British Columbia's February 2026 budget introduced a new tax credit that is easy to miss if your business isn't specifically watching corporate tax measures, but it is worth a close look if you manufacture or process anything in the province: a refundable Manufacturing and Processing Investment Tax Credit worth 15% of eligible capital spending, now in force for investments made on or after April 1, 2026. Unlike most corporate tax credits, this one pays out in cash even if your company has no BC tax payable to offset — which changes how it should factor into a capital-spending decision.
What the credit actually does
The credit refunds 15% of net eligible expenditures on qualifying buildings, machinery and equipment used in manufacturing or processing in BC, up to $2 million of eligible investment per year, for a maximum credit of $300,000. Where a corporation belongs to an associated group, that $2 million annual limit is shared across the group rather than available to each member separately, so related companies need to coordinate their capital plans to avoid leaving credit unclaimed.
The credit is available to Canadian-controlled private corporations (CCPCs) that carry on manufacturing or processing operations in BC. It was introduced as part of Budget 2026, tabled by Finance Minister Brenda Bailey on February 17, 2026, and enacted through the province's Budget Measures Implementation Act, 2026 — it has received Royal Assent and is in force, not a proposal awaiting passage.
Source: Province of British Columbia — B.C. manufacturing and processing investment tax credit.
What counts as "eligible property"
The credit is deliberately narrow in scope, and the 90% threshold is the detail most likely to catch a business off guard:
- New buildings, or new portions of buildings, used 90% or more for manufacturing or processing activity in BC.
- New machinery and equipment used 90% or more for manufacturing or processing, restricted to the categories of assets that also qualify for the federal government's accelerated capital cost allowance treatment for M&P property.
A mixed-use facility that houses manufacturing alongside a showroom, office space, or warehousing for non-manufacturing product lines needs to test each portion of the property against that 90% threshold separately — a building that is 70% production floor and 30% retail front does not qualify as a whole, and a business may need to apportion costs by square footage or another reasonable basis to isolate the eligible share.
Source: Province of British Columbia — B.C. manufacturing and processing investment tax credit.
Why "refundable" is the detail that matters most
Most provincial investment tax credits only reduce tax otherwise payable — worth nothing to a company in a loss year or one still working through non-capital losses from an earlier expansion. This credit is structured differently: because it is refundable, a qualifying corporation receives the cash value of the credit even if it owes little or no BC income tax for the year. For a manufacturer making a large equipment purchase during a low-profit or loss year — not an unusual scenario for a business that is investing heavily precisely because it is scaling up — that distinction is the difference between a credit that helps immediately and one that sits unused as a carryforward.
That also means the credit should be modelled into the actual cash return on an equipment or facility purchase, not just its effect on the tax line. A $1.5 million qualifying equipment purchase carries a $225,000 refundable credit (15% of $1.5 million) regardless of whether the year's operating results would otherwise support claiming a non-refundable credit at all.
The rate steps down starting in 2031 — plan accordingly for multi-year projects
The 15% rate applies to eligible property acquired and available for use between April 1, 2026 and March 31, 2031. After that, the rate declines by 2.5 percentage points per year, phasing out completely for property acquired on or after April 1, 2036. For a business planning a multi-year capital program — a new production line phased in over two or three fiscal years, for example — timing the in-service dates of later phases matters: equipment that becomes available for use just after March 31, 2031 claims a lower rate than an identical purchase made a year earlier, even under the same broader project.
Source: Province of British Columbia — B.C. manufacturing and processing investment tax credit.
How and when to claim it
The credit is claimed with the corporation's T2 Corporation Income Tax Return for the tax year in which the eligible property became available for use. There is a filing deadline attached: the claim must be filed no later than 18 months after the end of the tax year in which the property became available for use, so this is not something to leave for a subsequent year's return once the paperwork catches up. Businesses working with a calendar year-end that put new manufacturing equipment into service in 2026, for instance, need the claim filed by mid-2028 at the latest — but there is no reason to wait, since the refund is available as soon as the return for the year of acquisition is assessed.
What BC manufacturers should do now
- Inventory planned 2026–2027 capital spending on buildings, machinery, and equipment and test each item against the 90%-use-in-manufacturing threshold before assuming it qualifies.
- Check associated-company status if your manufacturing operation sits inside a group of corporations, since the $2 million annual investment cap — and the resulting $300,000 maximum credit — is shared across associated corporations, not available to each one individually.
- Model the credit as a cash inflow, not just a tax reduction, particularly for any purchase happening in a year where BC tax payable is expected to be low.
- Sequence multi-year capital projects with the 2031 rate step-down in mind if a project's later phases could land close to that date.
- Coordinate the BC claim with your federal accelerated CCA claim, since eligible machinery and equipment must already qualify under the federal M&P accelerated CCA categories — the two claims should be prepared together, not as separate exercises.
Key takeaways
- BC's new Manufacturing and Processing Investment Tax Credit refunds 15% of eligible capital spending, up to $2 million of investment (a $300,000 maximum credit), for property acquired April 1, 2026 or later.
- It is refundable — CCPCs get the cash value even with little or no BC tax payable for the year, unlike most investment tax credits.
- Eligible property is limited to new buildings and new machinery/equipment used 90% or more for manufacturing or processing in BC, with machinery/equipment also needing to qualify for the federal M&P accelerated CCA categories.
- The 15% rate applies through March 31, 2031, then steps down 2.5 points a year until it's fully phased out for property acquired from April 1, 2036 onward.
- Claims are filed on the T2 return, no later than 18 months after the end of the tax year the property became available for use.
- The credit is enacted law — it passed through Budget 2026's implementing legislation and received Royal Assent — not a budget proposal still awaiting a vote.
If your business is planning capital spending on manufacturing or processing space and equipment in BC, RN Canada can help model whether a purchase qualifies for this credit, coordinate the claim with your federal CCA position, and build the refund into your project's cash-flow plan.