Employer Health Tax for Charitable or Non-Profit Employers

The employer health tax is an annual tax on an employer’s B.C. remuneration paid to employees and former employees in a calendar year beginning on January 1, 2019. 

Find out how the employer health tax applies to charitable or non-profit employers:

Charitable or Non-Profit Employers

You’re considered a charitable or non-profit employer if you’re a registered charity with the Canada Revenue Agency (CRA) or you’re exempt from paying income tax under the following sections of the Income Tax Act (Canada):

  • An agricultural organization, a board of trade, or a chamber of commerce (section 149(1)(e))
  • A registered Canadian amateur athletic association (section 149(1)(g))
  • A corporation constituted exclusively to provide low-cost housing for seniors (section 149(1)(i))
  • A non-profit corporation for scientific research and experimental development (section 149(1)(j))
  • A labour organization or society or a benevolent or fraternal society or order (section 149(1)(k)) 
  • A club, society or association that isn’t a charity and is organized and operated only for social welfare, civic improvement, pleasure or recreation and any other purpose other than profit (section 149(1)(l))

For employer health tax purposes, a charitable or non-profit employer doesn’t include an organization within the government reporting entity.

Calculating the Employer Health Tax

A charitable or non-profit employer with B.C. remuneration:

  • Of $1,500,000 (exemption amount) or less doesn't pay employer health tax
     
  • Between $1,500,000.01 and $4,500,000 (notch rate amount) pays the tax as calculated: 
    • 2.925% x (B.C. remuneration - $1,500,000)
       
  • Greater than $4,500,000 pays the tax as calculated:
    • 1.95% x B.C. remuneration

Use the employer health tax calculator to help you estimate the tax.

The exemption amount is prorated, for a period in a calendar year, if you don't have a permanent establishment in B.C.

Note: Employers who are associated with a charitable or non-profit employer aren't required to share the exemption with the charitable or non-profit employer.

Exemptions

Claiming One Exemption

If you’re a charitable or non-profit employer with B.C. remuneration who is claiming only one exemption for the calendar year, the qualifying location details don’t apply to you. You calculate the employer health tax based on the rates above.

Claiming More than One Exemption

If you’re a charitable or non-profit employer with B.C. remuneration who is eligible to claim more than one exemption, the qualifying location details apply to you. You calculate the employer health tax based on the rates above separately for each of your qualifying locations in B.C.

You’re eligible to claim more than one exemption if you’re a charitable or non-profit employer with:

  • More than one qualifying location, and 
  • Each qualifying location has B.C. remuneration of $4,500,000 or less.

Each qualifying location may be eligible for an exemption. Your employer health tax for a calendar year is the total of each qualifying location’s employer health tax. 

A charitable or non-profit employer with 2 or more qualifying locations can only claim an exemption amount of $1.5 million for each qualifying location, regardless of how many locations the employer may have.

Example - Multiple Exemptions

You’re a charitable or non-profit employer with 5 locations and only 2 of your locations are qualifying locations. You can only claim the exemption amount on the 2 qualifying locations.

The B.C. remuneration paid to the employees at the other 3 locations must be allocated to the 2 qualifying locations.

Register

If you’re a charitable or non-profit employer, you must register for the employer health tax if you have a total B.C. remuneration greater than $1,500,000 (i.e. the total B.C. remuneration of all qualifying locations if you have more than one qualifying location). The $1,500,000 may be reduced for part-year employers.

Example - Register B.C. Remuneration Over $1,500,000

Charity ABC has three locations. Each location has a B.C. remuneration of $1,000,000. Since each location’s remuneration is less than the exemption amount of $1,500,000, Charity ABC doesn’t pay employer health tax. However, all charitable or non-profit employers with a total B.C. remuneration greater than $1,500,000 must still register for the employer health tax, even if they do not pay tax. Therefore, Charity ABC must register for the employer health tax.

For more information on how to register for the tax, see Register for Employer Health Tax.

File & Pay

If you’re a charitable or non-profit employer with multiple qualifying locations you must file and pay your employer health tax on one tax return, calculate one tax amount and submit one payment, if applicable, for all your qualifying locations.

If you’re a charitable or non-profit employer with a total B.C. remuneration (i.e. the total B.C. remuneration of all qualifying locations) greater than $1,500,000, you’re still required to file a tax return, even if you don’t pay the employer health tax.

For more information on how to file and pay your employer health tax, see File and Pay Your Employer Health Tax.

Instalment Payments

Charitable and non-profit employers must make instalment payments if their employer health tax in the previous calendar year was greater than $2,925. 

Qualifying Locations

The land or premises, including any contiguous land or premises, must meet all the following to be considered a charitable or non-profit employer’s qualifying location.

  1. The land or premises is or is part of a permanent establishment of the charitable or non-profit employer in B.C.
  2. The charitable or non-profit employer has the exclusive right to occupy the land or premises.
  3. The land or premises is used and occupied only by the charitable or non-profit employer.

If a charitable or non-profit employer has branches, sections, parishes, congregations or other internal divisions, a qualifying location includes all their locations and all locations of any of its internal divisions that are in one building, or on one property or on contiguous properties.

Reporting for Work at a Qualifying Location

When determining your B.C. remuneration, if you’re a charitable or non-profit employer with only one location, the report for work rules that apply to an employer that isn’t a charitable or non-profit employer apply to determine whether an employee reports for work at a permanent establishment of yours in B.C.

If you’re a charitable or non-profit employer with two or more qualifying locations, you need to determine the following:

  • Whether an employee reports for work at a permanent establishment of yours in B.C., and
  • Which qualifying location each employee’s B.C. remuneration should be allocated.  

The following will help you determine how to allocate an employee’s B.C. remuneration to a specific qualifying location: 

  • If an employee reports for work at a qualifying location in a calendar year, the B.C. remuneration paid to or on behalf of the employee includes all remuneration paid to or on behalf of the employee during the calendar year;
  • If an employee reports for work at more than one qualifying location in a calendar year, all B.C. remuneration paid to or on behalf of the employee during the calendar year is considered to be attributed to the B.C. qualifying location where the employee primarily reports for work;
  • If an employee doesn’t report for work at a qualifying location in the calendar year, the B.C. remuneration paid by the charitable or non-profit employer must be allocated to a qualifying location that is reasonable based on all of the circumstances; and
  • All of the B.C. remuneration paid by a charitable or non-profit employer during a calendar year must be allocated to one or more qualifying locations for the calendar year. 

Example - Reporting for Work at a Qualifying Location

Non-Profit A is a non-profit childcare provider with four qualifying locations of different sizes across the province. 

The B.C. remuneration at each location is as follows.

Location 1: $900,000; Location 2: $400,000; Location 3: $450,000; Location 4: $1,600,000 

Locations 1, 2 and 3 all have B.C. remuneration that is less than $1.5 million and therefore no employer health tax is payable for those locations.

Location 4 must pay the employer health tax since that location has B.C. remuneration that is greater than $1,500,000. The employer health tax for location 4 is $2,925 ($1,600,000 – exemption of $1,500,000) x 2.925%. 

Non-Profit A will file a single tax return combining the employer health tax calculated for each location. In this case, Non-Profit A’s total employer health tax owed will be $2,925 for the calendar year.

Part-Year Employers

Employers that either begin or cease to have a permanent establishment in B.C. in a calendar year are required to pro-rate the exemption amount and the notch rate amount (where the rate drops to 1.95%) as follows:

  • To pro-rate the exemption amount:
    •  $1,500,000 x number of days with a permanent establishment in B.C. / 365 days
  • To prorate the notch rate amount:
    •  $4,500,000 x number of days with a permanent establishment in B.C. / 365 days

Example - Part-Year Employers

Charitable Organization ABC is a registered charity that begins to have a permanent establishment in B.C. on September 1, 2021.

Charitable Organization ABC has a permanent establishment in B.C. during the 2021 calendar year for 122 days.

Charitable Organization ABC will be eligible for a maximum exemption for the 2021 calendar year of $1,500,000 x 122 / 365 = $501,370.

Charitable Organization ABC calculates its notch rate amount at $4,500,000 x 122/365 = $1,504,110.

If Charitable Organization ABC has B.C. remuneration for the 2021 calendar year greater than $1,504,110, Charity A won’t be eligible for an exemption and will be taxed at the rate of 1.95%.

Any B.C. remuneration that is greater than $501,370 and less than or equal to $1,504,110 will be taxed at the notch rate of 2.925%.

If Charitable Organization ABC has B.C. remuneration for the 2021 calendar year that is equal to or less than $501,370, Charitable Organization ABC won’t pay the employer health tax.