Instructions for logging tax return of income for processors (FIN 542P)

You must file the Logging Tax Return of Income for Processors if you processed B.C. logs into primary or secondary forest products (e.g. lumber, shakes, shingles, poles, pulp, paper etc.).

Don’t use this return if you didn’t process logs. If you only have income from the sale of B.C. logs, standing timber, timber rights, or the export of B.C. logs you must file the Logging Tax Return of Income instead to report your income from logging operations.

1. Complete your tax return
2. Submit your tax return

Complete your tax return

For help completing your tax return, review what information you need to provide in the following sections:

• Identification Information
• Calculation of Income Derived from Logging Operations
• Calculation of Income from Processing
• Calculation of Processing Allowance
• Calculation of Logging Tax Credits
• Calculation of Logging Tax Payable
• Payments
• Required Supporting Documentation
• Certification

Identification information

Line 002 - Full Legal Name

If your business is a corporation under the Business Corporations Act or other legislation, enter that name as it appears on your incorporation certificate. If you are an individual, enter your full legal name (first name, middle initial, last name).

Line 011 - Mailing Address 

Only complete this field if:

• this is the first time you’re filing a logging tax return, or
• your address has changed and we don’t have your current address on file

Enter the street number and name, or PO Box, city, province and postal code. 

To authorize a representative to act on your behalf you must complete an Authorization or Cancellation of a Representative (FIN 146) (PDF, 260KB). This form allows us to release information to your representative.

Line 001 - Business Number

Enter the nine-digit Business Number (BN) that identifies your business for income tax purposes.

Line 006 - Social Insurance Number

Complete this field only if you are an individual. Enter your Social Insurance Number.

Line 003 - Account Number

If you know your eight-digit Logging Tax account number enter it, otherwise leave the field blank. 

Line 005 - Ministry of Forests Client Number

Enter the eight-digit client number assigned to you by the Ministry of Forests, Lands and Natural Resource Operations, if applicable.

Line 007 - Driver’s Licence / BCID Number

Complete this field only if you are an individual. Enter either your driver’s licence number or BC ID number.

Line 078 - Is this the final year of logging operations?

Indicate if this is the final year of logging operations. You will no longer need to file a logging tax return unless you resume logging operations. If you resume logging operations in the future, you must file a return with us at that time.

Line 020 and 024 - Telephone Number & Email Address

Enter the telephone number and email address for the person you want our office to contact if we need to verify information on your account. 

To authorize a representative to act on your behalf you must complete an Authorization or Cancellation of a Representative (FIN 146) (PDF, 260KB). This form allows us to release information to your representative.

Line 076 - Is this a taxpayer requested adjustment to the return?

Indicate if you are requesting an adjustment to a return that has already been filed.

Line 077 - Is this adjustment due to a federal loss carryback?

Indicate if the adjustment you are requesting is due to the application of a loss you are carrying back to previous tax years.

If it is, you must provide a copy of the Notice of Reassessment within 90 days of receiving it from the Canada Revenue Agency to show that they accepted the loss. If it is not received within the 90 days your request to adjust your return may be rejected. If more information is needed to support your claim we will let you know.

Once we have the information needed to support your claim you will be issued a refund. If the refund is issued more than 60 days after you provided the information you will receive interest with your refund. Interest is calculated from the 61st day after you provided the information to support your claim.

Line 060 and 061 - Start and End of Tax Year

Enter the start and end date of the tax year for which this return is being filed. The start and end date must coincide with the federal income tax year.

Corporations with a floating tax year end must advise us of the occurrence of the end date. You can advise us by adding a note beside the End of Tax Year field, for example “last Saturday in September”, or including it in a cover letter.

Individuals who report business activities on their federal T1 Income Tax and Benefit Return (T1 Return) using an elected non-December year-end (as approved by the Canada Revenue Agency) must report the start and end dates on a calendar basis (January 1 to December 31.)

Calculation of income derived from logging operations

Logging operations to be reported on this return include the following:

• The sale of logs or standing timber
• The sale of the right to cut standing timber
• The export of logs
• B.C. net processing income

If you have income from logging operations but do not operate or use a sawmill, a pulp and paper plant or another place for processing B.C logs within Canada you should use the Logging Tax Return of Income.

Logging income is generally gross revenue from logging operations less related operating expenses and calculated according to the federal Income Tax Act. If you record income from logging operations as a capital gain, the logging income is equal to the taxable portion of the capital gain.

An individual must report logging income based on the amount of net income from logging operations included and reported in net income on line 23600 of their T1 Return. If the net income on line 23600 includes logging income and other sources of income, and the logging income is not clearly identifiable on the T1 Return, you must include a schedule that shows how you have allocated the revenue and expenses between sources of income.

A corporation must report logging income based on the amount of net income from logging operations included and reported in net income on line 300 of the T2 Corporation Income Tax Return (T2 Return). If the amount on line 300 includes logging income and other sources of income you must include a schedule that shows how you have allocated the revenue and expenses between sources of income.

Line 100 - Net income from the sale of British Columbia logs in British Columbia

Enter the net income from the sale of logs obtained by the taxpayer:

• by cutting standing timber in B.C.
• by acquiring logs cut from standing timber in B.C.

You must report logging income from the sale of logs that were harvested on Crown land and on private land.

Line 110 - Net income from the sale of British Columbia standing timber or timber rights

Enter the net income from the sale of standing timber or timber rights. This includes the sale of timber marks, licences, standing timber sold with or without land and the sale of a right to a logging contractor.

You must report logging income from the sale of standing timber, or timber rights, on Crown land and on private land.

Line 120 - Value of logs exported from British Columbia net of expenses

Enter the fair market value of logs exported from B.C. net of expenses.

Line 122 - Sub-total

Add up the amounts on Lines 100, 110, and 120.

Calculation of income from processing

Line 130 - Net income for the year reported on your federal income tax return

For a corporation, enter the amount on line 300 (Net income) of the T2 Return.

For an individual, enter the amount on line 23600 (Net income) of the T1 Return, plus the amounts, if any, reported on lines:

• 20800 (RRSP deduction)
• 21000 (Deduction for elected split-pension amount)
• 21300 (Universal Child Care Benefit repayment)
• 21400 (Child care expenses)
• 21500 (Disability supports deduction)
• 21900 (Moving expenses)
• 22000 (Support payments made)
• 22200 (Deduction for CPP or QPP contributions on self-employment and other earnings)
• 23200 (Other deductions) Please specify: legal fees etc.

Line 132 - Non-logging amount included in line 130

Enter the amount of net income from the taxpayer's non-forest or non-logging operations included in line 130.

Line 122 - Subtotal from Line 122 above

Enter the amount from line 122 above.

Line 135 - Processing income

Deduct the amounts on Lines 132 and 122 from the amount on line 130. This is your processing income.

Calculation of processing allowance

Line 140 - 8% of the original cost of processing assets

Calculate 8% of the original cost of qualifying processing assets used to process logs and enter the result on line 140.

All qualifying processing assets must be owned and used for processing. Qualifying processing assets include:

• all assets and buildings used to change a log into a saleable product
• a jack-ladder or conveyor used primarily to move logs into the mill
• boom boats and loaders used primarily to move logs into the mill
• lumber stackers used to stack the end product as it emerges from the production line
• dry kilns

Assets don’t qualify as processing assets if they are:

• obsolete or idle,
• under construction and not used, or
• used for logging, transportation, storage, warehousing, selling, distribution or administration; such as:
  • lumber carriers and spur lines for delivery of product to market
  • lumber storage areas for finished product
  • offices and office equipment
  • first aid rooms or coffee rooms

Line 142 - Minimum processing allowance

The minimum processing allowance is 35% of line 135 (processing income).

Line 144 - Maximum processing allowance

The maximum processing allowance is 65% of line 135 (processing income).

Line 145 - Processing allowance

The median, or mid value, of the amounts on line 140, 142 and 144 is the processing allowance.

Line 150 - Net processing income

Deduct the amount on line 145 from the amount on line 135. This is the net processing income after deducting your processing allowance.

Line 155 - Non-British Columbia net processing income

If you process logs cut from standing timber outside B.C. you may be able to deduct an amount for the non-B.C. net processing income. You will need to attach a copy of your calculation to the return.

The non-B.C. processing income is calculated as:

A x (B ÷ C)

where:

• A is the net processing income (the amount on line 150), 
• B is the volume of logs acquired or cut outside of B.C., and
• C is the total volume of logs acquired or cut

Line 160 - British Columbia net processing income

Deduct the amount on line 155 from the amount on line 150 to calculate B.C. net processing income.

Line 190 - Income derived from logging operations

Add up the amounts on Lines 122 and 160. This is your income derived from logging operations.

Calculation of logging tax credits

The logging tax is equal to the lesser of:

• 10% of income derived from logging operations in B.C., or
• 150% of the federal logging tax credit that would be allowable before any deductions for federal investment tax credits or political contribution credits.

Line 400 - Adjusted federal taxable income

An individual’s adjusted federal taxable income is the amount reported on line 26000 (taxable income) of the T1 Return plus the amounts, if any, reported on lines:

• 20800 (RRSP deduction)
• 21000 (Deduction for elected split-pension amount)
• 21400 (Child care expenses)
• 21500 (Disability supports deduction)
• 21900 (Moving expenses)
• 22000 (Support payments made)

A corporation’s adjusted federal taxable income is the amount reported on line 360 (taxable income) of the T2 Return.

Line 410

Enter the amount from either Line 190 or 400, whichever is less.

Line 420

Multiply the amount on Line 410 by 6 2/3%. Our assessing system and web forms use 6.666667% for this calculation.

Line 430 - Adjusted federal income tax otherwise payable

An individual’s adjusted federal income tax otherwise payable is the amount reported on line 40600 (federal tax) of the T1 less the amount, if any, on line 41400 (labour-sponsored funds tax credit). You must add back the amount of the federal logging tax credit deducted, if any, in calculating line 40600 (federal tax).

A corporation’s adjusted federal income tax otherwise payable is the amount reported on line 700 (Part I tax) of the T2 Return plus the amounts, if any, on lines:

• 640 (federal logging tax credit)
• 652 (investment tax credit)

Line 440 - Maximum federal logging tax credit

Enter the amount from either Line 420 or 430, whichever is less. This is the maximum federal logging tax credit.

Line 450 - Maximum provincial logging tax credit

Multiply the amount on Line 440 by 50% to calculate the maximum provincial logging tax credit.

Line 460 - Maximum logging tax credits

Add up the amounts on Lines 440 and 450 and the result is your maximum logging tax credits.

Calculation of logging tax payable

Line 700 - Tax at 10%

Multiply the amount on Line 190 by 10% and enter the result on Line 700.

Line 770 - Logging tax payable

Enter the amount from either Line 460 or Line 700, whichever is less. This is the logging tax payable for the tax year.

Payments

Line 840 - Payments made by instalments

Enter the total of all instalment payments for the current tax year.

Line 842 - Application of prior year’s overpayment

Enter the amount of the prior year’s overpayment (if any) that you asked to be applied to the current year’s tax.

Line 844 – Subtotal

Add Line 840 and 842. This represents the amount paid towards this year’s logging tax payable amount.

Line 846 - Tax Due (or overpayment)

Subtract the amount on Line 844 from the amount on Line 770. A positive amount indicates a balance owing. A negative amount indicates a refund.

Line 898 - Payment amount enclosed

If you have a balance owing, enter the amount of payment enclosed with the return and the date of the cheque. Please make the cheque payable to the Minister of Finance, include on the front of the cheque your logging account number and the tax year.

If payment is to be sent separately, enter 0 (zero).

Line 894 –Overpayments

If you have overpaid your instalment payments for the tax year you may have the overpayment either refunded or applied to the subsequent year by checking the appropriate box.

If neither box is checked, the overpayment will be refunded.

Required supporting documentation

You must attach all items that are applicable. Additional documents may also be requested to support your calculation of logging tax payable for the tax year.

Line 902 – Federal Income Tax Return

An individual must include a complete copy of their T1 return package filed for the tax year with the Canada Revenue Agency. The complete T1 return package includes the regular printed copy of all federal and B.C. provincial income tax schedules and any financial statements filed with the return.

A corporation must include a complete copy of the corporation’s T2 return package filed for the tax year with the Canada Revenue Agency. The complete T2 return package includes the regular printed copy of all federal and B.C. provincial income tax schedules.

Line 904 – Financial Statements

Provide a complete copy of the financial statements for the tax year, including the notes to the financial statements.

Line 906 – Calculation of Net Income From Logging Operations

You must include a schedule showing the reconciliation of the net income reported on your federal income tax return to the amount of the income derived from logging operations. The schedule should clearly show how you have allocated revenue and expenses.

Line 908 – Authorization Form (If Applicable)

Taxpayer information is confidential. The Ministry of Finance requires the taxpayer’s authorization to release confidential information to a person specified as their representative under the Logging Tax Act (such as a spouse, lawyer or an accountant). To arrange for an authorization, complete and submit an Authorization or Cancellation of a Representative (FIN 146) (PDF, 260KB). The authorization will stay in effect until it is cancelled.

Certification (Lines 950 to 955)

The return must be signed and dated by the taxpayer or an authorized signing authority of the taxpayer.

Submit your tax return

You can submit your tax return, payment and supporting documents:

• Online using eTaxBC
• By mail or courier
• At a government office