Incentive Tax Credit;
- $120 million through community infrastructure grants for the tourism and arts sectors;
- $96 million for the CleanBC Program;
- $50 million to be made available through Circuit Breaker Business Recovery Grants;
- $45 million for youth employment initiatives;
- $44 million for Launch Online to help businesses boost online sales;
- $10 million to expand the Grow BC, Feed BC, Buy BC strategy and strengthen the domestic market for the province’s agri-food and seafood products; and
- $10 million for work-integrated learning opportunities and short-term skills training.
Further information on British Columbia’s 2021 budget may be found on the province’s website at: https://www.bcbudget.gov.bc.ca/2021/
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.