Canada

On 1 January 2019, the government of British Columbia (BC) launched a new Employer Health Tax (EHT) to shift the health care system financial burden from employees to employers. The EHT is a tax levied on an annual payroll for employers with a permanent establishment in BC. The EHT was introduced by the Budget Measures Implementation (Employer Health Tax) Act, 2018 and will phase out Medical Services Plan (MSP) premiums, usually paid by employees.

Background

The MSP premiums were reduced by 50% on 1 January 2018 and monthly payments will still be required until 1 January 2020. Therefore, employers who pay MSP premiums for their employees will be responsible for paying both the reduced MSP premiums and the EHT in 2019.

The government estimates that the EHT will save families as much as CAD 1,800 per year and individuals as much as CAD 900 per year. The switch from MSP to EHT will reduce administrative costs for businesses.

Key details

Employers with BC remuneration greater than CAD 500,000 in a calendar year must register for the EHT and pay as follows: 

  • Employers with an annual remuneration between CAD 500,000.01 and CAD 1,500,000 pay a tax amount of 2.925% on the BC remuneration above CAD 500,000.
  • Employers with an annual remuneration greater than CAD 1,500,000 pay a tax amount of 1.95% on the total BC remuneration.

Employers with BC remuneration of CAD 500,000 (exemption amount) or less do not have to pay the EHT unless they are part of an associated group of employers or if their payroll records were only part of the year.

All taxable employers should be registered with EHT account on eTaxBC by:

  • 15 May 2019, if the EHT amount that would have been paid for 2018 calendar year was greater than CAD 2,925 (if the tax was in force on 1 January 2018).
  • 31 December 2019, if the previous year EHT amount would have been less than CAD 2,925.

Employers that had registered with the EHT by 15 May 2019 begin with quarterly payments due on 15 June, 15 September and 15 December. The deadline to file and pay the first return is 31 March 2020.

Renumeration includes all employment income and taxable benefits under the Canada Income Tax Act. Exemptions include:

  • Registered pension plan contributions.
  • Private health services plan (i.e., extended health) contributions.
  • Supplementary unemployment benefit plan contributions.
  • Deferred profit-sharing plan contributions.
  • Retirement compensation arrangement contributions.
  • Pension, annuity or superannuation payments paid by an employer to a retired employee.
  • Fees paid to independent contractors.

EHT payments are deductible from business income for income tax purposes.

Next steps

Employers with remuneration in B.C. of CAD 500,000 or greater in a calendar year should ensure they are registered for the EHT and are filing quarterly payments when applicable. Business budgets should be reviewed and revised accordingly.