Frequently Asked Questions
An individual or corporation that is required to file a BC Tax Return is eligible to claim a VCC or EBC tax credit.
Annual Returns are due within six months of the VCC's or EBC's fiscal year-end.
The Act defines "equity capital" as the consideration in money received by a company before or after its registration under this Act as a VCC for its issued shares or by a small business for its issued "equity shares". Equity shares are defined as:
Generally, companies are affiliated if they are in a parent/subsidiary relationship or are sister companies under common control. Specifically, affiliate means any corporation where one is the subsidiary of the other, or both are subsidiaries of the same corporation. Two corporations are also affiliates if both are controlled by the same person or group of person; or if one corporation is controlled by a person and the other corporation is controlled by their spouse, parent, grandparent, sibling, child or other their spouse’s relative.
Generally, 2 people are associates if they are related. Your associates include your spouse, parents, grandparents, children, grandchildren, and siblings. Your spouse's parents, grandparents, children, grandchildren, and siblings are also your associates if they live with you.
Associates can also be your business partners and those people who participate in a joint venture with you.
A corporation can be your associate if you own, directly or indirectly, shares carrying more 10% or more of the outstanding voting rights for the election of the company’s directors.
Likewise, a trust or estate can be your associate if you serve as a trustee (or in a similar capacity), or have a substantial beneficial interest in the trust or estate.
Employees are individuals who report for work for the small businesses, and include all "persons engaged by a small business". This includes the officers of the small business and persons who work for or provide services to the small business who are employed through a temporary help service.
Contractors are not considered employees. British Columbia based contractors working to support the EBC’s qualifying activity are considered an eligible expense. Contractors who are not British Columbia based or do not support the EBC’s qualifying activity are considered an ineligible expense.
The number of employees may be calculated using either of the following formulas:
Number of Employees = Total Hours / (40 x w)
Total Hours = total hours worked by all employees each of whom worked for at least 20 hours (counting all time worked by each employee whether for the small business, any of its affiliates or both) during any week of the calculation period, and
w = number of weeks in the calculation period
Number of Employees = [(Employee Costs x 52) / w] / $45,000
Employee Costs = all amounts paid or payable by the small business to or on behalf of employees for work performed or services provided by them during the calculation period
w = number of weeks in the calculation period.
Note: If the small business has any corporate "affiliates" (as defined in the Act), the number of employees of the small business together with its affiliates, is the sum of the number of employees of the small business and each of its affiliates, calculated using the above formulas.
Percentage of wages and salaries = (Wages (B.C.) / Total Wages) x 100
Wages (B.C.) = total remuneration paid, payable or to be paid in respect of the calculation period to employees of the corporation who regularly reported to work during the calculation period at operations located in British Columbia
Total Wages = total remuneration that was paid, payable or to be paid in respect of the calculation period to all employees of the corporation during the calculation period.
The calculation period used to determine the number of employees or percentage of wages paid to employees who regularly report to work in British Columbia is either:
- where, at the date of the calculation, a corporation has been in business for a period of less than 12 consecutive months, that entire period.
- where, at the date of the calculation, a corporation has been in business for a period of 12 or more consecutive months, the 52 weeks just ended at the date of the calculation.
Generally, the qualifying activities must represent the majority of the business' total activity.
To be substantially engaged, more than 50 percent of the assets and expenses of the business are used in (or more than 50 percent of the business revenue is derived from) one or more of the prescribed qualifying activities.
(Activity Assets + Activity Expenses) / (Total Assets + Total Expenses) > 0.5
Activity Assets = value of assets of the small business used in B.C. in the prescribed business activity
Total Assets = total value of all assets of the small business
Activity Expenses = expenses of the small business incurred during the calculation period with respect to the portion of the prescribed business activity carried on in B.C.
Total Expenses = total of all expenses of the small business incurred during the calculation period with respect to all operations of the small business.
Note: The value of assets and expenses must be determined in accordance with generally accepted accounting principles.
XYZ Co. is a family business that grows and harvests specialty timber from its private lands (40% of assets/expenses), mills and processes the lumber into furniture (51% of assets/expenses) and has a small factory direct retail outlet (9% of assets/expenses). Even though the business is engaged in "manufacturing and processing" which is a prescribed activity, the primary resource extraction and retailing portions of its operations are specifically not prescribed activities.
Therefore, the harvesting and retailing assets and expenses could not be included in the numerator of the above formula. Even so, the business would still be "substantially engaged" in prescribed business activities because 51% of its assets and expenses are applied to manufacturing and processing activities.
Manufacturing, Processing or Export of Value-Added Goods Produced in B.C.
Manufacturing and processing are considered to be activities that consist of producing, or putting goods or materials into marketable form by employees of the small business, from raw, unfinished or prepared goods or materials, by changing the form or content of those goods or materials into a finished product.
Goods not wholly produced in B.C. will be deemed to be goods produced in B.C. if the Administrator is satisfied that substantial value has been added by the business' operations in the Province.
To qualify under this activity, a business must demonstrate that it does or will earn 50% or more of its gross revenues from tourists. A “tourist” is an individual who resides more than 80 kilometres from the destination resort or attraction.
The following activities are included:
The development and operation of a destination tourist resort ( e.g. fishing lodge, ski resort lodge, or a guest ranch) that is:
The development and operation of a tourist attraction that is:
The development and operation of a tourist service that is:
Research and Development of Proprietary Technology
This category covers business activities involving research and development of proprietary technologies produced in B.C., including services, undertaken inside or outside the province, that are directly associated with exporting the technologies.
Some industry sectors included under this activity are:
A proprietary or “ownership” right to the technology is critical for qualification under this category because it enables the business to commercially exploit the technology, and direct its research and development.
To qualify for the R&D of proprietary technology category the business must be substantially engaged in activities such as applied research, basic research, and experimental development.
Some costs associated with exporting the technology can be included for the purpose of calculating being substantially engaged. This category assumes no product has been developed at this stage of the business's development, and so the costs are those to export the proprietary technology developed in British Columbia, and include:
Development of an Interactive Digital New Media Product
In order to access tax credits reserved for the new media sector a small business must be substantially engaged in the development, within British Columbia, of an interactive digital media product for commercial exploitation, that:
To qualify for the interactive digital media category the business must be developing an interactive digital media product. To qualify as a product it must be capable of being durable and tangible. While many interactive digital media products are experienced on-line, the characteristic of having the potential of being durable and tangible is to distinguish between the development of, for example, an on-line interactive game, which may qualify for the program, and a streaming service, which does not qualify for the program.
The product must be interactive. To be interactive the product must provide the user with information (e.g. text, sound, visual images), to which the user has to make choices and respond using a key-board, mouse, touch-screen, stylus, voice recognition or other device. Interactivity is defined by the repeated steps whereby the product presents information to the user, and to which the user must respond.
In using the product, the user must experience at least 2 of the 3 mediums of text, sound or visual images.
A company may still qualify under this category if it is developing a product under contract for a third-party client. However, the product must be developed in B.C. and the business developing the product under contract must still meet the remaining eligibility requirements.
An activity will not be considered eligible if it involves the development of a product that is contrary to public policy. Examples of content that would be considered “contrary to public policy” include product that:
Community Diversification Outside of Metro Vancouver and the Capital Regional District
For a business to qualify in the community diversification category it must be substantially engaged in an activity outside Metro Vancouver and the Capital Regional District, and the activity must promote community diversification in the region.
The activities are:
In assessing community diversification, consideration will be given to:
A business substantially engaged in the manufacturing and processing, and research and development, within B.C. for commercial exploitation of technologies that: