If you own a business in BC, it is important to understand the tax rate and taxes you will be paying. This can help you manage your taxes, take advantage of tax credits and remove some of the stress from filing.
Canada uses a progressive tax system with different rates applied at different levels of income. Federal and provincial taxes are based on this system.
Corporate Income Tax
If you run a business, it’s important to know the tax rate that applies to your taxable income. The rate is based on a number of factors, including the type of income you earn and the Canadian province or territory in which your business carries on business.
There are two main types of corporate income taxes in Canada: the federal tax and the provincial/territorial tax. The federal tax is applied to all taxable Canadian-source earnings, while the provincial/territorial tax applies to profits earned in the Canadian province or territory.
Corporations are able to claim a number of deductions, including interest expenses and dividend payments. These deductions can vary from province to province, so it’s important to make sure you’re claiming the correct deductions on your taxes.
In addition, a number of special tax incentives are available to businesses in BC Canada. For example, the Small Business Investment Tax Credit encourages companies to invest in B.C. small businesses and helps to fund early-stage development and growth.
However, the amount of tax you pay is based on your annual income and may be subject to changes yearly. It’s best to consult a tax professional, accountant or financial advisor if you’re not sure what the tax rate for your business might be.
There are also certain rules that apply to the taxation of passive investment income. These are mainly governed by tax treaties, and Canada has taken steps to limit the effect of double taxation, which occurs when a corporation’s Canadian-source income is taxed twice.
The government has imposed a reduced tax rate on the first CAD 500,000 (CAD 600,000 in Saskatchewan) of active business income for Canadian-controlled private corporations, or CCPCs. In addition, a formula-based reduction in the small business income limit is introduced for CCPCs with significant passive income.
Alternatively, you can also opt for the lower general corporate income tax rate. This reduces the overall corporate tax rate to 15%, but it is only applicable to profits earned in a Canadian province.
The CRA has an online tool that you can use to calculate your taxable income for the year and identify any tax deductions you may be eligible for. Having this information can help you make better tax decisions and avoid penalties and interest. It also can help you track your upcoming payments so that you don’t forget to pay your taxes.
Whether you are running a small business or a large company, sales tax is something you should know about. It is a key component of Canada’s tax system and is required to be paid by anyone who sells goods or services in Canada, unless there is an exemption.
The sales tax rate in BC is 7% and applies to retail purchases of taxable goods and services made by businesses or individuals who are located in the province or have customers in the province. The PST is also charged when taxable goods are brought or sent into the province for use in BC, or are received from BC for use in BC.
In addition to the PST, a 2% Municipal and Regional District Tax (MRDT) is applied in provincially approved municipalities by hotels, motels, cottages, inns, resorts and other roofed accommodations. Additionally, select hotels levy an additional 1.5% Destination Marketing Fee (DMF) on room rentals.
For private used vehicles, a 12% provincial tax is applied. This tax remains in effect even after the HST was introduced.
If you’re looking to save money on your next vehicle purchase, a trade-in is a great way to do so. By trading in your old car, you can deduct the value of your trade-in when buying a new one and only pay tax on the difference.
You can find more information on trade-ins at the Government of British Columbia‘s website. You may also want to consider a used vehicle tax credit, which offers an incentive to buy a car that is at least two years old.
Once you have enabled all the currencies in which you will be selling your products, you can configure your prices to either include or exclude tax. This can be done by selecting a “tax exclusive” price type for each of these currencies.
When you are ready to start collecting tax on your purchases, you will need to register your business with the CRA. Once registered, you will be able to use eTaxBC to file your taxes and submit your payments online.
You’ll need to keep track of all the sales tax you collect and remit it each quarter. This is a task that can be very time consuming and requires close attention to detail. If you’re not careful, you could end up losing a lot of money from your business.
Personal Income Tax
BC Canada taxes personal income through a progressive system, meaning the tax rate increases as the amount of income increases. These taxes are levied on both individual taxpayers and businesses in the province.
The top personal income tax rate in BC Canada is 20.5 per cent, which is slightly higher than the federal rate of 18.8 percent, and much higher than Ontario’s top personal income tax rate of 14.6 percent. It’s also among the highest of all provinces in the country.
It’s a significant burden on doctors, entrepreneurs and other high-income earners in B.C., making the province less appealing compared to other jurisdictions including the United States where tax rates are lower. If the new Eby government wants to make the province more competitive in the global race to attract top earners, it should reduce the top personal income tax rate and create a level playing field for all British Columbians.
Fortunately, there are several ways to offset this burden, including non-refundable tax credits. These include a basic personal amount, dependents, Canada/Quebec Pension Plan contributions, Employment Insurance premiums, disabilities, tuition and education and medical expenses.
A credit is also available for dividends received from taxable Canadian corporations. This credit is indexed every year, and is adjusted by the Consumer Price Index for B.C. (BC CPI) for the 12-month period ended on September 30 of the previous year. For 2022, the credit amount was increased by a BC CPI rate of 2.1%.
In addition, BC residents are eligible for a number of other non-refundable tax credits. These include logging and mining credits, the BC Family Benefit, the BC Climate Action Credit, Farmers’ Food Donation Tax Credit, British Columbia Home Renovation Tax Credit for Seniors and Persons with Disabilities, unused tuition credits, and charitable or political donations.
In addition to these non-refundable credits, British Columbia residents can claim a tax reduction credit. This is a non-refundable tax credit that’s available to people with net income below a certain amount for a tax year. Once a person’s net income hits the threshold, they’re no longer eligible for the credit.
If you own a home, you will need to make property tax payments in order to keep it in good condition. It is a recurring fee that is required for every homeowner.
The property tax rate varies from one municipality to another, and is calculated based on the assessed value of your home. This is done by a government authorized entity called BC Assessment.
In BC, you can find a breakdown of your taxes online or at your local City Hall. You can also contact a local financial planner or accountant to get more information on how the tax system works in your area.
Unlike federal taxes, property taxes are determined by your municipal government and not the provincial government. They are a necessary revenue source for municipalities to pay for a variety of public services like police, schools, and roads.
You will receive a notice from BC Assessment at the beginning of each year that shows you how much your property was worth as of July 1st of the previous year. The notice can be helpful for determining what your property taxes will be for this year.
British Columbia is known for having low property tax rates. However, this has not been enough to prevent home prices from skyrocketing in the province. The primary reason is that a number of policies are encouraging speculative investment in residential property, which is contributing to the affordability crisis.
The principal residence capital gains tax exemption and the provincial homeowner grant are two of these policies that give preferential tax treatment to homeowners who use their homes as investments. The homeowner grant has been especially effective in boosting housing prices in Vancouver.
These tax policies enrich private landowners and drive up housing costs for everyone else, thereby threatening the values of most residents’ biggest personal investment. As a result, it is essential to implement more targeted taxes to cool speculation and reduce prices.
The best way to do this would be to raise the property tax rate only on the land portion of the value. This would be a more affordable solution than raising the rates for both land and improvements equally, which is currently being done.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.