What is the Employer Health Tax? Do I need to register?
The Employer Health Tax, or “EHT” is a new tax brought into B.C. by the Provincial Government, effective January 1, 2019. Employers no longer have a choice of whether or not they want to pay for MSP premiums on behalf of their employees – it is now mandatory, unless certain exemptions are met.
MSP premiums are set to be phased out by 2020, and instead, the responsibility for subsidizing the cost of healthcare will be shifted to employers.
What kind of renumeration are subject to EHT?
Here are a few examples of payroll items that the Employer Health Tax applies to:
- Salaries and wages
- Bonuses and/or commissions
- Pay advances
- Vacation pay
- Tips/Gratuities received from an employer
- Any taxable allowances and benefits
- Directors’ fees
- Stock option benefits
- Employer-paid contributions to RRSPs
- Employer-paid group life insurance premiums
- Employer-paid contributions to employer profit sharing arrangements
How much will my tax liability be?
For all employers (other than registered charities or non-profit organizations):
If your total B.C. remuneration
is under $500,000… you qualify for the exemption, and do not have to
register or pay EHT.
If your total B.C. remuneration is between $500,001 – $1,500,000… you must register for EHT, and your total tax liability will be calculated as follows: 2.925% x (B.C. Remuneration – $500,000)
If your total B.C. remuneration is $1,500,001 or more… you must register for EHT, and your total tax liability will be calculated as follows: 1.95% x total B.C. Remuneration
So, here are some examples of how much EHT will be assessed based on your yearly payroll:
|Yearly B.C. Remuneration||Calculation of EHT||Total Amount Due||Effective Rate|
|<$500,000||N/A||$Nil – exemption applies||0.00%|
|$750,000||2.925% x ($750,000 – $500,000)||$7,313||0.98%|
|$1,000,000||2.925% x ($1,000,000 – $500,000)||$14,625||1.46%|
|$1,500,000||2.925% x ($1,500,000 – $500,000)||$29,250||1.95%|
|$1,500,001||1.95% x $1,500,001||$29,250||1.95%|
|$3,000,000||1.95% x $3,000,000||$58,500||1.95%|
However, the exemption is different if you are a Registered Charity or Non-Profit Entity:
- if your total B.C. remuneration is $1,500,000 or less, you qualify for a full exemption.
- if your total B.C. remuneration is between $1,500,000.01 and $4,500,000, the total EHT liability is calculated as 2.925% x (B.C. Remuneration – $1,500,000)
- if your total B.C. remuneration is greater than $4,500,000, your total EHT liability is calculated as 1.95% x total B.C. Remuneration
Please note this is a general guideline and there are many factors that must be assessed when determining the total cost of the Employer Health Tax liability.
TIP: Here is a EHT Calculator to assist you with calculating your total tax liability: https://forms.gov.bc.ca/taxes/employer-health-tax-calculator/
My yearly B.C. remuneration exceeds $500,000 per year. How do I register for Employer Health Tax?
Registration for EHT is done through eTaxBC – it will take ten to twenty minutes to complete, and once it has been processed you will receive an eleven digit health tax account number.
If you’re registered for PST already via eTaxBC, log-in through the same portal and add access to your EHT account.
For business registration, you’ll need the following items:
- Your federal Business Number
- Mailing address and/or business location address
- Date your permanent establishment started in B.C.
- Incorporation number and date
When do I have to register by?
If you are required to pay instalments, you must register no later than May 15, 2019. If you are not required to pay instalments, you must register no later than December 31, 2019.
How do I know if I have to pay instalments? When do I pay them, and when do I file?
If your EHT in the previous calendar year exceeds $2,925, then quarterly instalment payments must be made June 15, September 15, and December 15. The remaining balance owing is due with the final EHT return due March 31 of the following year.
In order to calculate the instalment payments due in 2019, payroll and EHT must be estimated as if the EHT were in effect beginning January 1, 2018.
So, the first filing deadline is March 31, 2020 and it will cover all EHT for calendar 2019. Remember, if your payroll is not subject to EHT you are not required to register or file an EHT return. As there are many factors that impact exemption status and instalment calculations, we recommend you discuss your filing responsibilities with a professional before making a final determination on registration, payment and filing.
For more information you can visit the FAQ section of the Ministry of Finance website on the Employer Health Tax here.
This information is for informational purposes only. As it is impossible to include all situations, circumstances and exceptions, please consult with a qualified professional.