Tax Highlights from the 2026 British Columbia Budget

Minister of Finance Brenda Bailey tabled the 2026 British Columbia provincial budget on February 17, 2026.

The budget projects a deficit of $13.3 billion for the 2026/27 fiscal year, declining to $12.2 billion for 2027/28, and $11.4 billion for 2028/29. As a result of these declining deficits, the government deficit-to-GDP ratio is projected to decline from 2.9% in 2026/27 to 2.3% by 2028/29. The forecast deficit for the nearly completed 2025/26 fiscal year is expected to be $9.6 billion, compared with the initial projected deficit of $10.9 billion.

British Columbia is expected to experience slow to moderate economic growth, with real GDP projected at 1.3% in 2026 and 1.8% in 2027, due to continued trade uncertainty and the impacts from changes to immigration policy. Economic growth is expected to improve over the medium term (2028-2030), averaging 2.1% annually as immigration levels normalize and trade uncertainty subsides.

On the income tax front, the budget increases the lowest personal income tax rate from 5.06% to 5.60%, effective for the 2026 taxation year and subsequent years. In addition, the budget introduces a temporary refundable manufacturing and processing investment tax credit, expands the Provincial Sales Tax to certain professional services, and raises speculation and vacancy tax rates.

The following pages summarize the changes announced in the budget. Please note that these changes remain proposals until passed into law by the provincial government.

Personal Tax Matters

Personal Income Tax Rates and Tax Brackets

The budget increases the lowest personal income tax rate from 5.06% to 5.60%, effective for the 2026 taxation year and subsequent years. Tax brackets and other amounts have been indexed by 2.2% to account for inflation. The table below outlines British Columbia’s tax rates and brackets for 2026.

The table below outlines the 2026 combined federal and provincial highest marginal tax rates for various types of income.

Lowest Personal Income Tax Rate

Effective for the 2026 taxation year and subsequent years, the lowest personal income tax rate increases from 5.06% to 5.60%. This increased rate will apply to the first $50,363 of taxable income for 2026.

Basic Personal Income Tax Credits

Effective for the 2026 taxation year and subsequent years, the applicable percentage for basic personal income tax credits increases from 5.06% to 5.60%. This change increases the value of credits claimed under the basic personal amount, age amount, and other basic non-refundable income tax credits, partially or fully offsetting the tax rate increase for taxpayers.

Personal Income Tax Brackets and Non-Refundable Tax Credits Indexation Paused for 2027-2030

Effective for the 2027 to 2030 taxation years, the indexation of personal income tax brackets and non-refundable tax credits is paused at their 2026 levels. Indexation will resume for the 2031 taxation year and subsequent years.

B.C. Tax Reduction Credit Amount

Effective for the 2026 taxation year, the maximum B.C. tax reduction credit increases by $115 to $690. The credit is non- refundable and can be claimed by lower-income individuals. The maximum amount may be claimed by individuals with net income below $25,570 for 2026. The credit is reduced by 3.56% on income exceeding this threshold.

Tax Credit for Volunteer Firefighters and Search and Rescue Volunteers

Effective for the 2026 taxation year and subsequent years, the eligible income amount for the volunteer firefighters’ and search and rescue volunteers increases from $3,000 to $6,000. This raises the maximum tax credit from $168 to $336.

New Children and Youth Disability Supplement

A new children and youth disability supplement for the B.C. Family Benefit will be introduced for payments beginning July 1, 2027. This measure forms part of the changes to the Children and Youth with Support Needs program.

The new payment will be income-tested and available to families with children who have support needs and meet the eligibility criteria. Families may receive an additional annual amount of up to $6,000 for each eligible dependent. Eligibility will be based on entitlement to the federal disability tax credit. The maximum payment of $6,000 will be reduced at a rate of 4% for families with income above $50,000. The additional payment will be delivered monthly alongside the B.C. Family Benefit.

Farmers’ Food Donation Tax Credit

Effective on royal assent, the farmers’ food donation tax credit is made permanent by removing its sunset date. The non- refundable credit equals 25% of the fair market value of donated agricultural products and is intended to encourage farmers to donate fresh food to registered charities, such as food banks and homeless shelters. Removing the sunset date supports investment in long-term food security efforts and further reduces food waste.

Corporate Tax Matters

Corporate Income Tax Rates

There are no proposed changes to corporate income tax rates. The table below outlines British Columbia’s tax rates and the small business limit for 2026.

The table below outlines the 2026 combined federal and provincial corporate income tax rates for various types of income earned by a Canadian Controlled Private Corporation (CCPC).

B.C. Manufacturing and Processing Investment Tax Credit

Effective April 1, 2026, a temporary refundable investment tax credit will be introduced for investments made by Canadian- controlled private corporations in buildings, machinery, and equipment used for manufacturing and processing, subject to legislative exclusions.

The credit equals 15% of eligible investments up to $2 million, for a maximum credit of $300,000, for investments made between April 1, 2026 and March 31, 2031. Beginning April 1, 2031, the credit rate will be reduced by 2.5% per year and will be fully phased out for investments made after March 31, 2036.

Scientific Research and Experimental Development Tax Credit

The Scientific Research and Experimental Development (SR&ED) tax credit is amended to align with recent changes to the federal SR&ED tax incentive program:

• The expenditure limit for the refundable tax credit increases from $3 million to $6 million;
• The taxable capital phase-out thresholds increases from $10 million and $50 million to $15 million and $75 million, expanding the range over which the expenditure limit is gradually reduced;
• Capital expenditures are once again eligible for the tax credit; and
• Eligible Canadian public corporations may now claim the refundable SR&ED tax credit.

These changes are effective for taxation years beginning on or after December 16, 2024.

Mining Exploration Tax Credit Eligible Expenditures

Subject to legislative amendments to the Income Tax Act (Canada), effective November 4, 2024, the Province will amend the B.C. mining exploration tax credit to clarify that expenses incurred to determine the quality of a mineral resource in Canada do not include expenses related to assessing its economic viability or engineering feasibility. This change aligns with the announcement in Budget 2025.

Production Services Tax Credit

Effective on royal assent, the requirement for corporations to file a notice of intent to claim the production services tax credit is eliminated for notices due on or after February 17, 2026. Notices required to be filed prior to February 17, 2026, remain subject to the previous requirements and timelines.

Film Incentive B.C. and Production Services Tax Credit

Effective on royal assent, the time for a corporation to file a claim for either the Film Incentive B.C. tax credit or the production services tax credit is extended from 18 months to 36 months after the end of its taxation year. The 36-month limit applies to corporations with a taxation year beginning on or after February 17, 2026. For corporations with taxation years beginning before February 17, 2026, the 18-month limit is extended by an additional 18 months if it would otherwise have expired on or after February 17, 2026.

Effective on royal assent, corporations claiming the Film Incentive B.C. tax credit are no longer required to file a completion certificate with the Canada Revenue Agency for certificates due on or after February 17, 2026. This change applies only to the filing of a tax credit claim and does not affect a corporation’s requirement to apply for a completion certificate with the certifying authority.

Production Services Tax Credit and Major Production Tax Credit Certification Fee

Effective March 1, 2026, the accreditation certificate fee for the production services tax credit increases to $19,000 for corporations that began principal photography after December 31, 2024, and apply for certification on or after March 1, 2026. The major production tax credit certificate fee is set at $5,000.

Book Publishing Tax Credit

Effective March 31, 2026, the book publishing tax credit is made permanent by removing its sunset date.

Shipbuilding and Ship Repair Industry Tax Credit

Effective on royal assent, the shipbuilding and ship repair industry tax credit is extended by one year, to the end of 2027.

Other Initiatives

Northern and Rural Home Owner Benefit

Effective January 1, 2027, the northern and rural home owner benefit is repealed. The benefit was introduced to offset the effects of the consumer carbon tax, which has now been repealed. It provided an additional $200 to eligible homeowner grant recipients living outside the Capital, Metro Vancouver, and Fraser Valley regional districts to offset higher carbon tax costs.

Purpose-Built Rental Exemptions

Effective January 1, 2025, the purpose-built rental exemptions from the property transfer tax are expanded to apply to newly constructed purpose-built rental buildings that are leased for up to 24 months before their first taxable transaction is registered with the Land Title and Survey Authority of British Columbia. The 24-month period begins on the commencement date of the first lease, and leases must have a term of at least one month.

The expanded exemptions recognize a common practice among developers to lease units in newly constructed rental buildings to achieve steady revenue prior to sale. This is often required by lenders and purchasers who rely on the verified revenue to determine a building’s value.

Purchases of qualifying new purpose-built rentals are exempt from the additional 2% property transfer tax, which applies to the fair market value of the residential component of a taxable transaction exceeding $3 million. In addition, transactions occurring between January 1, 2025, and December 31, 2030, are also exempt from the general property transfer tax.

To qualify, properties must be newly constructed, non-stratified, and held as rentals on a monthly basis or longer for at least 10 years. The residential portion of the property must be used entirely for rental purposes and contain at least four apartments.

Provincial Sales Tax (PST)

Effective October 1, 2026, the following services will become subject to the PST: accounting and bookkeeping; architectural engineering, and geoscience; rental property and strata management; commissions related to buying and selling non- residential real estate; and security and private investigation services.

Also, effective October 1, 2026, the PST exemption for clothing patterns, yarn, natural fibers, synthetic thread, and fabric commonly used to make or repair clothing is eliminated. The exemption for services related to clothing and footwear will also be removed. PST exemptions for basic cable television services, toll-free telephone services, and residential landline telephone services are also eliminated.

Speculation and Vacancy Tax

Effective January 1, 2027, the rate for foreign owners and untaxed worldwide earners, and others specified under the Speculation and Vacancy Tax Act currently taxed at 3% increases to 4%. The 4% rate will apply to tax payable based on the use of residential properties during the 2027 calendar year and onward.

Various Technical Measures

The budget introduces a number of technical amendments to various enactments, including the Assessment Act, Income Tax Act, School Act, Taxation (Rural Area) Act, Speculation and Vacancy Tax Act, Property Transfer Tax Act, and Provincial Sales Tax Act.

We Can Help

Your financial advisor can help you assess the impact of these proposals on your personal finances or business affairs and show you ways to take advantage of their benefits or ease their impact.