Widodo CPA - Blog by Adhityo Widodo

BC Is Expanding PST to Accounting Services Starting October 1, 2026: What Your Business Needs to Know

Sat, 01 Aug 2026 11:27:47 -0700

If you run a business in British Columbia, a change is coming that will affect nearly every invoice you receive from your accountant, bookkeeper, and several other professional service providers. Starting October 1, 2026, the province is expanding the Provincial Sales Tax to cover a range of professional services that have never been taxed this way before, including accounting and bookkeeping. Here is what is actually changing, who it affects, and what you should be doing right now to prepare.

What Is Changing

Effective October 1, 2026, British Columbia will apply 7% PST to the following professional services:

● Accounting services, including bookkeeping and assurance services

● Architectural services

● Engineering and geoscience services

● Security and private investigation services

● Non residential real estate services, including trading services, rental property management, and strata management

Architectural, engineering, and geoscience services have a partial exemption built in, where PST applies to only 30% of the purchase price rather than the full fee. Accounting and bookkeeping services do not get this partial treatment. If your invoice is for accounting or bookkeeping work, the full amount becomes subject to the new 7% tax.

This is a genuinely significant shift. Professional services like these have historically sat outside PST entirely in British Columbia. This expansion brings the province's tax base closer in line with a handful of other provinces that already tax professional services, and it means most BC businesses will see a new line item on invoices they receive starting this fall.

Who This Affects

If you are a business owner purchasing accounting, bookkeeping, or assurance services in BC, you will start seeing 7% PST added to those invoices from October 1 onward, on top of any GST that already applies. For a business spending meaningful amounts annually on bookkeeping and accounting support, this is a real cost increase worth building into your budget now rather than discovering it on your first invoice after the change takes effect.

If you are a service provider offering any of the newly taxable categories, including firms like ours, you will need to register for PST, update your invoicing systems, and begin charging and collecting the tax correctly from the effective date.

A Transitional Detail Worth Knowing

One detail that catches businesses off guard: work performed before October 1, 2026 but invoiced after that date may still be subject to the new PST, depending on the final transitional rules. This means the timing of invoicing around the effective date matters, both for service providers managing their billing cycles and for clients trying to understand what they will owe.

Final regulations clarifying several of these details are expected later this summer, so some specifics may still shift before October 1 arrives.

What You Should Do Now

If you purchase accounting or bookkeeping services, start factoring an additional 7% into your budget for these costs from October 1 onward. If you have any large engagements planned for later this year, such as year end financial statement work or a significant advisory project, talk to your provider about timing and how the transition will be handled on your invoices.

If you provide any of the newly taxable services, registration can begin as early as several months before your first taxable sale. Most advisors are recommending businesses wait until the final regulations are released before registering, since some definitions and exemptions are still being finalized. That said, now is the right time to start reviewing your invoicing systems, engagement letters, and internal processes so you are ready to move quickly once the rules are confirmed.

Where This Leaves You

This change touches a wide range of BC businesses, not just the professional service firms directly affected. Whether you are budgeting for higher costs on the services you buy, or preparing your own systems to charge PST correctly for the first time, the next few months are the window to get ahead of this rather than scrambling in September.

If you have questions about how this affects your specific situation, whether as a business purchasing these services or as a provider needing to get registered and compliant, we are happy to help you think through it.

This article is provided for general informational purposes and does not constitute legal or tax advice specific to your circumstances. Contact Widodo CPA Corp. to discuss how the BC PST expansion applies to your business.

Salary vs Dividends in Canada: How to Pay Yourself from Your Corporation in 2026

Tue, 30 Jun 2026 13:39:00 -0700

One of the most common questions we receive from incorporated business owners in Metro Vancouver is how to pay themselves from their corporation. Should you take a salary, pay yourself dividends, or use a combination of both? The answer depends on your personal financial situation, your retirement goals, your family circumstances, and the profitability of your corporation. This article explains both options clearly so you can have an informed conversation with your CPA about the right strategy for your business.

Quick answer: Most Canadian incorporated business owners benefit from a combination of salary and dividends. The optimal mix depends on your total income, CPP objectives, RRSP contribution room, and personal tax situation. A CPA can model the best strategy for your specific numbers.

Understanding the basics: how a corporation pays its owner

When you own an incorporated business in Canada, you and your corporation are two separate legal and tax entities. Your corporation earns income and pays corporate tax on its profits. You, as the shareholder and often also an employee, can receive money from your corporation in two main ways: through salary as an employee, or through dividends as a shareholder.

Each method has distinct tax consequences at both the corporate and personal level. The goal of any good compensation strategy is to minimize the combined total of corporate tax plus personal tax paid by both you and your corporation.

What is a salary from your corporation?

A salary is employment income paid from your corporation to you as an employee. From a tax perspective, salary is a deductible expense for your corporation, which reduces your corporate taxable income. At the personal level, salary is included in your employment income and taxed at your personal marginal tax rate.

Advantages of paying yourself a salary

Creates RRSP contribution room equal to 18% of your earned income, up to the annual RRSP limit ($31,560 in 2026)
Qualifies as earned income for Canada Child Benefit calculations
Allows you to contribute to the Canada Pension Plan (CPP), building retirement benefits
Provides a consistent and predictable income that is easier to manage for personal budgeting and mortgage qualification
Reduces corporate net income, which lowers the corporate tax bill
Salary can create a business loss at the corporate level, which can be carried back or forward

Disadvantages of paying yourself a salary

Salary is subject to payroll deductions including CPP contributions and income tax withholdings, which require monthly or quarterly remittances to CRA
As both employer and employee, you pay both the employer and employee portions of CPP, effectively doubling the CPP contribution cost
Salary is taxed at your full personal marginal tax rate, which can be as high as 53.5% in BC for income above $253,414 in 2026
Requires setting up payroll, filing T4 slips annually, and making remittances throughout the year

CPA tip: Paying yourself a salary of at least $60,200 in 2026 will maximize your CPP contributions for that year. If CPP retirement benefits are important to your retirement plan, this threshold is worth targeting.

What is a dividend from your corporation?

A dividend is a distribution of after-tax corporate profits to you as a shareholder. Unlike salary, dividends are not a deductible expense for the corporation. Instead, the corporation first pays corporate tax on its earnings, and then distributes the remaining after-tax profit to you as a dividend. To prevent double taxation, the Canadian tax system applies a dividend tax credit at the personal level, which reduces the personal tax you pay on dividend income.

There are two types of dividends in Canada:

Eligible dividends: paid from income taxed at the general corporate rate (above the small business deduction limit). These receive a larger dividend tax credit and are taxed more favourably at the personal level.
Non-eligible dividends: paid from income taxed at the small business rate. Most Canadian Controlled Private Corporation (CCPC) owners will pay non-eligible dividends.

Advantages of paying yourself dividends

Lower combined tax rate compared to salary in many situations, due to the dividend tax credit
No CPP contributions required on dividend income, which saves money if CPP is not a priority for you
No payroll administration, no remittances, and no T4 slips required
Flexible timing: you can declare dividends at any point during the year based on your cash flow and tax planning needs
Income splitting opportunities: if family members hold shares in your corporation, you may be able to pay them dividends, subject to the Tax on Split Income (TOSI) rules

Disadvantages of paying yourself dividends

Dividends do not create RRSP contribution room, which limits your ability to defer personal income tax through RRSP contributions
Dividends do not count as earned income for CPP, so you will not build CPP retirement entitlements
Dividend income may not satisfy lenders' income requirements for mortgage qualification as easily as employment income
No deductions such as childcare expenses or moving expenses can be claimed against dividend income
Subject to the TOSI rules if paid to family members who do not meet specific criteria for active participation in the business

CPA warning: The Tax on Split Income (TOSI) rules introduced in 2018 significantly restrict income splitting through dividends to family members. If you are considering paying dividends to a spouse, adult children, or parents, you must meet specific tests set out in the Income Tax Act. Violating the TOSI rules results in the income being taxed at the top personal marginal rate. Always consult a CPA before implementing any income-splitting strategy.

Comparing the tax rates: salary vs dividends in BC (2026)

The following comparison illustrates the approximate combined federal and BC provincial tax rates on different income types for 2026. These figures are approximate and your personal rate will depend on your total income from all sources.

Salary income in BC

Up to $57,375: approx. 20.1%
$57,375 to $114,750: approx. 28.2%
$114,750 to $155,625: approx. 31.0%
$155,625 to $253,414: approx. 44.0%
Above $253,414: approx. 53.5%

Non-eligible dividends in BC

Up to $57,375: approx. 15.0%
$57,375 to $114,750: approx. 21.6%
$114,750 to $155,625: approx. 25.8%
$155,625 to $253,414: approx. 40.6%
Above $253,414: approx. 48.9%

At first glance, dividends appear to be taxed at a lower personal rate. However, this comparison does not account for the corporate tax already paid before dividends are distributed. The true comparison must look at the combined corporate and personal tax.

The integration principle: why the combined tax matters

The Canadian tax system is built on a principle called integration. The goal is that income earned through a corporation and paid out to a shareholder should result in approximately the same total tax as if the income had been earned directly by an individual. In practice, integration is not perfect, and there are scenarios where one method results in a lower combined tax bill.

Simplified example: Your corporation earns $100,000 in active business income.

Salary route: Corporation deducts $100,000 salary. Corporate tax is $0. You pay personal income tax on $100,000 at your marginal rate, plus CPP contributions.

Dividend route: Corporation pays 11% small business tax on $100,000, leaving $89,000 after tax. You receive $89,000 as a non-eligible dividend and pay personal tax on it, reduced by the dividend tax credit. Combined tax often approximates the salary route due to integration, but the timing and cash flow differ significantly.

The optimal mix: salary plus dividends

Most incorporated business owners in Canada benefit from paying themselves a combination of salary and dividends rather than choosing one exclusively. A common strategy involves:

Paying enough salary to maximize RRSP contribution room for the following year
Paying enough salary to cover personal expenses comfortably
Taking the remaining profit as dividends to reduce overall payroll administration and take advantage of lower dividend tax rates
Retaining surplus profits in the corporation to defer personal tax until a future year when your marginal rate may be lower

CPA tip: Retaining profits inside your corporation is one of the most powerful tax deferral tools available to Canadian business owners. Corporate tax rates on active business income are significantly lower than top personal marginal rates. Profits left inside the corporation can be invested or used for business expansion before ever being taxed at the personal level.

Factors that influence the right strategy for you

The ideal salary and dividend mix is different for every business owner. Key factors your CPA will consider include:

Your personal income needs and lifestyle expenses
Whether you want to maximize RRSP contributions and retirement savings
Whether CPP retirement benefits are important to your retirement plan
Your family situation, including whether a spouse or adult children are involved in the business
The profitability of your corporation and whether you qualify for the Small Business Deduction
Your plans for the business, including whether you intend to sell it in the future and want to protect the Lifetime Capital Gains Exemption (LCGE)
Whether you have a holding company structure, which introduces additional planning considerations
Your province of residence, as provincial tax rates vary significantly across Canada

The Lifetime Capital Gains Exemption and salary vs dividends

If you plan to sell your incorporated business in the future, the Lifetime Capital Gains Exemption (LCGE) may allow you to shelter up to $1,250,000 in capital gains on the sale of qualifying small business corporation shares from federal tax in 2026. To qualify for the LCGE, your shares must meet specific tests, including the requirement that throughout the 24 months before the sale, more than 50% of the fair market value of the corporation's assets must have been used in an active business carried on primarily in Canada.

This means if you are retaining significant passive investment assets inside your corporation, it may affect your LCGE eligibility. Your CPA should review your corporate structure regularly to ensure you remain on track to qualify for this valuable exemption.

What about paying a salary to a spouse or family member?

You may pay a reasonable salary to a family member, including a spouse, for services they actually provide to the corporation. The salary must be reasonable in relation to the services performed and must be supported by documentation. CRA will challenge salaries paid to family members that are not commensurate with the work performed.

Alternatively, if your spouse or adult children hold shares in your corporation, you may consider paying dividends to them. However, the TOSI rules apply strictly and must be reviewed carefully with a CPA before proceeding. Penalties for non-compliance are significant.

How to decide: questions to ask your CPA

When meeting with your CPA to discuss your compensation strategy, come prepared with answers to these questions:

What is my expected corporate net income before owner compensation this year?
How much do I need personally to cover my living expenses?
Do I want to maximize my RRSP contribution room for this year?
Am I planning to apply for a mortgage or other financing in the near future?
Are there family members who are active in my business?
Am I planning to sell the business within the next five years?
Do I have a holding company or am I planning to establish one?

Summary: salary vs dividends at a glance

Choose more salary if you:

Want to maximize RRSP room
Want to build CPP benefits
Are applying for a mortgage
Have childcare or other earned income deductions
Want predictable personal income

Choose more dividends if you:

Want to minimize CPP costs
Have sufficient retirement savings
Want to avoid payroll administration
Have a spouse holding shares
Want flexibility in timing your income

About the author: Adhityo Widodo, CPA is a Chartered Professional Accountant regulated by CPABC with over 10 years of financial leadership experience across logistics, construction, insurance, and professional services. He is the founder of Widodo CPA Corp., a Vancouver-based accounting firm serving small and medium-sized businesses across Metro Vancouver and the Lower Mainland. For a free 30-minute consultation, visit widodocpa.ca or call (672) 200-4677.

Disclaimer: This article provides general information only and does not constitute tax advice. Tax rules change frequently. Consult a CPA for advice specific to your business situation.

GST vs HST vs PST in BC: Complete Guide for Vancouver Small Businesses (2026)

Wed, 24 Jun 2026 16:39:54 -0700

If you own a small business in British Columbia and you are unsure whether to charge GST, HST, or PST to your customers, you are not alone. Canadian sales tax is one of the most confusing areas for small business owners, and the rules in BC are different from most other provinces. This guide explains exactly what each tax is, when you are required to collect it, and what your obligations are as a BC business owner in 2026.

Quick answer: In British Columbia, most businesses charge GST (5%) and PST (7%) as two separate taxes. There is no HST in BC.

What are GST, HST, and PST?

GST: Goods and Services Tax

GST is a federal tax charged on most goods and services sold in Canada. The GST rate is 5% across the entire country and has remained at 5% since January 1, 2008. GST is administered by the Canada Revenue Agency (CRA), and all businesses registered for GST must file returns directly with CRA.

HST: Harmonized Sales Tax

HST is a combination of the federal GST and a provincial sales tax, merged into a single tax administered by CRA. HST applies in five provinces only:

Ontario at 13%
New Brunswick at 15%
Nova Scotia at 14% (reduced from 15% on April 1, 2025)
Newfoundland and Labrador at 15%
Prince Edward Island at 15%

British Columbia does not use HST. BC withdrew from the HST system in April 2013 following a provincial referendum and returned to a separate GST and PST structure.

PST: Provincial Sales Tax (BC)

British Columbia's PST is a retail sales tax administered by the BC Ministry of Finance, separate from the federal GST collected by CRA. The BC PST rate is 7% and applies to most goods and some services sold in the province. Unlike GST, PST is not a value-added tax. This means businesses cannot claim PST paid on purchases as an input tax credit. PST is a cost to your business when you purchase goods, and a collection obligation when you sell them.

Do I need to register for GST in BC?

Under the Income Tax Act, you are required to register for GST when your total taxable revenues exceed $30,000 in any single calendar quarter or in four consecutive calendar quarters. This $30,000 threshold is called the small supplier threshold.

Key rules about GST registration in BC:

If your annual revenue is below $30,000, you are a small supplier and GST registration is optional
Once your revenue exceeds $30,000 in any 12-month rolling period, you must register within 29 days
You can voluntarily register for GST even if you are below the threshold, which allows you to claim input tax credits (ITCs) on business purchases
Once registered, you must collect GST on all taxable supplies and remit it to CRA
Filing frequency is determined by CRA based on your annual revenue: monthly, quarterly, or annually

CPA tip: Voluntary GST registration can benefit new businesses with significant startup expenses. By registering early, you can reclaim the GST paid on equipment, software, and professional services through input tax credits.

Do I need to register for PST in BC?

BC PST registration is required if you sell taxable goods or provide taxable services in British Columbia. Unlike GST, there is no revenue threshold for PST. You must register from your very first dollar of taxable sales.

You must register for BC PST if you:

Sell taxable goods in BC, including most physical products
Provide taxable services such as software, telecommunications, or accommodation
Sell goods online to BC customers if you are located in BC
Bring taxable goods into BC from another province for use in your business

You do not need to register for PST if you:

Sell only exempt goods or services
Are a reseller purchasing goods for resale and hold a valid PST exemption
Are a manufacturer purchasing materials that become part of a product you manufacture for sale

What is exempt from PST in BC?

Not everything is subject to PST in British Columbia. Key PST exemptions include:

Most professional services such as legal, accounting, medical, dental, and veterinary services (New regulation will take place in October 1, 2026)
Food for human consumption, specifically groceries and not restaurant meals
Prescription medications
Residential rent
Sales to registered resellers, requiring a completed exemption certificate
Goods purchased for use in manufacturing products for sale

An important note for professional service firms: most accountants, lawyers, consultants, and other professionals are not required to collect PST on their fees. However, if your firm sells any physical products alongside services, the product portion may be subject to PST.

SaaS and software: special PST rules in BC

BC has specific PST rules for software and digital products that catch many tech-forward businesses off guard:

Prewritten or off-the-shelf software sold or licensed to BC customers is subject to PST at 7%
Software as a Service (SaaS) subscriptions are subject to PST in BC
Custom software developed specifically for one customer is generally not subject to PST
Cloud storage and hosting services may be subject to PST depending on the nature of the service

CPA warning: If your business sells SaaS subscriptions or software licenses to BC customers, you are likely required to register for BC PST and collect 7% on those sales, even if you are not based in BC. The BC Ministry of Finance has been actively enforcing this rule since 2020.

How to charge sales tax correctly to BC customers

For most BC small businesses, a properly formatted invoice shows two separate tax lines. Here is an example using a $1,000 sale to a BC customer:

Subtotal: $1,000.00
GST 5%: $50.00
PST 7%: $70.00
Total: $1,120.00

HST should never appear on a BC invoice for goods or services delivered in British Columbia. HST applies only when you determine that the place of supply is an HST province, for example when shipping goods to an Ontario customer.

Place of supply rules: selling to customers in other provinces

The place of supply rules determine which province's tax applies to your sale. For a BC business selling to customers across Canada:

Goods physically shipped to Ontario: charge 13% HST, not BC taxes
Goods shipped to Alberta: charge 5% GST only, as Alberta has no provincial sales tax
Goods shipped to Quebec: charge 5% GST plus 9.975% QST
Services delivered to an Ontario client: charge 13% HST based on the client's location
Goods shipped to another BC customer: charge 5% GST plus 7% BC PST

The place of supply rules are complex and depend on the type of supply, whether goods, services, or digital products, and how they are delivered. A CPA can help you determine the correct tax treatment for your specific business model.

Filing and remittance: who do you pay?

BC's separate tax structure creates two distinct filing obligations for most businesses:

GST: filed and remitted to the Canada Revenue Agency (CRA), either monthly, quarterly, or annually depending on your revenue
PST: filed and remitted to the BC Ministry of Finance, monthly or quarterly depending on your PST liability

You must maintain separate records for GST and PST collections. Failing to remit collected taxes on time results in interest charges and penalties from both CRA and the Province of BC.

Key deadlines for BC businesses in 2026

GST annual filing with December 31 year-end: due June 15, 2026
GST quarterly for Q1 2026: due April 30, 2026
GST quarterly for Q2 2026: due July 31, 2026
PST monthly returns: due the last day of the following month
T2 corporate tax return: due six months after fiscal year end

Common GST and PST mistakes BC small business owners make

In our experience working with Metro Vancouver small businesses, these are the most common sales tax errors we see:

Not registering for PST when required, which is especially common among SaaS companies and online retailers
Charging HST instead of separate GST plus PST on BC sales
Missing the $30,000 GST threshold and failing to register on time
Not collecting PST from BC customers under the incorrect assumption that business-to-business sales are exempt
Failing to keep adequate records of PST exemption certificates received from resellers
Missing input tax credits on legitimate business expenses

When should you talk to a CPA about sales tax?

You should consult a CPA when:

You are approaching or have crossed the $30,000 GST threshold
You sell goods or services to customers in multiple provinces
You sell software, SaaS, or digital products to BC customers
You have been selected for a GST or PST audit by CRA or the BC Ministry of Finance
You are registering a new corporation in BC
You are unsure whether your sales are taxable, zero-rated, or exempt