What is an affiliate?

  What is an associate?

  Who is an employee of a small business?

  How do I calculate the number of employees?

  What is the formula for calculating the percentage of wages and salaries paid to employees who regularly report to work in British Columbia?

  What is the calculation period?

  How do I determine if a small business is substantially engaged in a prescribed qualifying activity? 

  What are the 5 qualifying activities?

What is an affiliate? 

Generally, companies are affiliated if they are in a parent/subsidiary relationship or are sister companies under common control.  Specifically, affiliate means any corporation where one is the subsidiary of the other, or both are subsidiaries of the same corporation.  Two corporations are also affiliates if both are controlled by the same person or group of person; or if one corporation is controlled by a person and the other corporation is controlled by their spouse, parent, grandparent, sibling, child or other their spouse’s relative.

What is an associate?

Who is an employee of a small business?

Employees are individuals who report for work for the small businesses, and include all "persons engaged by a small business".  This includes the officers of the small business and persons who work for or provide services to the small business who are employed through a temporary help service.  Contractors are also employees, unless they provide accounting, legal or other professional services on a temporary working or ad hoc consulting basis.

How do I calculate the number of employees?

The number of employees may be calculated using either of the following formulas: 

Option A:         

Number of Employees =     Total Hours

                                            40 x w  

Where:

   Total Hours   =           the total hours worked by all employees each of whom worked for at least 20 hours (counting all time worked by each employee whether for the small business, any of its affiliates or both) during any week of the calculation period, and 

   w                  =          the number of weeks in the calculation period; or

Option B:

Number of Employees =    Employee Costs x 52   divided by $45,000

                                                      w

Where:

   Employee Costs   =    all amounts paid or payable by the small business to or on behalf of employees for work performed or services provided by them during the calculation period, and 

   w                        =    the number of weeks in the calculation period.

Note:   If the small business has any corporate "affiliates" (as defined in the Act), the number of employees of the small business together with its affiliates, is the sum of the number of employees of the small business and each of its affiliates, calculated using the above formulas.

What is the formula for calculating the percentage of wages and salaries paid to employees who regularly report to work in British Columbia?

Percentage of wages and salaries =   Wages (B.C.)     x     100

                                                        Total Wages

Where: 

   Wages (B.C.)    =       the total remuneration paid, payable or to be paid in respect of the calculation period to employees of the corporation who regularly reported to work during the calculation period at operations located in British Columbia, and 

   Total Wages     =        the total remuneration that was paid, payable or to be paid in respect of the calculation period to all employees of the corporation during the calculation period.

What is the calculation period?

The calculation period used to determine the number of employees or percentage of wages paid to employees who regularly report to work in British Columbia is either:

1. where, at the date of the calculation, a corporation has been in business for a period of less than 12 consecutive months, that entire period.

2. where, at the date of the calculation, a corporation has been in business for a period of 12 or more consecutive months, the 52 weeks just ended at the date of the calculation.

How do I determine if a small business is substantially engaged in a prescribed qualifying activity? 

A business may be engaged in a number of activities, some may be qualifying activities and others may not.  The company’s activities must be closely examined to determine if the company is substantially engaged in a qualifying activity.  Generally, the qualifying activities must represent the majority of the business' total activity. 

To be substantially engaged, more than 50 percent of the assets and expenses of the business are used in (or more than 50 percent of the business revenue is derived from) one or more of the prescribed qualifying activities. 

Formula:      Activity Assets   +   Activity Expenses     >   0.5

                      Total Assets     +    Total Expenses

Where,

   Activity Assets     =   the value of assets of the small business used in B.C. in the prescribed business activity

   Total Assets         =   the total value of all assets of the small business

   Activity Expenses =   the expenses of the small business incurred during the calculation period with respect to the portion of the prescribed business activity carried on in B.C. 

   Total Expenses    =    the total of all expenses of the small business incurred during the calculation period with respect to all operations of the small business.

Note:   The value of assets and expenses must be determined in accordance with generally accepted accounting principles. 

Example: 

XYZ Co. is a family business that grows and harvests specialty timber from its private lands (40% of assets/expenses), mills and processes the lumber into furniture (51% of assets/expenses) and has a small factory direct retail outlet (9% of assets/expenses).  Even though the business is engaged in "manufacturing and processing" which is a prescribed activity, the primary resource extraction and retailing portions of its operations are specifically not prescribed activities.  Therefore, the harvesting and retailing assets and expenses could not be included in the numerator of the above formula.  Even so, the business would still be "substantially engaged" in prescribed business activities because 51% of its assets and expenses are applied to manufacturing and processing activities.

What are the 5 qualifying activities?

1. Manufacturing, processing or export of value-added goods produced in British Columbia;

2. Destination tourism;

3. Research and development of proprietary technology;

4. Development of interactive digital new media product; or

5. Community diversification outside of the Lower Mainland and the Capital Region.

1. Manufacturing, processing or export of value-added goods produced in British Columbia 

Manufacturing and processing are considered to be activities that consist of producing, or putting goods or materials into marketable form by employees of the small business, from raw, unfinished or prepared goods or materials, by changing the form or content of those goods or materials into a finished product.

Goods not wholly produced in B.C. will be deemed to be goods produced in B.C. if the Administrator is satisfied that substantial value has been added by the business' operations in the Province.

2. Destination tourism 

To qualify under this activity, a business must demonstrate that it does or will earn 50% or more of its gross revenues from tourists.  A “tourist” is an individual who resides more than 80 kilometres from the destination resort or attraction. 

The following activities are included: 

• The development and operation of a destination tourist resort (fishing lodge, ski resort lodge or a guest ranch) that is:

  • a resort having an accommodation facility, a restaurant, and a facility providing recreational activity operating that operate concurrently for at least 120 consecutive days a year, and

  • located outside of the Greater Vancouver Regional District, the Capital Regional District and the Municipality of Whistler. 

• The development and operation of a tourist attraction that is:

  • located outside of the Greater Vancouver Regional District, the Capital Regional District and, the Municipality of Whistler; and

  • a facility intended to attract and provide recreation to tourists on a fee for service basis; but not including the operation of:

1. motion picture or drive in theatre;

2. video or electronic game parlour;

3. bowling alley, ice rink, health club, racquet club or playing field;

4. night club; or

5. a facility that is restricted to members;

• The development and operation of a tourist service is:

  • a charter service that provides the service of hiring of vehicles, boats or aircraft for tourists and is not licensed as a common carrier for scheduled passenger services; or,

  • a tour operator or service registered under the Travel Agents Act that provides, for one price, vacation packages consisting of accommodation and recreation with the province of B.C.

3. Research and development of proprietary technology

This category covers business activities involving research and development of proprietary technologies produced in B.C., including services associated with marketing or exporting the technologies inside or outside the province.

Some industry sectors included under this activity are: 

• Life sciences

• Information & communication technology

• Alternative Energy development

• Environmental technology

A proprietary or “ownership” right to the technology is critical for qualification under this category because it enables the business to commercially exploit the technology and direct its research and development. 

Services that support the export of proprietary technologies developed in British Columbia include:

• Marketing the technology to clients outside B.C.,

• Attendance at international trade shows, or

• The operation of a demonstration or prototype facility.

4. Development of interactive digital new media product

In order to access tax credits reserved for the new media sector a small business must be substantially engaged in the development, within British Columbia, of an interactive digital media product for commercial exploitation, that:

• Educates, informs or entertains and presents information using at least two of the mediums of text, sound or visual images;

• Is not developed for internal corporate use involving the promotion of products or services;

• Is not used primarily for interpersonal communication; and

• Is not a product for which public financial support would, in the opinion of the Administrator, be contrary to public policy.

A company may still qualify under this category if it is developing a product under contract for a third-party client.  However, the product must be developed in B.C. and the business developing the product under contract must still meet the remaining eligibility requirements.

An activity will not be considered eligible if it involves the development of a product that is contrary to public policy.  Examples of content that would be considered “contrary to public policy” include product that:

• incites hatred against an identifiable group, or

• has a dominant characteristic which is the undue exploitation of

  • sex,

  • violence involving one or more crime,

  • horror, or

  • cruelty.

5. Community diversification outside of the Lower Mainland and the Capital Region 

A business located outside the Greater Vancouver Regional District and the Capital Regional District may be engaged in a prescribed activity if the business activity promotes economic diversification within the region. 

In assessing community diversification, consideration will be given to: 

• the impact of the business activity on existing businesses in the region, and

• how the business activity supports or will support existing businesses in the community.

It should be noted that an activity that involves a ‘commercial service’ or ‘community infrastructure project,’ such as a technology ‘incubator’ centre may qualify under this activity if it can be demonstrated that the activity supports the economic diversification and development of a community.

What is the definition of equity capital?

The Act defines "equity capital" as the consideration in money received by a company before or after its registration under this Act as a VCC for its issued shares or by a small business for its issued "equity shares".  Equity shares are defined as: