Natural gas tax credit

The natural gas tax credit reduces the amount of B.C. corporate income tax payable for qualifying corporations. 

The credit is available to qualifying corporations that own natural gas immediately after the natural gas passed through a liquefied natural gas (LNG) facility inlet meter for a major LNG facility during the taxation year. 

The maximum credit you can claim in a taxation year is the least of:

• The qualifying corporation's natural gas tax credit, calculated at 3% of the cost of natural gas notionally acquired at an LNG facility inlet meter plus any unused natural gas tax credit carry forward from a previous year

• The qualifying corporation’s B.C. corporate income tax payable after all other B.C. income tax credits have been deducted, or

• The amount used to reduce the qualifying corporation’s B.C. corporate income tax to the amount that would be payable if the B.C. general corporate income tax rate was 9%

If the qualifying corporation continues to meet all the requirements, any unused annual natural gas tax credit amount can be carried forward to subsequent taxation years.

If there is an amalgamation or wind up of a subsidiary, the qualifying corporation may be able to use the unused natural gas tax credit carried forward from the predecessors or the subsidiary.

Qualifying corporation

Only qualifying corporations are eligible to claim the natural gas tax credit.

A qualifying corporation is a corporation:

• That has a permanent establishment in B.C. during the taxation year

• Whose principal business in B.C. during the taxation year consists of one or more of the following:

  • The exploration for or development of petroleum or natural gas

  • The production, gathering, processing, refining, marketing, storage or disposal of petroleum, natural gas or LNG

  • The construction, use, or operation of a major LNG facility

  • The liquefaction of natural gas

  • A prescribed activity

Major LNG facility

A major LNG facility is a liquefied natural gas facility in B.C. that is used or intended to be used to process natural gas and is designed and built to be capable of producing 2 million tonnes or more of LNG per year.

LNG facility inlet meter

An LNG facility inlet meter is a meter where the volume of natural gas is first measured after the natural gas is delivered to the major LNG facility.

Required forms and documents

The qualifying corporation must file and submit the following forms and documents with the natural gas tax credit application to the B.C. Ministry of Finance to claim and receive the natural gas tax credit:

• A natural gas tax credit application through eTaxBC for the tax credit within 18 months after the end of the taxation year

• Proof, within 3 years after the end of the taxation year, that all B.C. and federal income taxes for the taxation year have been paid

• Copies of all notices of assessment or reassessment issued by the Canada Revenue Agency for the taxation year relating to your T2 Corporation Income Tax Return

• Monthly records to confirm the values from your Monthly Gas Worksheets for your corporate owned gas. You are not required to attach these supporting documents for partnership-owned gas. These values include the:

  • LNG facility inlet volume

  • Heating value for LNG facility inlet volume

  • Energy content for LNG facility inlet volume

If your company amalgamated, wound up subsidiaries, or used partnerships to own gas entering a major LNG facility, then additional documents will be required.

Records to support your application must be maintained. See Recording the cost of natural gas to find the data elements you'll need to enter on your application.

Amending your natural gas tax credit application

If a prior application is inaccurate, it can be amended by submitting another natural gas tax credit application through eTaxBC.

Amendments are required if the cost of natural gas previously reported was incorrect or an updated Notice of Assessment or Reassessment of the T2 Corporation Income Tax Return with relevant changes was received from the Canada Revenue Agency for the taxation year.

Relevant changes to the T2 Corporation Income Tax Return may include:

• T2SCH427, Part 1 Line 1K – Income subject to British Columbia higher tax rate

• T2SCH427, Part 2 Line 2C – British Columbia tax before credits

• T2SCH5, Line 244 – Net British Columbia tax payable or refundable tax credit

If the T2 Corporation Income Tax Return has been reassessed, resulting in a change in an amount that's relevant in the calculation of the natural gas tax credit on the previously filed natural gas tax credit application, notify us within 90 days after the notice was issued by filing an amended natural gas tax credit application to avoid administrative penalties. Penalties for filing after the deadline are the greater of $100 or $25 per day to a maximum of $2,500 per notification.

Legislation

The following legislation applies to the natural gas tax credit:

• Income Tax Act (B.C.)

Regulations

• Natural Gas Tax Credit Regulation