As one of the most famous and economically developed Canadian provinces, British Columbia (BC) has long been among the top choices for companies and businesses. At the same time, the government of BC has also provided plenty of attractive tax credit programs for those companies.
There are 3 most popular Tax Credit Programs in BC:
- Eligible Business Corporation (EBC) Tax Credits
- Scientific Research & Experimental Development (SR&ED) Program
- Interactive Digital Media Tax Credits (IDMTC)
If you are starting or expanding a business in BC, find out how these programs could help you on business taxes .
What Is A Tax Credit Program?
Generally speaking, grants, loans, tax credits are three most common types of government funding awarded to businesses:
- Grants: to secure a grant, companies must first complete a funding application and obtain the government’s approval before beginning their projects and incurring expenses.
- Loans: for loans, there might be some decreases in the rate, but in the end, companies still need to repay the money to the government.
- Tax credits: in contrast, tax credits reduce a business’ income tax payable and can be fully or partially refundable. In addition, they result in a cash reimbursement after submitting the proper tax forms to the government.
Under these circumstances, tax credit programs may be the best choice for Canadian SMEs and startups to receive funding from the government.
Eligible Business Corporation (EBC) Tax Credits
Companies who prefer to invest in a particular industry and receive certain benefits should look no further than the EBC program. Since 2003, BC investors have been eligible to receive a 30% tax credit for investing in corporations that participate in one of the following activities:
- Manufacturing and processing of goods
- Research and development of proprietary technology
- Destination tourism
- Development of interactive digital media products
- Development of clean technology
- Advanced commercialization
To become a qualified EBC investor, companies must file a BC tax return. Compared to individuals, company investors have no investment limit per year. They may also carry forward unused tax credits for four subsequent years.
There is one thing to keep in mind that the investor must not control the EBC individually (50% or more of the votes for the election of directors) or in combination with the investor’s associates or related parties.
The Eligible Business Corporation Tax Credits page provides a quick overview of the program, including EBC requirements, claim process and FAQs. You can also find more information in Invest in British Columbia? EBC Might Be the Best Choice.
Scientific Research & Experimental Development (SR&ED) Program
Offered by the Canada Revenue Agency (CRA), the Scientific Research and Experimental Development (SR&ED) program is one of Canada’s largest tax credit programs. Since 1986, SR&ED has been supporting research and development for Canadian companies and each year the program provides over $3 billion in tax credits to over 20,000 claimants.
The objective of the SR&ED program is to encourage and support different types of companies to explore and experiment with the development of technology projects. According to the official explanations on the CRA website, a qualified SR&ED project needs to cover either of these categories:
- Basic Research – work intended to advance scientific knowledge without aiming for a specific application, e.g. traditional research conducted in labs;
- Applied Research – work intended to advance scientific knowledge while aiming for a specific application, e.g. research through a variety of channels;
- Experimental Development (most common) – work intended to achieve technological advancement to create new or improve existing products or processes, e.g. demo, prototype, code, etc.
Compared to the federal SR&ED program, BC’s SR&ED is a relatively new program that came into effect in 1999. And the BC SR&ED tax credit can be carried back three years or forward ten years to decrease income taxes payable.
If you are interested in applying for SR&ED, the SR&ED Program page and top 20 SR&ED FAQs may help you understand the program quickly. Our most popular SR&ED articles also provide more useful information:
Interactive Digital Media Tax Credits (IDMTC)
The Interactive Digital Media Tax Credit (IDMTC) is a provincial program to further interactive media development in BC. According to the requirements from the BC government, Interactive Digital Media (IDM) products are the only products allowed to be claimed under the IDMTC.
The purposes of the IDMTC is to encourage and support a product developed in BC, made for use by an individual, the primary purpose of which is to educate, entertain or inform. Therefore, the product must include a combination of at least two methods of presenting information: text, sound, and images. And it could be video games, educational software, edutainment products, simulators such as flight or driving etc.
Certain products are specifically excluded from IDM products, which includes:
- Online magazines or newspapers
- Slide shows
- Videos or PowerPoint presentations
- Video streaming applications
- Social media products
Eligible businesses can receive a tax credit equivalent to 17.5% of wages and salaries spent. It is also worth mentioning that if your project is eligible for BC’s SR&ED, you cannot submit the same expenditures for a BC IDMTC in the same fiscal year. Please find our Interactive Digital Media Tax Credit page for detailed information and FAQs.
How Tax Consultant Can Help You With BC Tax Credits
Partnering with professional tax advisors and consultants is undoubtably an effective and efficient way to apply for tax credit programs in BC. A skilled consulting team can make the application successful, and offer further advice for your company and business in the future.
We are proud to introduce a professional consulting team specializing in all of the programs above. We will cover all the parts of the application process and adjust the plan according to each client’s unique background and demands of each client. We aim to claim all applicable activities to maximize benefits for our clients.