Tax season has arrived and BC employers should be aware of the Employer Health Tax (“EHT”), which the BC provincial government implemented on January 1, 2019. The EHT is an annual payroll tax that is calculated on the remuneration that an employer pays to its current and former BC employees in a calendar year. Despite the provincial government’s implementation of the EHT in 2019, this year marks the first year of EHT reconciliation. Qualified employers must file their EHT by March 31, 2020.
Employers that are subject to the EHT
Employers that are required to pay the EHT are divided into three categories:
- for-profit employer (includes an individual, a corporation, a partnership, a trust or a government);
- charitable or non-profit employer; or
- associated employer (a group of employers connected with each other by ownership or by a combination of ownership and relationships between individuals).
What is "remuneration"?
As mentioned above, BC’s EHT is calculated on the remuneration that an employer pays to its current and former BC employees in a calendar year. “Remuneration” includes all payments, benefits, or allowances that must be included in an employee’s income. An employer’s BC remuneration includes the total of:
- all remuneration paid to employees who report for work at the employer’s permanent establishment in BC, and
- all remuneration paid to employees who do not report for work at a permanent establishment of the employer, but are paid from or through a permanent establishment in BC.
Importantly, remuneration does not include certain employer paid contributions or premiums, death benefits, retiring allowances or severances, pensions, or annuities paid to retirees. Also, BC remuneration does not apply to employees who report for work at a permanent establishment of the employer outside BC for all or substantially all of the calendar year.
Amount of remuneration payable by employers
The following breakdown provides the amount of EHT that each type of employer is required to pay:
A for-profit employer with BC remuneration in 2019:
- totaling $500,000 or less is exempt from paying the EHT.
- between $500,000.01 and $1,500,000 pays the reduced EHT amount as calculated: 2.925% x (BC remuneration - $500,000).
- greater than $1,500,000 pays the EHT on its total BC remuneration as calculated: 1.95% x total BC remuneration.
A charitable or non-profit employer with BC remuneration in 2019:
- totaling $1,500,000 or less does not pay the EHT.
- between $1,500,000.01 and $4,500,000 pays the EHT as calculated: 2.925% x (BC remuneration - $1,500,000).
- greater than $4,500,000 pays the EHT as calculated: 1.95% x BC remuneration.
An associated employer: If an employer is associated with other employers and the associated employers’ BC remuneration is between $500,000.01 and $1,500,000, each associated employer must share the $500,000 exemption. If the associated employers’ combined BC remuneration is greater than $1,500,000, the associated employers are not eligible for the EHT exemption.
How Does an Employer Register for EST?
Employers that are subject to the EHT should have registered through eTaxBC by December 31, 2019. Registration can take up to 21 days to process, so an employer that is subject to the EHT must create an account to file and pay the EHT for 2019 by March 31, 2020 to avoid a late penalty and interest charges.