B.C. Provincial Budget Tax Updates 2026

February 20, 2026
11:44 am

Overview

On February 17, 2026, the B.C. government delivered its 2026 provincial tax budget entitled Securing B.C.’s Future. This comprehensive summary highlights the key changes included in this budget that will influence the province tax environment in the coming years.

Personal Income Taxes Measures

In a continued effort to reduce the tax burden on British Columbians and their families, while preserving governmental core services from cuts, the 2026 BC Budget, introduced targeted fiscal measures to strengthen the province revenue base.

Effective for 2026 and subsequent taxation years, the lowest provincial personal income tax rate will increase from 5.06% to 5.60%. Concurrently, certain basic non-refundable income tax credits (basic personal income, age amount, other) are also set to increase (from 5.06% to 5.60%) based on the budget announcements and will be effective for 2026 and subsequent taxation years.

Additionally, the maximum B.C. tax reduction credit will rise from $575 to $690. The enhanced tax reduction credit will help offset the increase in the lowest tax bracket rate. Individuals with net income below $25,570 for 2026 will qualify for the full credit, while those with income below $44,950 will receive a partial credit.

As a result of the above, more than 40% of taxpayers should experience a net tax reduction, with the rate increase fully offset for many lower-income individuals.

The province also announced a temporary suspension of the indexation of the non-refundable tax credits and personal income tax brackets from 2027 through 2030.

The current personal combined income tax rates for BC top marginal tax rate in effective January 1^st, 2026 remain as follows:

Taxable income above $265,545	Rate
Interest/regular income	53.50%
Capital gains	26.75%
Eligible dividends	36.54%
Non eligible dividends	48.89%

New Children and Youth Disability Supplement payment

Starting July 1, 2027, a new supplement payment will be introduced for the B.C. Family Benefit. For eligible families, an additional annual amount of up to $6,000 will be paid for each eligible dependent. This maximum payment amount of $6,000 will be reduced at a rate of 4% for families with income above $50,000. The payments will be received monthly as part of the B.C. Family Benefit.

Corporate Income Taxes Measures

There are no proposed changes to the corporate income tax rates for 2026. The corporate income tax rates for British-Colombia in 2026 remain as follows:

	Provincial tax rate	Federal and provincial combined tax rate
Small-business tax rate[1]	2.00%	11.00%
Manufacturing and processing (“M&P) tax rate	12.00%	27.00%
General corporate tax rate	12.00%	27.00%

New B.C. Manufacturing and Processing Investment Tax Credit

The 2026 B.C. Budget announced a new temporary refundable tax credit calculated at a rate of 15% of eligible investments made by Canadian-controlled private corporations (“CCPC”). This credit will apply to investments made on or after April 1, 2026, and before April 1, 2031. Beginning April 1, 2031, the rate will be reduced by 2.5 percentage points per year and will be fully phased out for investment made after March 31, 2036.

This new temporary measure would have the following key features:

The credit will be calculated at a rate of 15%
The credit will be available for CCPCs investing in buildings, machinery and equipment used for manufacturing and processing, subject to exclusions in the legislation
The credit will apply to eligible investments up to $2 million for a maximum of $300,000 tax credit which would need to be claimed within 18 months following the end of the tax year in which the property becomes available for use by the claimant corporation.

Scientific Research and Experimental Development (“SR&ED”) Tax Credit

Amendments to the SR&ED tax credit are announced in the BC budget 2026 and will apply retroactively to taxation years that began on or after December 16, 2024. Such changes, which were design to align with the recent changes to the federal SR&ED tax incentive program, are as follows:

Increase of the expenditure limit from $3 million to $6 million
Increase of the taxable capital phase-out thresholds to $50 million to $75 million (from $10 million to $15 million)
Reinstatement of Capital expenditures as eligible expenditures
Entitlement to such credit for certain qualifying Canadian Public corporarion; and
Removal of the sunset date for such incentive.

Patent box consultation

BC Budget 2026 announces that British Columbia intends to consult with various stakeholders, in support of R&D businesses, on the suitability of adopting a patent box regime for the life sciences sector. Such an approach would lower taxes on profits derived from R&D developed and patented in Canada.

Film Incentive B.C. and Production Services Tax Credit

Filing Deadline Extended

Effective on royal assent, the deadline for claiming the Film Incentive B.C. tax credit or the production services tax credit (PSTC) is extended from 18 months to 36 months after the end of a corporation’s taxation year. The extended deadline applies to corporations with taxation years beginning on or after February 17, 2026, as well as to corporations for which the original 18-month filing deadline would otherwise expire on or after February 17, 2026.

Requirement to File a Completion Certificate Eliminated

Effective on royal assent, corporations claiming the Film Incentive B.C. tax credit are no longer required to file a completion certificate otherwise due on or after February 17, 2026.

Requirement to File a Pre-Certification Requirement Eliminated

Effective on royal assent, corporations claiming the PSTC are no longer required to file a notice of intent for notices otherwise due on or after February 17, 2026.

Changes to the Production Services Tax Credit Certification Fee and Introduction of the Major Production Tax Credit Certification Fee

Effective March 1, 2026, the accreditation certificate fee for the PSTC will increase to $19,000 for corporations that began principal photography after December 31, 2024. In additional, and a new major production tax credit certificate will be introduced with a fee of $5,000.

Mining Exploration Tax Credit

Subject to legislative amendments to the Income Tax Act (Canada) effetive November 4, 2024, amendments to the mining exploration tax credit will be introduced to clarify that expenses incurred to determine the economic viability or engineering feasibility of a mineral resource in Canada do not qualify for the credit.

Shipbuilding and Ship Repair Industry Tax Credit

Effective on royal assent, the shipbuilding and ship repair industry tax credit is extended until the end of 2027.

Book Publishing Tax Credit

The book publishing tax credit was scheduled to expire at the end of March 2026. Budget 2026 eliminates the sunset provision.

Sales Tax Measures

Provincial Sales Tax (PST) on Certain Professional Services

Effective October 1, 2026, B.C. proposes to extend PST to certain professional services, including:

Accounting and bookkeeping services
Architectural services
Engineering and geoscience services
Rental property and strata management services
Commissions related to buying and selling real estate
Security and private investigation services.

The government notes that extending PST to these services is generally consistent with how sales tax applies in most provinces.

As such, services that have not historically been within the PST base such as certain commission-based real estate services would become taxable, and businesses making those supplies may need to register for PST (or update an existing registration) and ensure their invoicing systems can charge PST as of October 1, 2026.

PST Relief Where Goods Are Shipped Out of B.C. by the Purchaser

Under the prior framework, point-of-sale PST relief for goods intended for use outside B.C. generally requires the seller to ship (or arrange shipment of) the goods out of the province in order for the exemption to apply. This created practical challenges where the purchaser managed its own logistics, often resulting in PST being paid upfront and later recovered through the refund process.

As of February 18, 2026, sellers may provide a point-of-sale PST exemption (or a refund within 180 days) where goods are purchased for business use outside B.C. and the purchaser ships or arranges shipping out of B.C., provided the purchaser maintains evidence that the goods were shipped outside the province. This change simplifies cross-border commercial transactions and may reduce refund claims, subject to documentation requirements.

PST Exemptions Eliminated on Certain Goods and Services

Effective October 1, 2026, PST exemptions will be eliminated for:

Clothing patterns, yarn, natural fibres, synthetic thread, fabric used in making/repairing clothing;
Services related to clothing and footwear (basic laundry services remain exempt);
Basic cable TV, residential landline telephone, and toll-free telephone services.

Businesses that provide these goods and services may need to register for PST (if not already registered and update billing and invoicing systems to charge and remit PST as of the effective date. Additional details (including transition rules) are expected closer to implementation.

Other Tax Measures

Northern and Rural Home owner Benefit Repealed

Effective January 1, 2027, the $200 Northern and Rural Home Owner Benefit is repealed. The benefit was originally introduced to offset the impact of the consumer carbon tax, which was eliminated effective April 1, 2025.

Purpose-Built Rental Exemptions

Effective January 1, 2025, the Purpose-Built Rental Exemptions from the property transfer tax are expanded to apply to eligible newly constructed purpose-built rental buildings leased for a maximum of 24 months, beginning on the commencement date of the first lease, before their first taxable transaction is registered at the Land Title and Survey Authority of British Columbia.

Speculation & Vacancy Tax Rate Increase

Effective January 1, 2027, foreign owners and untaxed worldwide earners will see an increase from 3% to 4%.

The budget also includes various other technical and administrative changes.

For further information, visit https://www.bcbudget.gov.bc.ca/2026/

[1] Applies to the first $500,000 of active business income of a Canadian-Controlled Private Corporations (CCPCs).

CONTACT OUR TEAM OF EXPERTS

This article was prepared by the individuals listed below. For further information on the above, we invite you to please reach out Danny Guérin and Nicolas Rondeau of Andersen Inc.