B.C. Unveils Liquefied Natural Gas Tax Framework

Earlier today, the Liquefied Natural Gas Income Tax Act (the "Bill") was introduced into the British Columbia legislature. The Bill reflects the culmination of the Province's goal to introduce an LNG tax framework, which was initially unveiled in February 2014. The Bill provides for a tier 1 tax rate of 1.5% and a tier 2 rate of 3.5%. The LNG tax applies to the net income from all liquefaction activities in British Columbia.

Effective for the taxation years beginning on or after Jan 1, 2017, the tax rate on net income will be 3.5%. During the period when net operating losses and the capital investment are being deducted, the tier 1 tax rate of 1.5% will apply and is creditable against the 3.5% tier 2 tax. In 2037, the tier 2 rate will increase to 5% of net income. The tier 2 rate set out in the Bill represents a significant reduction from 7% contemplated in the initial framework announced in February.