On September 17, 2020, the British Columbia government released its economic recovery plan for the province, Stronger BC for Everyone: BC's Economic Recovery Plan. The plan details various new support measures for B.C. businesses, including a new refundable tax credit for employers.
The B.C. Increased Employment Incentive is a refundable tax credit for employers which is intended to encourage the creation of new jobs and increase earnings for existing low or medium income employees.
All private sector B.C. employers who increase their B.C. remuneration by creating new jobs for eligible employees or increasing the pay of their existing eligible employees between October 1, 2020 and December 31, 2020 are eligible. Public institutions are not eligible for the tax credit.
An eligible employee is one who: (1) reports for work at the employer's permanent establishment in B.C.; or (2) who is paid from a permanent establishment in B.C. and who principally performs his or her job duties in B.C.
In general, an employer has a permanent establishment in B.C. if the employer has a fixed place of business in the province. However, an employer may also be considered to have a permanent establishment in other circumstances, such as when the employer carries on business through an employee or agent located in B.C., or when the employer uses substantial machinery or equipment in B.C.
An employee is considered to report for work at an employer's permanent establishment if the employee comes to the permanent establishment in person to work. An employee who is temporarily working from home due to COVID-19 should also be considered to "report for work" at a permanent establishment provided the employee is otherwise "attached" to the permanent establishment. The following factors will be considered when determining whether an employee is "attached" to a permanent establishment:
- The nature of the duties performed by the employee;
- The place where the employee regularly performs his or her duties;
- The place from which the employee is hired;
- The place from which the employee regularly receives instructions or directions from the employer, through any type of communication;
- The place from which the employee is supervised;
- The place to which the employee submits attendance records and expense claims; and
- The place from which the employee receives equipment, uniforms, etc.
With respect to the second eligibility alternative, the Canada Revenue Agency has generally interpreted the term "principally" to mean more than 50%.
The tax credit is calculated as 15% of the amount by which qualifying B.C. remuneration exceeds base B.C. remuneration:
- Qualifying B.C. remuneration: the total B.C. remuneration paid to eligible employees for the quarter commencing on October 1, 2020 and ending on December 31, 2020, with a maximum weekly B.C. remuneration for each eligible employee of $1,129.33. Partial weeks are prorated.
- Base B.C. remuneration: the total B.C. remuneration paid to eligible employees for the quarter commencing on July 1, 2020 and ending on September 30, 2020, with a maximum weekly B.C. remuneration for each eligible employee of $1,129.33. Partial weeks are prorated.
For employers required to pay the Employer Health Tax (EHT), the credit will be first applied to any EHT outstanding and will be available as a refund to the extent that the credit exceeds the amount of EHT owed.
Interaction with the Canada Emergency Wage Subsidy (CEWS)
If an employer also qualifies for the CEWS, the employer may receive assistance from both the CEWS program and the B.C. Increased Employment Incentive.
Associated Employers, Charities and Non-Profits
If two or more employers are associated, only one employer may claim the credit per employee.
Charities and non-profit employers do not need to report the B.C. remuneration by location when applying for the credit.
Businesses will be able to apply online through the eTaxBC system starting in March 2021.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.