Employer Health Tax 101
This post will take less than 3 minutes to read.
In addition to the amendments to the Employment Standards Act that were discussed in our last blog entry, the B.C. government has introduced a new Employer Health Tax (the “EHT”) in January of this year.
Why is the EHT being implemented?
The government hopes that the EHT will help their efforts to eliminate the Medical Service Plan premiums paid by all individuals. With this new tax, the government hopes to completely eliminate MSP premiums by January 2020.
Who will be affected?
Employers who will be affected by the EHT include individuals, corporations, partnerships, trusts and governments. The EHT also applies to charitable or non-profit employers, however, their tax is calculated in different ways.
The income of employees and former employees who either work for, or are paid through, a permanent establishment in B.C. will be subject to the EHT. This encompasses all payments, benefits or allowances that must be included in the employee’s income under sections 5, 6, or 7 of the Income Tax Act.
Certain employer paid contributions (i.e., for registered pension plans and deferred profit sharing plans) are not subject to the EHT. The same is true of fees paid by employers to independent contractors.
Remuneration declared in 2018, but not paid until 2019, may also be subject to the EHT in 2019.
How much will employers have to pay?
Employers with B.C. remuneration greater than the $500,000 exemption amount in a calendar year, must register for the EHT. The specific taxation rates are as follows:
- Employers with remuneration of $500,000 or less are exempt from the EHT.
- Employers with remuneration between $500,001 and $1,500,000 (notch rate amount) pay a reduced tax of 2.925% of the portion of B.C. remuneration that is above the $500,000 exemption.
- Employers with remuneration greater than $1,500,000 will pay tax at 1.95% of total B.C. remuneration.
Employers who are associated with other employers and if the combined B.C. remuneration of the associated employers is between $500,000.01 and $1,500,000, the employer must share the $500,000 exemption. If the combined B.C. remuneration of the associated employers is greater than $1,500,000, then no exemption is available to any of the employers.
Charities and non-profit employers may be eligible for a $1,500,000 exemption for each location.
How can employers calculate how much they owe?
The government has a helpful calculator on their website. Employers are also recommended to consult with their accountant if they are unsure of the exact calculation.
What deadlines should employers be aware of?
The government has listed a number of important deadlines associated with the EHT on their website:
- January 7, 2019 – Registration is open
- May 15, 2019 – Deadline to register if you are required to pay instalments in the 2019 calendar year
- June 15, 2019 – First instalment payment due date
- December 31, 2019 – Deadline to register for all other taxable employers
- March 31, 2020 – Deadline to file and pay your first return