British Columbia Budget 2018 included the announcement of a new payroll tax called the Employer Health Tax (the “EHT”). While legislation and full details on the EHT are expected to be released in the fall of 2018, the BC Government has released preliminary details about the EHT. The EHT is expected to come into effect on January 1, 2019; employers should be aware that the EHT may result in a significant new tax liability for 2019 and future years.
The EHT is intended to replace the existing Medical Services Plan (“MSP”) premiums, which will be phased out on January 1, 2020. Both the EHT (paid by employers) and the MSP (paid by individuals or, in some cases, their employers) will be in effect during the 2019 year.
WHO WILL THE EHT APPLY TO AND WHAT ARE THE FILING REQUIREMENTS?
- The EHT will generally apply to employers with an annual “BC payroll” in excess of $500,000 determined on a calendar year basis. The EHT will apply to BC Payroll, which is: payments to employees who report to work at a permanent establishment of the employer in British Columbia, and
- payments to employees who do not report to work at a permanent establishment of the employer, but are paid from or through a permanent establishment in British Columbia.
BC payroll does not include any payment to employees who report for work at a permanent establishment of an employer that is outside British Columbia.
Employers who are liable for the EHT will be required to file an annual online EHT return; the first return will be for the 2019 year and the filing deadline for that 2019 year return will be March 31, 2020. Employers with BC payroll in excess of $600,000 will be required to make quarterly instalment payments.
Special rules and limits apply to registered charities and not-for-profit employers (see below).
HOW WILL MY EHT LIABILITY BE CALCULATED?
Generally, employers with BC payroll between $500,000 and $1,500,000 will be required to pay the EHT at a rate of 2.925% on BC payroll in excess of $500,000.
