Frequently asked questions regarding the Municipal and Regional District Tax Program.
Answers to Frequently Asked Questions
What is the Municipal and Regional District Tax (MRDT)?
The Municipal and Regional District Tax (MRDT) is a tax of up to three percent on the purchase of accommodation imposed in specific geographic areas of the province (designated accommodation areas) on behalf of municipalities, regional districts or eligible entities. The MRDT program was originally introduced in 1987 and raises revenue for local tourism marketing, programs and projects.
What does the MRDT apply to?
The MRDT applies to the purchase of accommodation in designated accommodation areas. Taxable accommodation can include hotels, motels, resorts, bed and breakfasts, cottages and cabins and other short term lodging. The MRDT applies in the same manner as the eight percent provincial sales tax (PST) on accommodation. For more information on the application of the MRDT, see Bulletin PST 120, Accommodation
What is the enabling legislation for the MRDT?
Section 123 of the Provincial Sales Tax Act
imposes a tax of up to three percent on the purchase price of accommodation in a designated accommodation area on behalf of a municipality, regional district, or eligible entity (designated recipient).
Where is the MRDT applicable?
The tax is only applicable in designated accommodation areas. Designated accommodation areas can be a municipality, a regional district or a part of a regional district. For a list of participating areas and their tax rates, see MRDT Participating Municipalities, Regional Districts and Eligible Entities in Bulletin PST 120, Accommodation
What is the purpose of the MRDT?
The MRDT raises revenue for local tourism marketing, programs and projects.
What is the MRDT rate?
The maximum rate of tax under the MRDT is three percent of the purchase price of accommodation in a designated accommodation area.
The MRDT is in addition to the eight percent PST on accommodation.
Municipalities, regional districts and eligible entities may voluntarily apply for either a two percent or a three percent MRDT rate.
Why were the MRDT Program Requirements revised?
The MRDT Program Requirements have been revised to clarify the application and renewal requirements, program policies and processes, timelines, and reporting requirements and accountabilities. The revised Program Requirements promote greater accountability and transparency and provide a framework for more effective use of MRDT funds through enhanced alignment between community and provincial marketing strategies.
Revisions to the MRDT Program Requirements include:
Revised application requirements for designated recipients requesting the province impose or renew the MRDT or increase the MRDT rate;
Clarification of the enhanced reporting requirements applicable to all designated recipients;
Clarification of the additional reporting requirements for designated recipients with a three percent MRDT rate;
Clarification on application timelines;
Clarification of reporting timelines;
Revised forms and templates for applications and reporting.
Who is eligible to be a designated recipient under the MRDT program?
The following are eligible to be a designated recipient under the MRDT program:
To qualify as an eligible entity, an applicant must:
Be a not-for-profit business association (e.g. a society incorporated under the Society Act; entities incorporated under the Business Corporations Act are not eligible). Note that a not-for-profit society whose specific purpose is tourism marketing is preferred;
Have a place of business in the designated accommodation area;
Be actively engaged in tourism marketing, programs, or projects in the proposed designated accommodation area;
Have approval from all the regional districts and all municipalities that are in the proposed designated accommodation area.
What are the eligible uses of MRDT funds?
The Designated Accommodation Area Tax Regulation
sets out the authorized purposes for revenue under the MRDT program. Authorized purposes of MRDT revenue for all designated recipients are tourism marketing, programs and projects. Some designated recipients are authorized to use revenue for other purposes as set out in the regulation.
Spending on tourism marketing, programs or projects under the MRDT should contribute to the increase of local tourism revenue, visitation, and economic benefits.
All proposed spending of MRDT revenues must be clearly set out in the Five-Year Strategic Plan and One-Year Tactical Plans which must be approved by the province as part of the approval of an application for the MRDT. For more information about these requirements see Program-Requirements-Application-Procedure.
MRDT revenue must augment current funding and cannot be used to replace existing sources of tourism funding for a designated recipient.
Please note there are two additional requirements related to the use of MRDT revenue:
1) Administration costs
Designated recipients are expected to manage and report out on administrative costs related to use of MRDT revenue, including (as applicable):
2) Capital expenditures
Management and staff unrelated to program implementation
Human Resources staff
Board of Directors costs
Workstation-related information technology costs (i.e., computers, telephone, support, network connections)
General office expenses
Using revenue from the MRDT to finance capital expenditures such as new tourism facilities or infrastructure will only be given consideration in special circumstances. Proposals for capital spending must be included in a designated recipient’s Five-Year Strategic Business Plan, and must demonstrate strong local stakeholder support in order to be considered as an authorized use of MRDT program funds. These proposals will be considered and approved on a case-by-case basis by the province.
Applicants must contact Destination British Columbia program staff prior
to submitting an application that includes proposed capital expenditures.
Please contact Destination British Columbia if you have any questions on approved uses of MRDT revenues at MRDT@destinationbc.ca
Who can I contact with questions about the MRDT Program?
Designated recipients and applicants may request further information about the MRDT Program by contacting Destination British Columbia by email at MRDT@destinationbc.ca
Accommodation providers may request further information on collecting the MRDT by contacting the Ministry of Finance at CTBTaxQuestions@gov.bc.ca
How do municipalities, regional districts and eligible entities apply for the MRDT?
Detailed instructions on the application process for the MRDT are found in the Municipal and Regional District Tax Program Requirements. For more information, visit www.destinationbc.ca/MRDT
How can a designated recipient increase its tax rate to three percent?
A tax rate increase is completely voluntary and will only take effect after an application has been approved by the province.
All existing designated recipients must make a request to the province to increase the tax rate in the designated accommodation area by submitting a completed application. Applications must contain all requirements listed in the MRDT Program Requirements.
Can I apply for a rate increase (to three percent) if I am currently in a five-year term at the two percent rate?
Yes, designated recipients may voluntarily apply for a rate increase (to three percent) prior to their renewal date, but they are subject to the new MRDT Program Requirements and must complete a new application package for approval.
When do I submit my new application, renewal application or rate increase application?
As set out in the MRDT Program Requirements, new applications for the MRDT must be submitted at least nine months in advance of the desired implementation date of the tax.
Renewal applications for designated recipients already collecting MRDT must be submitted at least six months in advance of the end of the five-year term (repeal date).
Voluntary rate change applications (increase from two percent to three percent) must be submitted at least nine months in advance of the desired effective date of the tax. The new tax rate implementation date will be the start date for the new five-year term. Designated recipients not subject to renewal requirements will be required to submit a complete application for the new rate but will continue to not be subject to ongoing renewal requirements.
How often does the MRDT application have to be renewed?
Designated recipients are required to submit a new MRDT application requesting an extension of the MRDT in the designated accommodation area every five years. They must follow the same procedures found within the MRDT Program Requirements.
Which communities continue to be grand-parented?
Designated recipients that were approved between 1987 and 1999 were grand-parented from the requirement to submit renewal applications to extend the MRDT every five years. These designated recipients are Tourism Vancouver, the City of Victoria, the City of Prince Rupert, the Resort Municipality of Whistler, the District of Oak Bay, the District of Saanich and the Town of Smithers. These designated recipients will continue to be exempt from the requirement to submit renewal applications.
Any grand-parented designated recipient voluntarily applying for the MRDT increase to three percent will be required to submit a complete application which meets all requirements listed in the MRDT Program Requirements.
All designated recipients (including grand-parented designated recipients) will be required to comply with the updated MRDT Program Requirements, including annual reporting requirements.
Grand-parented designated recipients must also submit a Five-year Strategic Business Plan, every five years, starting November 30th
They are required to make their Five-year Strategic Business Plan available to tourism industry stakeholders and accommodation providers.
What restrictions are there on the boundaries of a designated accommodation area?
As set out in the MRDT Program Requirements a designated accommodation area may be:
A whole municipality, but not a portion of a municipality
A whole regional district or a portion of a regional district
A combination of municipalities and portions of regional districts
The tax may be levied in more than one municipality or regional district on behalf of a single designated recipient.
Generally, an electoral area is the smallest portion of a regional district that may be prescribed as a designated accommodation area.
Who are considered “tourism industry stakeholders”?
Tourism industry stakeholders may include, but are not limited to, the following within the designated accommodation area:
tourism attraction, sightseeing and related activity businesses;
restaurants, retail and other tourism-related businesses;
regional and local tourism associations;
tourism product sector organizations;
parks and recreation businesses and facilities;
other primary tourism-related businesses; and
other provincial public sector agencies and organizations, within or outside the designated accommodation area, that have programs and services that relate to tourism activity in the designated accommodation area.
How do I determine what types of accommodation are taxable when preparing to consult with accommodation providers?
The onus is on the proposed designated recipient to determine:
whether an accommodation provider offers taxable accommodation within the proposed designated accommodation area, and
the total units of accommodation offered by accommodation providers who offer taxable accommodation within the proposed designated accommodation area.
The same accommodation that is taxable under the Provincial Sales Tax Act
is taxable under the MRDT. For specific information on what types of accommodation is taxable under the PST, please see Bulletin PST 120, Accommodation
While the Province is able to provide names and addresses of registrants under the Provincial Sales Tax Act
, it remains the responsibility of the designated recipient to ensure the accommodation directory is a complete and accurate list of all accommodation providers who offer taxable accommodation within the proposed designated accommodation area.
The Province is prohibited by law from providing any other information about an accommodation provider without that accommodation provider’s written consent.
One unit of taxable accommodation located within the proposed designated accommodation area is sufficient for an accommodation provider to be offering taxable accommodation within the proposed designated accommodation area, even if the accommodation provider also offers accommodation in a different geographic area.
An accommodation provider may be offering taxable accommodation even if the accommodation provider offers the accommodation on behalf of another owner.
An accommodation provider may be offering taxable accommodation even if, at any given time, not all of the units of accommodation within the proposed designated accommodation area are rented.
In determining the total number of units of accommodation offered by accommodation providers who offer taxable accommodation within the proposed designated accommodation area, all units of accommodation offered the accommodation providers must be included, including all exempt units of accommodation provided by the accommodation providers.
What is the process for approving an MRDT application?
A complete application package must be submitted in PDF format to Destination British Columbia via email at MRDT@destinationbc.ca
. The applicant will receive an email from Destination British Columbia confirming receipt of the application package.
Destination British Columbia will review the application and may contact the applicant for additional information. The application is checked for completeness and adherence to MRDT Program Requirements.
Once Destination British Columbia has conducted a review of the completed application package and approved the Five-Year Strategic Business Plan and One-Year Tactical Plan, it will be forwarded to the Ministry of Finance for approval.
If the application is approved by the Ministry of Finance, the application will be forwarded to Cabinet for approval and the Designated Accommodation Area Tax Regulation
will be amended if Cabinet approves the application. The Regulation sets out the designated recipient, the designated accommodation area, the rate of tax, the effective date of the tax, the repeal date of the tax, and the approved uses of the revenue.
What communication can an applicant expect once the application has been submitted?
The applicant will receive an email from Destination British Columbia confirming that the application package has been received.
Once Destination British Columbia completes a review of the application, an email will be sent to the applicant confirming that the application has been forwarded to the Ministry of Finance.
The applicant will be informed by the Ministry of Finance when the amendment to the Designated Accommodation Area Tax Regulation
has been made and will be given information on when the tax will come into effect.
Destination British Columbia will be unable to provide any additional information on the status of the application until a decision has been made by Cabinet.
What are the reporting requirements?
Under the Provincial Sales Tax Act
, all designated recipients must account annually to the Minister of Finance for how money received from the tax has been spent.
As set out in the MRDT Program Requirements all designated recipients must submit the following information, signed by their authorized signing authority to MRDT@destinationbc.ca
Annual Financial Report by April 30th of each calendar year
Annual Performance Report by April 30th of each calendar year
One-year Tactical Plan by November 30th of each calendar year.
Templates for the reporting requirements listed above can be found as Appendices to the MRDT Program Requirements.
Designated recipients not subject to renewal application requirements must also submit a Five-Year Strategic Business Plan every five years starting November 30th
2016. They are required to make their Five-year Strategic Business Plan available to tourism industry stakeholders and accommodation providers.
What time period should the Annual Performance Report, Annual Financial Report and the One-year Tactical Plan be based on?
All reporting must be based on activities for the previous calendar year for the Annual Financial Report and Annual Performance Report and on activities for the upcoming calendar year for the One-Year Tactical Plan. This will ensure consistency to allow for the province to report out on program-wide outcomes and performance measures.
If I stay at two percent, do I need to comply with the new reporting requirements? If so, by when?
designated recipients, including those not subject to the renewal application requirements, will be required to comply with the reporting requirements set out in Section 10 of the MRDT Program Requirements, commencing April 30th, 2016
, with the Annual Performance Report and Annual Financial Report and with the One-Year Tactical Plan due November 30th, 2016
What are the requirements for a One-Year Tactical Plan each year?
As set out in the MRDT Program Requirements a One-Year Tactical Plan is required to provide a brief overview of the strategic direction from the Five-Year Strategic Business Plan. The One-Year Tactical Plan is to include:
A brief overview of the strategic direction from the Five-Year Strategic Business Plan.
Key strategies for the year, if different from the Five-Year Strategic Business Plan, and key target markets.
Detailed tactics for the next year, including details about tactics and activities, as well as a proposed budget for the next year.
Performance measures for next year, including expected outputs, outcomes, and performance metrics. The performance measures must relate to the MRDT program principles.
A suggested template for the One-Year Tactical Plan is provided in Appendix 2.3 of the MRDT program requirements.
The One-Year Tactical Plan must be submitted by November 30 of each year, commencing November 30, 2016. If plans are available earlier, please submit as they become available.
What are the requirements for the Five-Year Strategic Business Plan?
The requirements of the Five-Year Strategic Business Plan are set out in Appendix 1.2.
All applicants will be required to submit a Five-Year Strategic Business Plan, at time of application. Designated recipients not subject to the renewal application requirements will be required to submit a Five-Year Strategic Business Plan every five years, commencing no later than November 30, 2016.
The Five-Year Strategic Business Plan must adhere to the MRDT program principles. It must identify marketing strategies, key markets and targets that the community will focus on to build its tourism business and the steps it needs to take to achieve desired results. All designated recipients will be required to make their Five-year Strategic Business Plan available to tourism industry stakeholders and accommodation providers. Also, please ensure there is alignment between provincial tourism strategies and community tourism efforts.
Please contact Destination British Columbia if you have any questions on completing your Five-Year Strategic Business Plan at MRDT@destinationbc.ca
Are there additional requirements for the new three percent MRDT rate?
Yes, all designated recipients choosing to implement a three percent tax rate will be subject to enhanced reporting requirements in regards to Stakeholder Satisfaction, Community Collaboration, and Coordination with Destination British Columbia (refer to Appendix 2.2 of the MRDT Program Requirements for further details).
It is intended that each designated recipient choosing to implement a rate of three percent will sponsor and contribute to a provincial Tourism Events Program. Under this program, 0.2 percentage points of the incremental one percent of the tax will contribute to a provincially-led program to support tourism events that have provincial significance.
What is the Tourism Events Program and why was it created?
The Tourism Events Program (TEP) is a new program open to all communities in British Columbia, which aims to support the planning, marketing and organization of events and celebrations with a high tourism value and provincial significance. The TEP was created to address a need for the Province to be able to make more strategic investments in tourism, by supporting world class events that increase the volume of visitors to British Columbia and our global reputation.
Hosting international events will attract international visitors and media and build global recognition for our province. As such, it is expected the TEP will enhance the overall impact of MRDT by supporting events that will help ensure our tourism sector remains competitive.
Potential events supported through the TEP could include arts, cultural, or sporting events such as the FIFA World Cup or Canada Winter Games – as these types of events typically grow tourism revenues by increasing the number of visitors coming to British Columbia.
The TEP will be sponsored by MRDT communities that voluntarily choose to apply a 3% MRDT rate.
More information is available at Tourism Events Program.
Implementation of the MRDT:
When will the tax come into effect?
For new applications, the tax will be implemented effective the first day of the month that is three full months after the month in which the tax was approved. For example, if Cabinet approves the tax in May, the tax will be imposed on accommodation purchased in the Designated Accommodation Area beginning September 1. This provides sufficient time for accommodation providers to prepare to collect the tax.
For voluntary rate changes, the new tax will be implemented effective the first day of the month that is 1 full month after the month in which the tax was approved. For example, if Cabinet approves the tax in May, the new tax rate will be imposed on accommodation purchased in the designated accommodation area beginning July 1.
How will accommodation providers be informed of the implementation of the MRDT in a particular community?
The Ministry of Finance will notify accommodation providers a minimum of three months prior to implementation for new MRDT applications. Accommodation providers will be notified of a rate increase one month prior to the new rate coming into effect.
The Ministry of Finance will also provide information on the procedures for collecting and remitting the tax. Accommodation providers may also refer to PST Bulletin 120, Accommodation.
How will the designated recipient receive funds from the MRDT?
Revenue from the MDRT will be disbursed by the Ministry of Finance monthly.
Can changes be made to the approved application mid-term?
Requests for interim changes to the designated recipient or the Designated Accommodation Area will not be considered. Changes to the designated recipient or the Designated Accommodation Area can only be made in a renewal application.
A designated recipient may voluntarily request a change in the rate of tax to three percent of the purchase price of the accommodation prior to their renewal date by submitting a complete application containing all MRDT Program Requirements. If approved, the tax will be renewed for another five-year period.
Proposed changes in the use of revenue from the tax by the designated recipient that require amendments to the Designated Accommodation Area Tax Regulation will generally only be considered with renewal applications, for example: a proposal to use revenue from the tax for capital projects.
Written requests for interim amendments to the Designated Accommodation Area Tax Regulation to change the approved uses of revenue by the designated recipient will only be considered if the province is satisfied that:
there are unexpected or extraordinary circumstances,
the proposed change is essential to support tourism in the designated accommodation area and
the proposed change cannot wait until the tax is renewed in the designated accommodation area.
The designated recipient will also need to provide evidence that there is substantial support for the proposed amendment from the vast majority of the tourism industry and accommodation providers in the designated accommodation area.
Designated recipients should determine that the province’s pre-conditions for consideration have been satisfied before seeking support from the tourism industry and accommodation providers in the designated accommodation area.
Designated recipients do not require approval from Destination British Columbia for changes in marketing tactics previously submitted in their one-year Tactical Plan (as part of their application package or submitted with the annual review), as long as the tactics are consistent with the overall approved five-year Strategic Business Plan.
All other proposed changes in the one-year Tactical Plan or the five-year Strategic Business Plan must be submitted to Destination British Columbia for review and approval in advance of the change being implemented.
What compliance activities does the Ministry of Finance conduct with respect to levying, collecting and remitting the MRDT?
The Ministry of Finance undertakes various compliance-related activities as part of the administration of provincial consumption taxes to ensure that all amounts due are remitted. These compliance activities include the MRDT collected on behalf of designated recipients.
The MRDT is levied under the Provincial Sales Tax Act
. Any compliance activities undertaken in relation to the MRDT are thus carried out as part of those conducted for the PST. As a result, such activities will be undertaken according to schedules and guidelines established for PST.
The Ministry will not undertake any compliance activities in relation to the MRDT beyond those undertaken during the regular course of administration of PST. This includes conducting any investigations into variances between outside estimates of revenues and amounts actually paid to the Ministry by operators.
The Ministry will review specific lead information provided, for example a hotel operating without collecting applicable taxes, and will make a determination as to what if any additional follow up may be warranted. In addition, where large or persistent fluctuations in typical revenues are observed, the Ministry may conduct any further investigation deemed warranted.
Due to privacy restrictions, the Ministry is not able to disclose information regarding individual accounts without the expressed written consent of the account owner. The Ministry is able to provide the names and addresses of registered accommodation providers
What activities would be considered to be non-compliance by a designated recipient of the MRDT Program?
The following activities would be considered in non-compliance of the MRDT Program:
Using MRDT revenue for unauthorized purposes
Not complying with the MRDT Program Requirements and the Annual Performance Management and Reporting Requirements.
How can the MRDT be terminated in a designated accommodation area?
If a designated recipient does not comply with the MRDT Program Requirements, including the Annual Performance Management and Reporting Requirements, and the non-compliance is not corrected in a timely manner, the tax may be terminated in the designated accommodation area.
A designated recipient may make a written request to the Minister of Finance to have the tax cease before the scheduled repeal date.
If the tax ceases in a designated accommodation area for any reason (e.g. failure to submit a completed renewal application on time, written request for early termination, or termination for non-compliance) a new application to impose the tax in that designated accommodation area would be required and it would be subject to the normal processing time associated with new applications. If the tax was cancelled for non-compliance the applicant will also be required to demonstrate that the non-compliance has been corrected and will not be repeated.