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1996 Legislative Session: 1st Session, 36th Parliament

FIRST READING

The following electronic version is for informational purposes only.

The printed version remains the official version.

HONOURABLE ANDREW PETTER

MINISTER OF FINANCE AND

CORPORATE RELATIONS

BILL 4 – 1996

INCOME TAX AMENDMENT ACT, 1996

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as follows:

Section 3 (5) (

h) of the Income Tax Act, R.S.B.C. 1979, c. 190, is repealed and the following substituted:

(h) 52.5% for the 1993 to 1995 taxation years;

(i) 52% for the 1996 taxation year;

(j) 51% for the 1997 taxation year;

(k) 50.5% for the 1998 and subsequent taxation years.

Section 3.4 (1) (

c) is repealed and the following substituted:

(

c) for the 1994 and 1995 taxation years,

(i) 30% of the amount by which that tax exceeds $5 300, and

(ii) 20% of the amount by which that tax exceeds $9 000 before the tax payable under subparagraph (

i) is added;

(

d) for the 1996 taxation year,

(i) 30% of the amount by which that tax exceeds $5 300, and

(ii) 21.5% of the amount by which that tax exceeds $8 915 before the tax payable under subparagraph (

i) is added;

(

e) for the 1997 taxation year,

(i) 30% of the amount by which that tax exceeds $5 300, and

(ii) 24.5% of the amount by which that tax exceeds $8 745 before the tax payable under subparagraph (

i) is added;

(

f) for the 1998 and subsequent taxation years,

(i) 30% of the amount by which that tax exceeds $5 300, and

(ii) 26% of the amount by which that tax exceeds $8 660 before the tax payable under subparagraph (

i) is added.

Section 7 is amended by striking out "10%" wherever it appears and substituting "9%" .

4 The following sections are added:

Two-year tax holiday for new small businesses

7.3

(1) If eligible under this section, a corporation for which taxes are payable under

section 7 (1) or (2) may deduct from the tax otherwise payable under that

section for a taxation year an amount equal, as applicable, to

(

a) the tax payable by the corporation under

section 7 (1) (

a) for that taxation year, or

(

b) the tax payable by the corporation under

section 7 (2) (

a) for that taxation year in relation to the applicable amount used for the purposes of subparagraph (

i) of that section.

(2) Interest or penalties on tax payable under

section 7 (1) (

a) or (2) (

a) is not to be considered tax payable under that

section for the purpose of determining the amount of a deduction under this section.

(3) In order to be eligible for a deduction under this section, a corporation must meet all the following requirements:

(

a) the corporation must be incorporated after April 30, 1996 and before April 1, 2001, and must be carrying on business in British Columbia for some period between those dates;

(

b) the taxation year for which the deduction is claimed must be the first or second taxation year of the corporation;

(

c) for the taxation year in which the deduction is claimed, the corporation must

(

i) be carrying on an active business within the meaning of

section 125 (7) of the federal Act, and

(ii) be allowed a deduction from federal tax under the provisions of

section 125 (1) of the federal Act;

(

d) the corporation must minimize its tax liability for that taxation year by claiming all allowable deductions from tax otherwise payable under

section 7 (1) (

a) or (2) (a), as applicable;

(

e) at least 25% of the amount of the wages and salaries paid by the corporation in the taxation year for which the deduction is claimed must be paid to employees who are resident in British Columbia;

(

f) the corporation must apply for a certificate of eligibility under subsection (7) within 3 years after the end of the taxation year for which the certificate would be issued;

(

g) a certificate of eligibility issued under subsection (7) for the applicable taxation year must be filed with the federal minister;

(

h) the corporation must not be ineligible under subsection (4).

(4) A corporation is not eligible for a deduction under this

section if one or more of the following circumstances apply:

(

a) subject to subsection (6), the business activity carried on by the corporation after incorporation is the same or mainly the same business activity as that carried on before incorporation as all or part of the business activity of a sole proprietorship, partnership, joint venture or corporation, whether registered as such or not;

(

b) the corporation results from an amalgamation or merger of corporations;

(

c) at any time since its incorporation, the corporation was associated with another corporation within the meaning of

section 256 of the federal Act;

(

d) at any time since its incorporation, the corporation was a beneficiary of a trust;

(

e) at any time since its incorporation, the corporation carried on the active business referred to in subsection (3) (c) (

i) by reason of being a member of a partnership, if any member of the partnership was not eligible for a deduction under this

section for the taxation year;

(

f) at any time since its incorporation, the corporation carried on the active business referred to in subsection (3) (c) (

i) by reason of being a co-venturer in a joint venture, if any other co-venturer in the joint venture was not eligible for a deduction under this

section for the taxation year;

(

g) at any time since its incorporation, the corporation carried on the active business referred to in subsection (3) (c) (

i) by reason of having acquired property from a sole proprietorship, partnership or joint venture in respect of which

(

i) the corporation,

(ii) any of its shareholders, or

(iii) any person related within the meaning of

section 251 of the federal Act to the corporation or its shareholders

had at any time, directly or indirectly, an interest in the proprietorship, partnership or joint venture;

(

h) at any time since its incorporation, the corporation carried on the active business referred to in subsection (3) (c) (

i) by reason of having acquired property from another corporation in respect of which

(

i) the corporation claiming the deduction,

(ii) any of the shareholders of the corporation claiming the deduction, or

(iii) any person related within the meaning of

section 251 of the federal Act to the corporation claiming the deduction or its shareholders

owned at any time, directly or indirectly, more than 10% of the issued shares of any class of the capital stock of the other corporation;

(

i) as a result of a transaction or an event, or a series of transactions or events, property of a business has been transferred or has been deemed to have been transferred, either directly or indirectly, to the corporation and it is reasonable for the Commissioner of Income Tax to believe that one of the principal purposes of the transfer or deemed transfer is to enable the corporation to claim a deduction under this

section that it could not otherwise claim;

(

j) as a result of a disposition or deemed disposition of shares of any corporation, it is reasonable for the Commissioner of Income Tax to believe that one of the principal purposes of the disposition or deemed disposition is to enable the corporation to claim a deduction under this

section that it could not otherwise claim;

(

k) the certificate of eligibility of the corporation for the taxation year has been rescinded;

(

l) the corporation is within a class prescribed by regulation under subsection (5).

(5) The Lieutenant Governor in Council may, by regulation, prescribe classes of corporations as ineligible for a deduction under this section.

(6) A corporation that would be eligible but for subsection (4) (

a) is eligible for a deduction under this

section if

(

a) the same or mainly the same business activity was carried on as all or part of the business activity of a sole proprietorship or partnership for a period of 90 days or less before the date of incorporation, and

(

b) the period referred to in paragraph (

a) did not begin until after April 30, 1996.

(7) The Commissioner of Income Tax may issue a certificate of eligibility for a corporation for a taxation year if

(

a) after the end of the taxation year for which the certificate would be issued, the corporation applies and provides information in accordance with the requirements established by the Commissioner, and

(

b) the Commissioner is satisfied that the corporation is eligible for a deduction under this

section for the taxation year.

(8) A separate certificate of eligibility must be obtained for each taxation year for which a deduction under this

section is claimed.

(9) For the purpose of determining whether a corporation is eligible under this section, the Commissioner of Income Tax has powers equivalent to the federal minister under sections 230 (3), 231, 231.1, 233 and 236 of the federal Act, and for this purpose those sections apply.

(10) If the Commissioner of Income Tax refuses to issue a certificate of eligibility for a corporation, the Commissioner must give notice of this refusal to the corporation together with reasons for the refusal.

(11) If, after issuing a certificate of eligibility and before the end of the period allowed for reassessment, the Commissioner of Income Tax determines on the basis of further information that a corporation was not in fact eligible for a deduction under this section, the Commissioner may rescind the certificate.

(12) If the Commissioner of Income Tax rescinds a certificate of eligibility, the Commissioner must notify the corporation of this rescission, together with reasons for the rescission.

(13) If a certificate of eligibility has been rescinded and the corporation has claimed and received a deduction under this section, the amount of the deduction, together with interest from the time referred to in

section 157 (1) (

b) of the federal Act, is a debt of the corporation due to the Provincial government.

(14) For the purpose of recovering a debt under subsection (13), the Commissioner of Income Tax may

(

a) issue a certificate stating that the amount is due, the amount remaining unpaid, including interest, and the name of the corporation required to pay it, and

(

b) file the certificate with the Supreme Court.

(15) A certificate filed under subsection (14) with the Supreme Court is of the same effect, and proceedings may be taken on it, as if it were a judgment of the Supreme Court for the recovery of a debt in the amount stated against the person named in it.

(16) A corporation that knowingly applies for a certificate of eligibility for a taxation year for which it is not eligible under this

section commits an offence and is liable on conviction to a fine of up to double the amount of the deduction claimed.

Appeal of refusal or rescission of

certificate of eligibility

7.4

(1) If the Commissioner of Income Tax refuses to issue a certificate of eligibility under

section 7.3 (7) or rescinds a certificate of eligibility under

section 7.3 (11), the corporation may appeal the Commissioner's decision to the Provincial minister.

(2) An appeal under subsection (1)

(

a) must be made within 120 days after the date appearing on the notice under

section 7.3 (10) or (12), as applicable, and

(

b) must be made by serving a notice of appeal on the Provincial minister by mailing it by registered mail addressed to that minister at the Parliament Buildings at Victoria, British Columbia.

(3) The notice of appeal must set out clearly and fully the reasons for the appeal and the facts on which it is based.

(4) On receipt of the notice of appeal, the Provincial minister must

(

a) consider the notice and the information and documents on file in the office of the Commissioner of Income Tax regarding the matter,

(

b) affirm the Commissioner's decision, direct the Commissioner to reconsider the matter, or direct the Commissioner to issue a certificate of eligibility, and

(

c) notify the appellant of the decision.

(5) A decision of the Provincial minister under subsection (4) may be appealed to the Supreme Court by way of an originating application and, for these purposes,

section 20 of the International Financial Business (Tax Refund) Act applies.

(6) If directed by the Provincial minister or a court under this section, the Commissioner must issue a certificate of eligibility under

section 7.3 (7) for the applicable taxation year.

Section 50 is amended by adding the following subsection:

(3) Subsection (1) does not apply to information disclosed in accordance with an information-sharing agreement under

section 50.1.

6 The following

section is added:

Information-sharing agreements

50.1

(1) With the prior approval of the Lieutenant Governor in Council, the Provincial minister may enter into an information-sharing agreement with any of the following:

(

b) the government of a province or another jurisdiction in Canada or an official or agency of such a province or jurisdiction;

(

c) the government of a state of the United States or an official or agency of such a state;

(

d) a public body as defined in the Freedom of Information and Protection of Privacy Act .

(2) For the purposes of subsection (1), "information-sharing agreement" includes a data-matching or other agreement for the exchange of personal or other information necessary for the administration or enforcement of

(

a) this Act,

(

b) a prescribed enactment of British Columbia, or

(

c) a prescribed enactment of Canada, a province or other jurisdiction of Canada or a state of the United States.

Transitional regulations

7 A regulation under

section 7.3 (5) of the Income Tax Act that is made before the end of one year after the day on which this Act was given First Reading in the Legislative Assembly may be made retroactive to any date after April 30, 1996 and, if made retroactive, is deemed to have come into force on the date specified.

Commencement

(1) Sections 1 and 2 are deemed to have come into force on January 1, 1996.

(2) Section 3 comes into force on July 1, 1996.

(3) Section 4 is deemed to have come into force on May 1, 1996, and is retroactive to the extent necessary to give it force and effect on and after that date.

Explanatory Notes

SECTION 1: [Income Tax Act, amends

section 3] reduces the basic rate of personal income tax, calculated as a percent of basic federal tax, by 2%.

SECTION 2: [Income Tax Act, amends

section 3.4] in relation to the reduction in the basic personal income tax rate, limits the benefit of the reduction in Provincial tax for taxpayers paying the highest personal income surtax.

SECTION 3: [Income Tax Act, amends

section 7] reduces the small business tax rate from 10% to 9%, effective July 1, 1996.

SECTION 4: [Income Tax Act, adds sections 7.3 and 7.4] establishes a tax deduction program to give new small businesses a 2 year "holiday" from taxes otherwise payable at the special small business tax rate.

SECTION 5: [Income Tax Act, amends

section 50] allows the sharing of information in accordance with an agreement under the proposed

section 50.1 of the Act.

SECTION 6: [Income Tax Act, adds

section 50.1] allows the Minister of Finance and Corporate Relations to enter into information-sharing agreements with other governments and their agencies.

Copyright © 1996: Queen's Printer, Victoria, British Columbia, Canada