Employer health tax overview for 2023 and prior years
Last updated on May 29, 2024This page applies to employer health tax returns for calendar years before 2024.
For employer health tax returns for calendar years from 2024 onwards, visit Employer health tax overview.
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:
- Employers in B.C.
- Charitable or non-profit employers in B.C.
Note: The employer health tax is separate and distinct from remitting source deductions or MSP premiums.
Employers
Employers with B.C. remuneration greater than the exemption amount in a calendar year must register for the employer health tax.
Employers include an individual, a corporation, a partnership, a trust or a government.
A joint venture is not considered to be an employer for purposes of the employer health tax. Rather, it is the venturers individually that are considered to be the employers.
Employers with B.C. remuneration:
- Of $500,000 (exemption amount) or less don’t pay employer health tax
- Between $500,000.01 and $1,500,000 (notch rate amount) pay the reduced tax amount as calculated:
- 2.925% x (B.C. remuneration - $500,000)
- Greater than $1,500,000 pay the tax on their total B.C. remuneration as calculated:
- 1.95% x total B.C. remuneration
Examples - Calculating the employer health tax
B.C. remuneration is $500,000 or less
Employer A’s B.C. remuneration is $450,000. Employer A has B.C. remuneration that is below the exemption amount of $500,000. Therefore, Employer A does not pay the employer health tax.
B.C. remuneration is between $500,000.01 and $1,500,000
Employer B’s B.C. remuneration is $800,000. Employer B’s remuneration is below $1,500,000. Therefore, Employer B is entitled to the exemption amount of $500,000.
Employer B calculates its employer health tax as:
2.925% x ($800,000 - $500,000) = $8,775
B.C. remuneration is above $1,500,000
Employer C’s B.C. remuneration is $1,550,000. Employer C has B.C. remuneration that exceeds $1,500,000. Therefore, Employer C is not entitled to the exemption amount.
Employer C calculates its employer health tax for the year as:
1.95% x $1,550,000 = $30,225
You must register for the employer health tax if you must pay the tax.
If you are associated with other employers and the combined B.C. remuneration of the associated employers is between $500,000.01 and $1,500,000, you must share the $500,000 exemption. If the combined B.C. remuneration of the associated employers is greater than $1,500,000, there is no exemption available to any of the employers.
Note: The B.C. employer health tax is deductible from business income for income tax purposes.
The employer health tax applies differently to charitable or non-profit employers. See employer health tax for charitable or non-profit employers for information.
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 as follows:
- To prorate the exemption amount:
- $500,000 x number of days with a permanent establishment in B.C. / 365 days
- To prorate the notch rate amount:
- $1,500,000 x number of days with a permanent establishment in B.C. / 365 days
Example - Part-year employers
Corporation A begins to have a permanent establishment in B.C. on September 1, 2021.
Corporation A has a permanent establishment in B.C. during the 2021 calendar year for 122 days.
Corporation A will be eligible for a maximum exemption for the 2021 calendar year of $500,000 x 122 / 365 = $167,123.
Corporation A calculates their notch rate amount at $1,500,000 x 122/365 = $501,370.
If Corporation A has B.C. remuneration for the 2021 calendar year greater than $501,370, Corporation A won’t be eligible for an exemption amount and will be taxed at the rate of 1.95%.
Any B.C. remuneration that is greater than $167,123 and less than or equal to $501,370 will be taxed at the notch rate of 2.925%.
If Corporation A has B.C. remuneration for the 2021 calendar year that is equal to or less than $167,123, Corporation A won’t pay the employer health tax.
See Increased Employment Incentive for information about the one-time refundable tax credit for employers. The deadline to apply was December 31, 2021.
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