Logging tax

Budget 2023 amended the Logging Tax Act to harmonize the offence and penalty provisions with other taxes, effective May 11, 2023. 

Logging tax applies to individuals or corporations that have income from logging operations on private or Crown land in B.C.

Logging operations include any or a combination of the following:

• The sale of:
  • Logs
  • Standing timber
  • The right to cut standing timber
  • Primary and secondary forest products (e.g. lumber, shakes, shingles, poles, pulp, paper etc.)
• The delivery of logs to:
  • A sawmill, pulp or paper plant, or other place for processing or manufacturing
  • A carrier for export
• The acquisition of:
  • Logs
  • Standing timber
  • The right to cut standing timber
• The cutting of logs from standing timber
• The import and export of logs
• The producing of primary and secondary forest products
• The transportation of logs

Calculating the tax

Logging income is generally gross revenue from logging operations less related operating expenses and is calculated according to Division B of the Income Tax Act (Canada).

If logging income is recorded as a capital gain, the logging tax applies to the taxable portion of the capital gain.

If logs are manufactured into primary and secondary forest products, a processing allowance may be deducted.

The processing allowance is calculated as 8% of the original cost of assets used to produce primary and secondary forest products. The allowance may not exceed 65% nor be less than 35% of the net processing income (calculated as total income from all sources less income from the sale of logs or standing timber and non-logging income).

For each tax year, a taxpayer must pay a tax equal to the lesser of:

• 10% of the taxpayer's income from logging operations in B.C., or
• 150% of the federal logging credit that would be allowable before political contributions and investment tax credits

There is no minimum number of trees or minimum amount of income for it to be considered income from logging operations.

The amount of logging tax you've paid is usually fully deductible as a credit against your income taxes if you make a claim within three years of filing your federal income tax return. Contact the Canada Revenue Agency for information on how to claim the logging tax credit.