B.C. economic recovery plan — Tax credit & PST rebate
B.C. economic recovery plan — Tax credit & PST rebate
The Plan includes employment incentives and a PST rebate on select machinery & equipment
British Columbia is introducing a new employment incentive as well as a temporary PST rebate on select machinery and equipment, according to the province's Economic Recovery Plan released September 17, 2020. Specifically, the province announced a new 15% refundable tax credit to employers who increase their employment of low- to middle-income workers in British Columbia. The PST rebate is a temporary measure that will apply to PST paid on select machinery and equipment purchased by incorporated businesses between September 17, 2020 and September 30, 2021.
British Columbia's Economic Recovery Plan comes in the wake of the economic challenges faced by many businesses as a result of COVID-19. Please note the province has recently announced an upcoming election on October 24, 2020. As a result, it is unclear at this time if these measures will be adopted as announced, or when legislation to implement these measures may be introduced.
Employment tax credit
The Economic Recovery Plan announced the B.C. Increased Employment Incentive, which is a 15% refundable tax credit for employers. Qualifying employers will be able to submit online applications as of March 2021. The credit will be available to employers who increase their payroll for low- to middle-income employees from the third to the fourth quarter of 2020, including employers who retain employees recently hired in the third quarter of 2020.
The credit will equal 15% of the amount by which the total remuneration paid to eligible employees in the quarter ended December 31, 2020 (up to $1,129.33 per eligible employee per week) exceeds the total B.C. remuneration paid to eligible employees for the quarter ended September 30, 2020 (up to $1,129.33 per eligible employee per week).
The credit is available to all employers in the province, other than public institutions. For employers required to pay the Employer Health Tax (EHT), the credit will first be applied to any outstanding EHT amount, with the excess available as a refund.
Temporary PST rebate on select machinery and equipment
In its Economic Recovery Plan, British Columbia announced a new temporary PST rebate on select machinery and equipment equal to 100% of PST paid by eligible businesses on qualifying property between September 17, 2020 and September 30, 2021.
Who is eligible for the new temporary PST rebate?
The new temporary PST rebate will apply only to incorporated entities (i.e., corporations). As a result, businesses operated by sole proprietors will not qualify for the new PST rebate. Certain other entities will also not qualify for the rebate including crown corporations, local government corporations, hospitals, schools, charities and non-profit corporations.
While British Columbia has noted that sole proprietors may choose to incorporate to qualify for the new PST rebate, only PST paid on qualifying property after incorporation may qualify for the new PST rebate.
Which machinery and equipment qualify for the PST rebate?
In general, qualifying machinery or equipment will be required to meet all three of the following conditions to qualify for the new temporary PST rebate:
- Meet the definitions of specific capital cost allowance (CCA) classes under Schedule II of the Income Tax Regulations
- Be acquired or leased substantially (i.e., more than 90%) for gaining or producing income
- Not be an excluded good (e.g., a vehicle that is not a zero-emission vehicle)
CCA classes covered by this PST rebate include:
- Machinery and equipment, tools, appliances and furniture
- Computer hardware and software
- Electric vehicle charging stations, and
- Certain qualifying zero-emission vehicles
Applying for the rebate
Qualifying corporations will be able to apply online for the new temporary PST rebate as of April 1, 2021, and will be limited to one rebate application for each of two specified periods.
Repayment obligations in some cases
The province also notes that qualifying corporations who received the new PST rebate may have to repay all or part of the rebate in certain circumstances. For example, a qualifying corporation may have to repay all or part of the PST rebate if it later receives a credit or refund for the machinery or equipment. A qualifying corporation may also have to repay all or part of the rebate if it no longer meets the "purpose" test (i.e., using the qualifying machinery or equipment to gain or produce income).
British Columbia notes that it will release additional details related to "the rebate process" ahead of April 1, 2021, as well as transition rules for certain transactions.
For more information, contact your KPMG adviser.
Information is current to September 22, 2020. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.
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