Exemption amount for associated employers for 2023 and prior years

Corporation A and Corporation B are an associated group of employers. Corporation A has B.C. remuneration of $100,000. Corporation B has B.C. remuneration of $300,000.

To determine whether Corporation A and Corporation B are entitled to claim the exemption amount of $500,000, Corporation A and Corporation B are required to combine their B.C. remuneration.

The combined B.C. remuneration of Corporation A and Corporation B is $400,000. Because the combined B.C. remuneration is below $500,000, neither Corporation A nor Corporation B is required to pay the employer health tax.

Corporation C and Corporation D are an associated group of employers. Corporation C has B.C. remuneration of $200,000. Corporation D has B.C. remuneration of $400,000.

To determine whether Corporation C and Corporation D are entitled to claim the exemption amount of $500,000, Corporation C and Corporation D are required to combine their B.C. remuneration.

The combined remuneration of Corporation C and Corporation D is $600,000. Because the combined B.C. remuneration is below $1,500,000, Corporation C and Corporation D are entitled to claim the exemption amount of $500,000.

As a group of associated employers, Corporation C and Corporation D must enter into an agreement to share the exemption amount. Corporation C claims an exemption amount of $200,000. Corporation D claims an exemption amount of $300,000.

Corporation C will calculate its employer health tax as:

2.925% x ($200,000 - $200,000) = $0

Corporation D will calculate its employer health tax as:

2.925% x ($400,000 - $300,000) = $2,925

Corporation D and Corporation E are an associated group of employers. Corporation D has B.C. remuneration of $700,000. Corporation E has B.C. remuneration of $900,000.

To determine whether Corporation D and Corporation E are entitled to claim the exemption amount of $500,000, Corporation D and Corporation E are required to combine their B.C. remuneration.

The combined remuneration of Corporation D and Corporation E is $1,600,000. Because the combined B.C. remuneration exceeds $1,500,000, neither Corporation D nor Corporation E are entitled to claim the exemption amount of $500,000.

Corporation D will calculate its employer health tax as:

1.95% x $700,000 = $13,650

Corporation E will calculate its employer health tax as:

1.95% x $900,000 = $17,550

In a group of associated employers, Corporation A has a permanent establishment in B.C. from July 1 until the end of a calendar year (184 days). The other corporations in the group have shorter periods for having a permanent establishment in B.C. in the calendar year (all starting after July 1).

The $500,000 group exemption amount and the $1,500,000 group threshold amount are prorated as follows:

• Maximum group exemption amount = $500,000 x (184/365) = $252,055
• Maximum group threshold amount = $1,500,000 x (184/365) = $756,165

If the combined remuneration paid during the calendar year by all of the associated employers is:

• $252,055 or less, you don’t pay the employer health tax for the year
• Between $252,055.01 and $756,165:
  • The group is eligible for the exemption amount of $252,055
  • Each employer in the associated group with B.C. remuneration greater than the allocated exemption amount pays the employer health tax at 2.925%
• Greater than $756,165
  • The group isn’t eligible for the exemption amount for the calendar year
  • Each employer in the group pays the employer health tax at 1.95% of the employer’s BC remuneration

For 59 days of the calendar year (from January 1 to February 28), no employer in the group has a permanent establishment in B.C. Therefore, the exemption amount and threshold amount must be prorated for the 306 days that at least one employer had a permanent establishment in B.C.

• Maximum exemption for the group = $500,000 x (306/365) = $419,178
• Threshold amount for the group = $1,500,000 x (306/365) = $1,257,534

To calculate the maximum exemption amount for each employer within the group of associated employers, each employer would calculate their maximum exemption amount as follows:

• Corporation A has a permanent establishment in B.C. from March 1 to December 31.
  Corporation A has a permanent establishment for the longest period of the group. Therefore, Corporation A’s maximum exemption amount is the same as the maximum exemption amount for the associated group of employers ($500,000 x 306/365) = $419,178
• Corporation B has a permanent establishment in B.C. from May 1 to December 31.
  Corporation B’s maximum exemption amount is ($500,000 x 245/365) = $335,616
• Corporation C has a permanent establishment in B.C. from July 1 to December 31.
  Corporation C’s maximum exemption amount is ($500,000 x 184/365) = $252,055

An agreement cannot assign an exemption amount to an employer that is higher than the exemption amount that employer would have been eligible for if that employer weren't associated.

The total (group) exemption amount claimed by all the employers in the group can’t exceed the group maximum exemption amount.

In this example, no more than $419,178 can be shared among the associated group of employers.

In addition, no more than:

• $419,178 can be allocated to Corporation A
• $335,616 can be allocated to Corporation B
• $252,055 can be allocated to Corporation C

Some possible exemption allocation options are:

• $419,178 to Corporation A and zero to Corporations B and C
• $100,000 to Corporation A, $100,000 to Corporation B, and $219,178 to Corporation C
• Zero to Corporation A, $300,000 to Corporation B, and $119,178 to Corporation C

Once the group has decided how to allocate the $419,178 exemption amount, they must enter into an allocation agreement outlining each employer's exemption amount for the calendar year.