Commitment to finalize LNG income tax framework fulfilled

VICTORIA – The administration and enforcement component of the Liquefied Natural Gas Income Tax Act provides proponents with clarity and British Columbians with confidence, announced Minister of Finance Michael de Jong today.

The introduction of Bill 26, the Liquefied Natural Gas Income Tax Amendment Act 2015, fulfils the government’s commitment to set out the remaining elements of a competitive LNG income tax framework.

The bill gives industry information about their obligations and rights under the act including their obligation to register, file returns and pay the tax and their right to appeal. It also sets out government’s powers to enforce the act including the powers to audit, assess penalties and collect the tax. In addition, the bill includes anti-avoidance rules, transitional rules and clarifying provisions.

The bill amends the Natural Gas Tax Credit under the British Columbia Income Tax Act to allow for the credit rate on the cost of natural gas to be adjusted above the existing 0.5% rate by regulation. This flexibility allows the Province to respond to the fluctuating cost of natural gas to maintain a competitive tax structure. The maximum effective reduction of B.C. general corporate income tax rate from 11% to 8% remains unchanged.

The Province committed to providing proponents with certainty through the introduction of the Liquefied Natural Gas Income Tax Act in the fall of 2014. This phase adds the administration and enforcement of the Liquefied Natural Gas Income Tax. The Province will continue to consult with LNG industry stakeholders in developing the regulations.

Quick Facts:

• The Liquefied Natural Gas Income Tax Act received Royal Assent on Nov. 27, 2014, and provided proponents with the certainty needed to move forward on reaching final investment decisions.
• At that time, the Province committed to setting out the administration and enforcement provisions of the act in spring 2015.
• Regulations to set out the Natural Gas Tax Credit rate, to support the determination of the cost of natural gas and the registration and security framework are expected to be finalized later this year.

Learn More:

Find out more by visiting the LNG Income Tax website www.gov.bc.ca/lngincometax or by reading B.C.’s LNG Income Tax – An Overview

Read specific information about the Registration and Security framework or Valuation Rules

Media Contacts:

Jamie Edwardson
Communications Director
Ministry of Finance
250 356-2821

BACKGROUNDER

Liquefied Natural Gas Income Tax Amendment Act 2015

Administration and Enforcement

Bill 26, the Liquefied Natural Gas Income Tax Amendment Act 2015, provides for administration and enforcement of the Liquefied Natural Gas Income Tax Act, including provisions related to:

• Registration and Security
• Returns and Assessments
• Penalties
• Offences
• Appeals
• Anti-avoidance Rules

Technical Provisions

Bill 26 details technical aspects of the LNG income tax framework that were not included in the fall 2014 legislation. These include:

• Debt forgiveness
• Bankruptcy
• Treatment of trusts with exempt beneficiaries
• Transitional rules for partnerships during the first taxation years

Clarifications

Bill 26 also clarifies several provisions that were introduced in the Liquefied Natural Gas Income Tax Act in fall 2014. These include:

• Clarifying the definitions of:Clarifying transfer pricing rules
  • Liquefaction activities
  • LNG plant
  • LNG facility
  • Capital investment property
  • Feedstock pipeline
  • Feedstock spur pipeline
• Clarifying transfer pricing rules

Natural Gas Tax Credit

The bill amends the Natural Gas Tax Credit under the B.C. Income Tax Act to allow the Province to increase the 0.5% credit by regulation, providing the flexibility to respond to the fluctuating cost of natural gas to ensure that B.C.’s LNG taxation framework remains competitive. The tax credit can reduce a corporation’s effective income tax rate to no lower than 8%.

Media Contacts:

Jamie Edwardson
Communications Director
Ministry of Finance
250 356-2821