If you’re a business owner with British Columbia (BC) remuneration, you may have already begun paying the new Employer Health Tax (EHT), which became effective January 1, 2019.
The provincial government introduced the EHT as a replacement to the Medical Services Plan, with its main goal of shifting some of the financial burden of the provincial healthcare system from individuals to employers. Medical Services Plan (MSP) premiums are expected to be eliminated by Jan 1, 2020, which will help families save as much as $1,800 per year.
However, this can be a confusing time for some business owners. Having to pay a new tax not only increases financial stress, but it also involves learning a whole new set of requirements, beyond BC payroll deductions. But there’s no need to worry—we’ve taken out the guesswork and created a guide with everything you need to know about BC's new Employer Health Tax.
Who has to pay the Employer Health Tax?
The EHT applies to employers with BC remuneration greater than $500,000 for regular employers or $1,500,000 for charitable and non-profit organizations. The term BC remuneration refers to the total BC wages, benefits, and allowances paid in a calendar year by an employer, in essence, the annual payroll.
For the purposes of calculating the EHT, an employer’s BC remuneration includes the total of the following:
- All remuneration paid to the employer’s employees who report for work at the employer’s permanent establishment in British Columbia
- All remuneration paid to the employer’s employees who do not report for work at a permanent establishment of the employer, but are paid from a permanent establishment in British Columbia
So what does this mean for employers who operate in multiple provinces?
To determine the BC remuneration of which employees should be included in your EHT calculations, you need to figure out the province of employment of your employee.
You can figure out the province of employment for your employee using the following criteria:
- The province where an employee lives is not a factor in determining the province of employment
- If an employee is required to physically report to work at the employer’s establishment, the employee’s province of employment is the province where the employer’s establishment is located
- If you’re not required to physically report to work at the employer’s establishment and the employee does not have authority to contract on behalf of the employer, then the employee’s province of employment is the province where the employer’s establishment is located and from where they are paid
How do you register for the Employer Health Tax?
For employers who pay the EHT, they must register for an employer health tax account online through eTaxBC. Once your registration is processed, you will receive an employer health tax account number in the mail. The account number is 11 characters and in the following format: EHT-1234-5678.
Once you have your employer health tax account number, you can enrol for access to manage your account through eTaxBC. From there, you can file returns and make payments online.
What are the tax rates for the Employer Health Tax?
For regular employers:
Employers with BC remuneration of $500,000 or less do not have to pay the EHT, falling under tax exemption.
Employers with BC remuneration between $500,000.01 and $1,500,000 pay the EHT as calculated:
2.925% x (BC remuneration - $500,000 exemption)
Employers with BC remuneration greater than $1,500,000:
Required to pay tax at 1.95 percent of total BC remuneration
Calculation: 1.95% x total BC remuneration
Employers with a permanent establishment for only part of the calendar year must prorate the $500,000 exemption amount, as well as the notch rate amount of $1,500,000.
To prorate the exemption amount: $500,000 x number of days with a permanent establishment in BC / 365 days
To prorate the notch rate amount: $1,500,000 x number of days with a permanent establishment in BC / 365 days
For associated employers:
Associated employers are a group of employers connected by ownership and/or relationships between individuals.
For example, if you or a group or employers own multiple businesses, and the combined BC remuneration for those businesses exceeds $500,000, then each business needs to register and pay EHT. Associated employers must share the $500,000 exemption if their combined BC remuneration is between $500,000.01 and $1,500,000.
There is no EHT exemption for any of the employers if their combined BC remuneration is over $1,500,000.
For charitable and non-profit employers:
To be considered a charitable employer, you need to be a registered charity with the Canada Revenue Agency (CRA).
Charitable and non-profit employers with BC remuneration of $1,500,000 (exemption amount) or less do not pay the EHT.
2.925% x (BC remuneration - $1,500,000 exemption)
1.95% x total BC remuneration
If you do not have a permanent establishment in BC. throughout the calendar year, the exemption amount is prorated. Employers associated with a charitable or non-profit employer are not required to share the exemption with the charitable or non-profit employer.
The first employer health tax annual return is due March 31, 2020, and can be filed through eTaxBC.
Have more questions?
The government of BC has additional information and resources about the Employer Health Tax online such as the EHT calculator and the EHT Overview guide.
EHT calculator: The EHT calculator is a free tool that helps employers estimate their EHT amount.
EHT Overview: The EHT overview is an online guide which includes useful links, examples, and important deadlines.
If you would like to speak with someone at more depth about the EHT, you can call the Province’s helpline Toll-Free (within Canada): 1 877 387-3332.
At Enkel, we provide business owners and non-profit organizations with reliable Payroll management services, giving you peace of mind as you focus on doing what you do best. Contact us today to learn more about how we can help you streamline your payroll process and manage your payroll.