The BC Employer Health Tax Effective Jan 2019: How Will It Affect Your Business?
In February 2018, BC’s NDP government proposed the Employer Health Tax (“EHT”) as part of their provincial budget. The introduction of the EHT will be supplemented by the elimination of the Medical Service Plan Premiums (MSPP). Medical Services Plan (MSP) premiums are levied on individuals, whereas the new B.C. Employer Health Tax (EHT) will be levied on an employer’s payroll.
The EHT is being implemented as part of the government’s plan to make life more affordable for individuals in British Columbia by providing savings of up to $1,800 per family each year. The government is introducing these savings by shifting the tax from individuals to businesses.
The B.C. Employer Health Tax is effective as of January 1, 2019.
Under the current system of MSP, employers can choose whether they want to pay their employee’s MSP premiums. In contrast, the EHT will be mandatory for businesses unless they meet the new program’s exemptions. MSP premiums (paid by individuals) will be completely phased out by January 1, 2020.
WHO WILL BE AFFECTED? OVERVIEW
The B.C. EHT will apply to the following employers with B.C. payroll:
- Employers in B.C. with payroll greater than $500,000 in a calendar year; this includes corporations, trusts, partnerships and sole proprietorships.
- Associated Employers with a combined payroll of $500,000.
- Charitable and Non-Profit Employers with payroll greater than $1,500,000.
- All total payroll amounts that fall below the EHT thresholds are exempt from filing and paying EHT.
Remember, as soon as the payroll exceeds the exemption thresholds, you are required to register for EHT. So, if you are an employer or associated employer, and your payroll reaches $500,001 or more, you will need to register. If you are a charitable or non-profit employer you will need to register as soon as your payroll reaches $1,500,001.
WHAT PAYROLL (REMUNERATION) IS SUBJECT TO THIS NEW TAX?
Examples of a few items included in payroll (remuneration) that are subject to EHT:
- Salaries and wages
- Bonuses/Commissions
- Commissions
- Vacation pay
- Taxable allowances and benefits
- Stock option benefits
- Employer-paid contributions to RRSP
- Employer-paid group life insurance premiums
There are many factors to consider when determining payroll items that count towards EHT thresholds. Please contact your accountant for a full listing of items to include or exclude from your EHT calculations.
HOW MUCH WILL YOUR BUSINESS BE REQUIRED TO PAY?
Depending on the size of their payroll, for-profit businesses will be subject to EHT rates ranging from 0.98% – 1.95%. The rate of 1.95% will apply to all payroll amounts greater than $1,500,000.
| Annual B.C. Payroll | Calculation | Amount Owing | Rate |
| $500,000 or less | $0 | $0 | 0% |
| $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% |
| $1,500,100 | 1.95% x ($1,500,100) | $29,252 | 1.95% |
| $2,000,000 | 1.95% x ($2,000,000) | $39,000 | 1.95% |
Charities and non-profit organizations’ EHT rates range from 0.42% – 1.95%. These types of employers do not pay the rate of 1.95% until the payroll is greater than $4,500,000.
| Annual B.C. PayroAnnual B.C. Payroll at each location | Calculation separate for each location | Amount Owing | Rate |
| $1,500,000 or less | $0 | $0 | 0% |
| $1,750,000 | 2.925% x ($1,750,000 – $1,500,000) | $7,313 | 0.42% |
| $2,000,000 | 2.925% x ($2,000,000 – $1,500,000) | $14,625 | 0.73% |
| $2,500,000 | 2.925% x ($2,500,000 – $1,500,000) | $29,250 | 1.17% |
| $4,500,100 | 1.95% x ($4,500,100) | $87,752 | 1.95% |
| $5,000,000 | 1.95% x ($5,000,000) | $97,500 | 1.95% |
HOW TO CALCULATE EHT WITH ACCOUNTING SOFTWARE?
Many businesses assume that since this tax is payroll-related, it will be part of a payroll update in their accounting software and will be calculated for them – this assumption is incorrect!
Remember, this is an employer expense, not an employee deduction, so we suggest keeping these calculations separate from your payroll module.
At this time, we recommend monitoring your payroll accounts and calculating EHT manually or using the online EHT calculator provided on the B.C. government website. It is free and easy to use:
https://forms.gov.bc.ca/taxes/employer-health-tax-calculator/
HOW AND WHEN SHOULD BUSINESSES REGISTER AND PAY EHT?
Registration for EHT commences on January 7, 2019. If your total payroll in 2018 would have exceeded the exemption thresholds outlined above you will be required to make EHT instalment payments for the 2019 calendar year. If you are required to make instalment payments, you must register for EHT by May 15, 2019.
Your first installment payment is due on June 15, 2019. Please contact our office for assistance in calculating your required instalment payment amounts.
The registration deadline for all other taxable employers is December 31, 2019. EHT returns and full tax payments will be due annually for all employers on March 31. The first filing deadline of March 31, 2020, will pertain to the payroll for calendar 2019.
If your payroll is not subject to EHT you are not required to register or file an EHT return. As there are several factors that impact exemption status, we recommend you discuss your filing responsibilities with your accountant before making a final registration determination.
All registrations can be done at eTaxBC, the same way a business would register for PST. Payments can be made online through eTaxBC or through your bank via EFT, wire transfers, or as a bill payment.
HOW TO MITIGATE THE EHT IMPACT ON YOUR BUSINESS
Since MSP will not be eliminated until January 1, 2020, some larger corporations will be hit with a double expense of EHT and MSP while they are going through this transition period.
Planning for this change and possibly making adjustments to your business’s remuneration structure can help with navigating the effects of this transition.
Please contact a specialized advisor at Avisar Chartered Professional Accountants for more information or assistance with EHT planning, registration, calculation, and payments.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
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