British Columbia’s 2010 Budget (the “2010 Budget”) proposes several important changes to the Province’s International Financial Activity (“IFA”) program, expanding the list of activities for which businesses registered under the IFA program can claim a tax refund and changing the qualifications of specialists working for those businesses who can personally claim provincial tax refunds.
Generally, the IFA program provides an income tax refund to registered businesses carrying on certain activities in British Columbia, as well as to eligible specialists who work for those corporations. By establishing a registered International Financial Business (“IFB”) in British Columbia, a company can receive a full refund of the provincial tax paid on the net income of the IFB. Alternatively, an IFB can receive a 75% refund, to a maximum of $8 million, of the income related to the licensing and commercialization of life science patents, patents related to power generation using forces of nature, and patents for fuel cell technology and wastewater treatment.
To become an IFB, a corporation must meet various criteria including being incorporated in Canada and having a permanent establishment in British Columbia. In addition, an eligible corporation must register as an IFB with the Ministry of Finance. Within 90 days of registration, the corporation must establish and carry on an eligible IFB activity and it must become and maintain a membership in the International Financial Centre British Columbia, which is a non-profit organization that has as its purpose to promote international financial activity in British Columbia
The 2010 Budget broadens the IFA program to include IFBs engaged in digital media publishing and distribution, certification and trading of carbon credits, and clean technology. These new qualifying activities are intended to encourage growth in the distribution end of the film and digital media industries, to increase the incentives for international businesses to develop clean technologies in British Columbia, and to position the province as a world leader in the global cap-and-trade system and low-carbon economy, respectively.
With respect to clean technology and carbon trading, the measures proposed to be introduced in the IFA are in line with other steps already taken by the British Columbia government in an effort to make the Province greener and cleaner while creating jobs and increasing prosperity, such as legislated targets for emission reductions or development of the Province’s clean energy resources. Details on effective dates, qualifying businesses and technologies, or qualifying international transactions have not been provided by the Ministry of Finance as of yet.