International Financial Centre British Columbia (IFC BC)

IFC BC 

International Financial Activity Act (IFAA).

• Under the International Financial Activity (IFA) program, a company incorporated in Canada, carrying on eligible international business from a location in British Columbia can qualify for a refund of up to 100% of BC provincial corporate income taxes.
• Eligible activities are financially based and one side of the transaction is carried out for, with, or on behalf of a non-resident. Qualifying activities can include treasury functions, head office activities (new in 2008), hedging activities, administrative support services, financial services, factoring, green-related (new in 2008) and life science patents, back-up office services, distributing film and television rights outside Canada, and selected insurance activities, including captive insurance.
• In most instances, arm's length or non-arms length transactions qualify. Corporations, not only financial institutions, are eligible to apply.

Budget 2008: Improving British Columbia's Competitiveness

The 2008 Budget introduced several measures to make BC a better place to do business, including expanding the IFAA, phasing out the capital tax, and lowering the corporate tax rate.

Head Office Activities Allowed Under the IFAA

Changes to the IFAA provide incentives for international firms to locate head office functions in British Columbia, including:

• Management and Control Activities
  Effective February 20, 2008, the IFAA is amended to allow management and control functions as eligible international financial activity. Management and control functions will be prescribed and will include, for example, human resource and strategic planning services.
• Short Term Financial Instruments
  Effective February 20, 2008, the IFAA is amended to allow non-securities corporations to trade in money market investments with a non-resident. These are generally short-term investments and include treasury bills issued by a government, commercial paper and bankers’ acceptances.

Hedging Activities

Effective September 1, 2004, the IFAA is amended to include income or loss from certain hedging transactions in determining income for non-securities corporations.

Green-Related Patents

As part of the climate action initiatives, effective March 1, 2008, the list of eligible life-science related patents is expanded to include patents with classifications under the International Patent Classification System related to power generation using forces of nature such as wind, solar and tidal.

Definition of “international financial business”

Effective February 20, 2008, the definition of international financial business is expanded to include a substantial British Columbia presence test. The definition of international financial business will include the following parameters:

• the corporation carries on an active business, or
• the corporation is affiliated with another corporation that carries on an active business and the corporation pays at least $300,000 in annual salary and wages to employees employed in the active conduct of the corporation’s business and has shares of at least $10 million related to the business.

Phase Out of the Corporation Capital Tax

Effective April 1, 2008, the Corporation Capital Tax Act is amended to phase out the existing corporation capital tax over the next three years by reducing the rates by one-third each year.
Effective April 1, 2010, financial institutions that have net paid up capital equal to or greater than $1 billion will be subject to a minimum tax of 1% of B.C. paid up capital. The minimum tax is reduced by the total of British Columbia corporate income tax payable for that year, for the seven preceding years and for the three subsequent years.

Corporate Tax Rate Reduced

The provincial general corporate income tax rate is reduced from 12 per cent to 11 per effective July 1, 2008. Since 2001, the rate has been reduced from 16.5 per cent to 11 per cent, a reduction of one-third.

For more information, click here to read ITB Budget Bulletin issued in February 2008.