CANADA - British Columbia employer health tax effective from 1 January 2019
British Columbia (BC) joins other Canadian provinces in enacting a payroll tax to fund public medical coverage, shifting the contribution burden from individuals to employers. Companies should be aware that this will increase employer costs and administration, and should be factoring this in to budgeting for the upcoming year.
The Employer Health Tax (EHT) will only apply to employers who pay BC remuneration in excess of CAD 500,000. BC remuneration generally includes:
- All remuneration paid to employees who report for work at an employer’s permanent establishment (PE) in BC; and
- All remuneration paid to employees who do not report for work at a PE of their employer, if it is paid from or through a PE in BC.
Payments to certain former employees are also included. In addition to this, remuneration paid to employees of non-resident companies who are performing services under an agreement for the benefit of a BC resident employer is subject to the EHT.
Remuneration includes most taxable employment income items (including benefits), such as salary, bonuses, stock option benefits and non-cash amounts. However, there are certain exclusions for non-taxable items, such as registered pension plans and private medical contributions.
The applicable tax rates are as follows:
Employers with annual BC remuneration:
- Of CAD 500,000 or less will not pay EHT
- Between CAD 500,000.01 and CAD 1,500,000 will pay tax at
- 2.925% x (Payroll -CAD 500,000)
- Greater than CAD 1,500,000 will 1.95% on their total payroll
Special rules apply to charitable and non-profit organizations. EHT for these organisations is calculated on a by-location basis, rather than total BC payroll.
Employers that are not subject to EHT will not need to file an annual employer EHT return. Those employers who will owe EHT are required to file and pay the EHT online. The annual return is due by 31 March following the end of each year.
Employers with an EHT liability of more than CAD 2,925 for the previous year are required to make quarterly instalment payments.
2019 instalments are required if the above threshold is likely to be met for the 2019 calendar year. If this is the case, employers should register by 15 May 2019 in advance of the first instalment due on 15 June.
Employers need to take action to ensure that they understand if they will be subject to the EHT. If so, they should register and make 2019 instalments as required. For companies with inbound expatriate assignees to BC, this will increase total assignment costs.