News from the Ministry of Provincial Revenue

Directors' liability for tax debts: new statutory provisions in BC

The Provincial Revenue Statutes Amendment Act, 2004, (Bill 34) will introduce directors' liability under the BC Social Service Tax Act, Hotel Room Tax Act, Motor Fuel Tax Act and Tobacco Tax Act. The government has announced that it will allow a six-month grace period for enforcement of the legislation, to run from the date Bill 34 received Royal Assent (May 13, 2004).

Under the legislation, directors and deemed directors may be held liable for a corporation's tax debts that were incurred during the period they served as directors or deemed directors if the corporation fails to collect or remit the tax or pay security. Directors who act appropriately, by exercising due diligence, will not be personally liable.

Deemed directors

A deemed director is a person who performs the function of a director, even though he or she is not a member of the board of directors. An individual cannot be deemed a director solely because he or she is: 1) acting under the direction of a shareholder, director or officer of the corporation; 2) a lawyer, accountant or other professional providing professional services; 3) a trustee in bankruptcy; or 4) a receiver or secured creditor controlling his or her interests in the property of the corporation.

Six-month grace period

The six-month grace period allows corporations and directors to voluntarily disclose existing tax debts and to review financial procedures to ensure that tax debts do not occur in the future.

Once the grace period has expired, directors may be held liable for a corporation's tax debt even though some or all of the debt was incurred before the expiration of the grace period.

For more information

For more information, please refer to Bulletin GEN 010 Directors' Liability on the Consumer Taxation Branch website (www.rev.gov.bc.ca/ctb) or contact the Consumer Taxation Branch at 604 660-4524 in Vancouver, or toll-free at 1-877-388-4440.