Tax Question:
What tax implications does the 2015 British Columbia (BC) provincial budget have for owner managed businesses?
Facts:
BC Provincial Finance Minister Michael de Jong introduced the 2015 budget on February 17, 2015. The BC provincial budget was aimed at balancing expenditures and revenues and did not introduce any significant tax measures. In fact the BC government is projecting a budget surplus for 2014-15 to hit $879 million. This is nearly double their earlier forecasts.
Discussion:
There were no significant changes to corporation tax measures, however, some highlights were:
• Training tax credits are extended for an additional three years, through to December 31, 2017.
• New mine allowance extended for an additional four years, through to December 31, 2019. This is available to new mines and those with major expansions.
• Increase in the small business venture capital tax credit by $3 million for the 2015 program year. This will allow up to $10 million in additional equity financing for qualifying new businesses in 2015.
• The temporary personal income tax rate of 45.80% (combined BC and Federal tax rate) on income more than $150,000 will be eliminated on January 1, 2016. High income earners will fall back into the top tax bracket of 43.7%. This will have an effect on whether it is better to receive dividends or salary (see Faq #17 Dividend vs. Salary). Previously, it was better to receive dividends rather than salary; however, with the changing rate, it is now better to receive salary. Based on the projected rates available, the effective combined BC and Federal marginal tax rates are (assuming the company uses the small business deduction and the individual receives non-eligible dividends and is in the top tax bracket):
2015 2016
Combined corporate and personal dividend tax rate 46.35% 44.22%
Personal salary tax rate 45.80% 43.70%
Therefore, the effective tax rates above show that it is slightly better to receive salary for 2015 and 2016.
Recommendation:
If you have any questions regarding corporate tax matters, please contact us at Gilmour Knotts, Chartered Accountants.
