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. 

Employers must pay the tax when their total B.C. remuneration is greater than $1,000,000 (this is referred to as the exemption amount). For charitable and non-profit employers, the exemption amount is set higher, at $1,500,000. 

When employers are associated with one another, they are required to share the exemption amount. However, employers who are associated with a charitable or non-profit employer are not required to share the exemption with the charitable or non-profit employer.

Learn more about how the employer health tax applies to charitable or non-profit employers:

• Definition of a charitable or non-profit employer
• Calculating the employer health tax
• Qualifying locations
  • Determining B.C. remuneration for each qualifying location
  • Calculating the employer health tax with multiple qualifying locations
  • Registering with multiple qualifying locations
  • Filing and paying with multiple qualifying locations
• Instalment payments
• Part-year 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 is not 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 does not include an organization within the government reporting entity.

A charitable or non-profit employer also does not include municipalities and crown corporations that are exempt from paying income tax under sections 149(1)(c) to (d.6) of the Income Tax Act (Canada).

Calculating the employer health tax

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

• Of $1,500,000 (exemption amount) or less does not 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

For example, Registered Charity A pays B.C. remuneration in the amount of $2.5 million for a calendar year. The employer health tax payable for the year is calculated as

• ($2,500,000 - $1,500,000) x 2.925% = $29,250

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 do not have a permanent establishment in B.C. throughout the calendar year.

If you’re a charitable or non-profit employer with multiple locations in B.C., determine if your locations are qualifying locations. If you have more than one qualifying location, you may be eligible for more than one exemption amount. 

Qualifying locations

Meeting the requirements of a qualifying location is only necessary if you have multiple locations and want to determine if you are eligible for more than one exemption amount. 

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:

• The land or premises is or is part of a permanent establishment of the charitable or non-profit employer in B.C.
• The charitable or non-profit employer has the exclusive right to occupy the land or premises
• 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.

Examples - Qualifying locations

To calculate your employer health tax if you have more than one qualifying location:

1. Determine the B.C. remuneration for each qualifying location
2. Calculate the employer health tax for each qualifying location
3. Add up each qualifying location’s employer health tax. The total is your tax payable

Determining B.C. remuneration for each qualifying location

If you’re a charitable or non-profit employer with two or more qualifying locations, you need to determine the B.C. remuneration for each qualifying location.  

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 does not 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. 

Note: If a location is not a qualifying location, the payroll/remuneration related to the location must be allocated to a qualifying location (such as the head office, or another qualifying location that the employees are attached to) for the purposes of calculating the employer health tax payable. The allocation must be reasonable under the circumstances.

For example, charitable or non-profit employer X has five locations in B.C. Two of the five locations are qualifying locations. X must calculate the employer health tax for each of the two qualifying locations. The B.C. remuneration paid to employees who report for work at the other three locations must be allocated to the two qualifying locations in a reasonable manner.

Calculating the employer health tax with multiple qualifying locations

If you have more than one qualifying location, you calculate the employer health tax for each qualifying location using the same tax rates for charitable or non-profit employers. 

Your employer health tax for a calendar year is the total of each qualifying location’s employer health tax. 

Examples - Multiple qualifying locations

Registering with multiple qualifying locations

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

For example, 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 does not 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.

Filing and paying with multiple qualifying locations

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 and the total B.C. remuneration of all your qualifying locations is greater than $1,500,000, you’re still required to file a tax return, even if you do not 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 your employer health tax in the previous calendar year was greater than $2,925. 

Part-year employers

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

• To prorate 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