BC FARMERS’ FOOD DONATION TAX CREDIT

A new tax credit is being introduced in 2016 for farmers in British Columbia.

The BC Farmers’ Food Donation Tax Credit is a credit to encourage farmers to donate agricultural products to eligible charities that are involved in the distribution of food to people in need. Eligible charities would include food banks or school meal programs.

This non-refundable credit will be equal to 25% of the fair market value of the food donated. This credit is in addition to the donation credit that the taxpayer would have received on the donation of the agricultural product.

Eligible agricultural products include items such as fruits and vegetables, meat products, eggs or dairy products, fish, seafood, or other commodities that have been grown and harvested on a farm in BC.

An eligible agricultural product does not include commodities in which there has been additional processing done to bring the item to market, such as apple pies, pickles, beef jerky, or preserves. It will also not include live animals.

The value of the credit will be equal to the highest dollar value a farmer could receive for that product in an unrestricted wholesale or retail market.

The tax credit will be available to taxpayers who make an eligible gift of agricultural products after February 16, 2016. The credit will also be available for the tax years 2017 and 2018.

DID YOU KNOW…

A company is considered to be a small business corporation in British Columbia if it has less than $10 million of taxable capital. Taxable capital is essentially the retained earnings of a company, less small adjustments for certain items.

If a company is below this threshold, it can qualify to have the first $500,000 of active business income taxed at the small business corporate tax rate of 13%. Active income above this threshold will be taxed at 26%.

EI PREMIUMS REDUCED IN 2017

There will be a significant drop in EI premiums in 2017.

Currently, EI premiums are calculated at $1.88 for every $100 of earnings. In 2017 this rate will drop to $1.63 for ever $100 of earnings.

At the same time, Maximum Insurable Earnings will be increased to $51,300, meaning that employees will have to pay EI premiums on wages up to $51,300.

As a result of these two adjustments, the maximum employee premium will be reduced from $955.04 in 2016 to $836.19 in 2017. The amount the employer contributes will continue to be 1.4 time the amount of the employee premium.

In conjunction with this, the federal government is eliminating the Small Business Job Credit.

Business who pay less than $15,000 of employer premiums in 2015 or 2016 are entitled to a refund of 39 cents for every $100 of insurable earnings paid in that year.

Eligible businesses receive a cheque from the federal government for this amount, after filing their T4 summary and slips for the year. Cheques received after filing the 2016 T4 slips will be the last cheques received under the Small Business Job Credit program.

 

NO FURTHER DROPS IN CORPORATE TAX RATE

Planned reductions in corporate tax rates for the years 2017 to 2019 have been cancelled by the federal government.

A measure had been introduced in 2014 to gradually reduce federal income tax rates for small business corporations from 11% to 9%. When combined with provincial income taxes for small business corporations , the total tax rate in BC for these companies would have been reduced from 13.5% to 11.5%.

The first of these planned tax cuts was implemented by the previous federal government for 2016, bringing the small business corporate tax rate down to 13%.

Corporate tax rates on other forms of income will remain the same in BC as they have in the past. The general corporate tax rate on income that does not qualify for the small business corporate tax rate is 26%. Investment income earned within a company is taxed at 49.5%. These rates are lower in BC than in any other province in Canada.

HOME RENOVATION TAX CREDITS EXPANDED

The provincial government has extended the Home Renovation Tax credit for seniors to include taxpayers with disabilities.

This is effective for any renovations undertaken after February 17, 2016.

This extension ensures the same taxpayers will qualify for both the federal credit, which has been introduced for 2016, and the provincial credit, which has been available to seniors in BC since 2012.

The main difference between the two is that the federal credit is non-refundable, whereas the provincial credit is refundable.

Refundable credits tend to benefit greater numbers of taxpayers than non-refundable credits.