Employer health tax frequently asked questions

The following information will help answer your questions about the B.C. Employer Health Tax:

• Registration
• Instalment payments
• Employer health tax and MSP for 2019
• Partnerships, joint ventures & cost-sharing arrangements
• Remuneration
• Reporting for work in more than one province
• Exemption amount
• Charitable or non-profit employers
• Associated employers
• B.C. employer health tax income tax deduction
• First Nations employers and employees 

Registration

If I’m an employer, who isn’t a charitable or non-profit employer, am I required to register for the employer health tax?

Not every employer must register. Only employers who must pay the employer health tax for a calendar year are required to register. Generally, employers with B.C. remuneration greater than $500,000 in a calendar year must register. However, employers with B.C. remuneration less than $500,000 may have to pay the employer health tax and may be required to register if the employer is part of an associated group of employers or if the employer has a part-year. 

When am I required to register for the employer health tax?

You must register by December 31 of the first calendar year you’re required to pay the employer health tax.

For more information on whether instalment payments are due, see instalment payments.

How do I register for the employer health tax?

Employers who must pay the employer health tax will first need to register for an employer health tax account using eTaxBC. The registration process will take approximately 10 to 20 minutes. Once your registration is processed, you will receive an employer health tax account number. An employer health tax account number is 11-characters long and will be in the following format:  EHT-1234-5678.

Once you have registered for an employer health tax account you can enrol for access to eTaxBC, or if you already have an eTaxBC account, you can logon to add access to your employer health tax account. You can learn more about adding your employer health tax account to eTaxBC by reviewing our eTaxBC Help Guide. For more information on employer health tax registration see Register for Employer Health Tax. 

Instalment payments

Do I need to pay my employer health tax in instalments?

You’re required to pay instalments in a calendar year if the employer health tax amount you must pay was greater than $2,925 for the previous calendar year. If the employer health tax amount you must pay is less than $2,925 you can choose to pay in instalments or make one payment when you file your employer health tax return for March 31.

How do I calculate my employer health tax instalments?

If an employer is required to make instalments for a calendar year, instalments are calculated as 25% of the lesser of:

• The employer’s employer health tax payable for the previous calendar year, and
• The employer’s estimated employer health tax payable for the current calendar year.

How are instalments calculated if an employer starts to have a permanent establishment in B.C. after 2019?

An employer that is new to B.C. and starts to have a permanent establishment in B.C. in 2020 or a later calendar year is not required to make instalments for that year.

For example, if an employer starts to have a permanent establishment in B.C. in 2020, the employer will not be required to make instalments for the 2020 year. The employer may be required to make instalments for the 2021 year if the employer’s employer health tax amount is greater than $2,925 for the 2020 calendar year.

For additional information on calculating instalments, please refer to the question above.

For more information on employer health tax instalments, see File & Pay Your Employer Health Tax.  

Partnerships, joint ventures & cost-sharing arrangements

Is B.C. remuneration allocated to the partners of a partnership?

No. For the purpose of the employer health tax, a partnership calculates and pays its employer health tax - as the employer. The employer health tax is not similar to the Income Tax Act (Canada), which calculates taxable income at the partnership level and then allocates that taxable income to be taxed at the partner level.

How is B.C. remuneration allocated in a joint venture?

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. The remuneration paid through the joint venture must be allocated to the individual venturers on the same basis otherwise used to allocate their revenues and expenses and is considered remuneration paid directly by the individual venturers. Each venturer is subject to the employer health tax on the venturer’s total remuneration paid in the year (including the remuneration allocated from a joint venture).

How is B.C. remuneration allocated in a cost-sharing arrangement?

A cost-sharing arrangement (CSA) is an arrangement between two or more participants to share specific common operating costs, such as capital or lease costs for business furniture and equipment, rent, or utilities. A CSA is common in medical practices or professional services.

A CSA is not an employer for purposes of the employer health tax. Rather, it is the participants individually that are considered to be the employers. A participant includes a sole proprietor, a partnership or an incorporated professional practice.

All B.C. remuneration paid in a calendar year must be allocated to the participants according to the CSA. Any participant allocated some or all of the B.C. remuneration is responsible for paying the employer health tax on that B.C. remuneration.

Remuneration

What is included in remuneration?

This is generally what is included in payroll. For the purpose of the employer health tax, remuneration includes all payments, benefits or allowances that must be included in the income of an employee under sections 5, 6, or 7 of the Income Tax Act (Canada). 

Generally, all payments, benefits or allowances that must be included in the income of an employee under sections 5, 6 or 7 of the Income Tax Act (Canada) are the same amounts that an employer is required to report on an employee’s T4 or T4A slip.

Does the employer health tax apply to remuneration paid to a former employee?

Yes, the employer health tax applies to remuneration paid to a former employee in the calendar year that the former employee was paid.

For more information on remuneration, see Employer Health Tax B.C. Remuneration.

Reporting for work in more than one province

If an employee reports for work at their employer’s permanent establishment in B.C. for some time in a year and then at their employer’s permanent establishment that is outside of B.C. for the rest of the year, is the employee’s remuneration subject to the employer health tax?

The general rule is that if an employee reports for work at the employer’s permanent establishment that is in B.C. at any time in a year, all of that employee’s remuneration for that year should be included in the employer’s B.C. remuneration and be subject to the employer health tax.

An exception to this general rule is that if an employee reports for work at the employer’s permanent establishment that is outside of B.C. for 90% or more of a year, the employee’s remuneration is not considered B.C. remuneration and is not subject to the employer health tax.

Some of my employees are not B.C. residents and they regularly report for work at a permanent establishment of mine that is outside of B.C., but they come to work in B.C. for a short period of time every year. Is their remuneration subject to the employer health tax?

It depends. If the time the employees work at the permanent establishment that is outside of B.C. is 90% or more of a calendar year, their remuneration is not considered B.C. remuneration. If the time the employees work at the permanent establishment that is in B.C. is more than 10% of a year, their remuneration is considered B.C. remuneration.

For example, an employee regularly works at a permanent establishment that is outside of B.C., but in 2019, the employee works at a permanent establishment that is in B.C. from January to March. The employee’s remuneration is considered B.C. remuneration because the employee works at a permanent establishment that is in B.C. for 25% of the year (i.e. the employee did not work at a permanently establishment that is outside of B.C. for 90% or more of the year).

Exemption amount

Am I exempt from the employer health tax?

The Employer Health Tax Act does not exempt any employers; however, there is an “exemption amount” available to all employers. Generally, employers with B.C. remuneration that is below $500,000 don’t have to pay employer health tax. However, the exemption amount of $500,000 may be lower or nil where an employer is a part-year employer (began or ceased to have a permanent establishment in B.C. in the calendar year) or where an employer is part of a group of associated employers.

For charitable or non-profit employers, the exemption amount is $1,500,000 and may be available for each qualifying location for a charitable or non-profit employer that has 2 or more qualifying locations.

For more information on the exemption amount, see Employer Health Tax Overview and Employer Health Tax for Charitable or Non-Profit Employers. 

Charitable or non-profit employers

If I’m a charitable or non-profit employer with 2 or more qualifying locations, am I required to register for the employer health tax?

Unlike other employers, the requirement of a charitable or non-profit employer to register for the employer health tax isn’t dependent on whether that employer must pay employer health tax.

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). 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 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 each location is exempt. Therefore, Charity ABC must register for the employer health tax.

What is a qualifying location?

A charitable or non-profit employer has a qualifying location where:

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.

A charitable or non-profit employer with 2 or more qualifying locations is eligible for an exemption amount of $1,500,000 million for each qualifying location.

What if a charitable or non-profit employer doesn’t have a qualifying location or has less than 2 qualifying locations?

If a charitable or non-profit employer doesn’t have a qualifying location, the charitable or non-profit employer may still be eligible for an exemption amount of $1,500,000.

A charitable or non-profit employer only has to have a qualifying location in order to claim the exemption amount for 2 or more qualifying locations.  If a charitable or non-profit employer doesn’t have 2 or more qualifying locations, the charitable or non-profit employer can still claim one exemption amount of $1,500,000 as long as the charitable or non-profit employer doesn’t have B.C. remuneration that exceeds $4,500,000.

What if a charitable or non-profit employer operates at 5 locations but only has 2 qualifying locations?

A charitable or non-profit employer with 2 or more qualifying locations can only claim an exemption amount of $1,500,000 for each qualifying location, regardless of how many locations the employer may have.

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

If I’m a charitable or non-profit employer with only one Canada Revenue Agency (CRA) payroll reporting number, does this affect whether an organization has multiple qualifying locations?

No, an organization doesn’t need to have more than one payroll reporting number or other organization-related reporting number to claim an exemption amount for multiple qualifying locations.

If an employer is an organization within the government reporting entity as defined in the Budget Transparency and Accountability Act, does that mean that the organization isn’t a charitable or non-profit employer and isn’t eligible for the exemption of $1,500,000?

Yes, an employer that is a government reporting entity as defined in the Budget Transparency and Accountability Act is not considered a charitable or non-profit employer for the employer health tax and is eligible for the employer exemption of $500,000, if B.C. remuneration does not exceed $1,500,000.

Do charitable or non-profit employers with multiple qualifying locations have to file a separate tax return for each qualifying location?

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 a charitable or non-profit employer has multiple qualifying locations with B.C. remuneration below $1,500,000 for each of those qualifying locations, does the charitable or non-profit employer have to file a tax return?

Maybe. 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 required to file a tax return, even if you don’t pay the employer health tax.

For more information on the requirement of a charitable or non-profit employer with 2 or more qualifying locations to register for the employer health tax, see the registration question above.

For more information on charitable or non-profit employers, see Employer Health Tax for Charitable or Non-Profit Employers. 

Associated employers

Is the combined B.C. remuneration for all the B.C. employers in an associated group of employers used to determine the exemption amount?

Yes, the combined B.C. remuneration for the associated group of employers for a calendar year includes the B.C. remuneration of all the B.C. employers that are within that associated group of employers.

How is the exemption amount determined for an employer that is associated with other employers?

If an employer is associated with other employers, the exemption amount is based on the group of associated employers’ combined B.C. remuneration. If the group’s combined B.C. remuneration is between $500,000 and $1,500,000, the group of associated employers is eligible for one exemption amount as a group. If the group’s combined B.C. remuneration exceeds $1,500,000, the group is not eligible for an exemption. Each employer’s employer health tax is 1.95% of each employer’s B.C. remuneration.

The association rules don’t apply to a charitable or non-profit employer.

For more information on associated employers, see Employer Health Tax for Associated Employers.

B.C. employer health tax income tax deduction

Is the B.C. employer health tax deductible for income tax purposes?

Yes, the B.C. employer health tax is deductible from business income for income tax purposes.

First Nations employers and employees

I have a few employees who are First Nations individuals. Do I exclude their remuneration when I calculate my employer health tax liability?

An employer can exclude the remuneration of a First Nations employee from the employer health tax liability if the employee:

• Doesn’t pay tax under section 5, 6, or 7 of the Income Tax Act (Canada) because they’re a status Indian under the Indian Act, and
• Earned their income on a reserve  

Any remuneration paid to that employee that’s exempt from the employer health tax does not need to be included in the remuneration used to determine:

• An employer’s exemption amount
• An employer’s obligation to register for the employer health tax
• An employer’s obligation to file a tax return

I’m a First Nations individual or band and have my own business on a reserve. Do I pay the employer health tax?

If a First Nations individual or band is an employer doing business on a reserve, the individual or band is exempt from the employer health tax. This applies regardless of whether their employees are status or non-status Indians under the Indian Act.