The government of British Columbia is releasing details on its budget commitment to introduce a new, enhanced dividend tax credit for individuals.

Finance Minister Carole Taylor announced that, subject to legislative approval, the proposed personal income tax credit rate for dividends eligible for the federal enhanced dividend tax credit will be 12%, effective for the 2006 and subsequent tax years.

“The purpose of the tax credit is to reduce the double taxation of income in the corporate and personal income tax systems,” the government said, adding that the proposed changes stem from the federal government’s November 2005 proposal to create an enhanced personal income tax credit to help equalize the tax treatment of dividends and other forms of investment. The federal proposal relies on the participation of provinces to provide parallel enhanced dividend tax credits.

In its latest budget, BC announced it would introduce an enhanced dividend tax credit once the federal details were known. The federal government released its draft legislation in support of the new credit in June, which allowed the province to finalize its design for the tax credit.

“While the legislation to implement the change will be tabled with the next provincial budget, the province is announcing additional details at this time to inform British Columbians of the anticipated tax implications and to allow them to make informed investment decisions,” it added.