Employer Health Tax for Charitable & Non-Profit Employers

A charity is a registered charity with the Canada Revenue Agency.

A non-profit organization is a club, society or association that isn’t a charity and is organized and operated only for:

  • Social welfare
  • Civic improvement
  • Pleasure or recreation
  • Any other purpose other than profit

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

Charitable or non-profit employers with B.C. remuneration calculate the employer health tax for each of their qualifying locations separately. Each qualifying location may be eligible for an exemption.  The employer health tax for a calendar year is the total of each qualifying location’s employer health tax. 

Charitable or non-profit employers that pay B.C. remuneration of $4,500,000 or less at a qualifying location are eligible for an exemption amount of $1,500,000 for that location. Charitable or non-profit employers that pay B.C. remuneration of $1,500,000 or less at a location don’t pay the employer health tax for that location.

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.

For each qualifying location with B.C. remuneration:

  • Of $1,500,000 (exemption amount) or less you do not pay employer health tax for the location
     
  • Between $1,500,000.01 and $4,500,000 (notch rate amount) you pay a reduced tax amount for the location as calculated: 
    • 2.925% x (B.C. remuneration for the location - $1,500,000)
       
  • Greater than $4,500,000 pay 1.95% of the location’s total B.C. remuneration

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

Instalment Payments

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

Qualifying Location

The land or premises, including any contiguous land or premises, must meet all of 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 of 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

If you are a charitable or non-profit employer with only one location, the regular report for work rules apply to determine whether an employee reports for work at a permanent establishment of the employer in B.C. 

If you are a charitable or non-profit employer with more than one qualifying location, the following will help to determine whether an employee reports for work at 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: 

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 

Charity A is a registered charity that begins to have a permanent establishment in B.C. on September 1, 2021.

Charity A has a permanent establishment in B.C. during the 2021 calendar year for 122 days.

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

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

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