As you may be aware, we have been actively fighting the Employer Health Tax since January 2018 and are continuing to shine alight on this bad tax policy.
Despite our efforts legislation passed this fall and the EHT is coming. So what does that mean for your business as of January 2019?
How the new tax works
- Businesses with more than $1.5 million in payroll will be levied at a 1.95% tax
- Business with payrolls between $500,000 and $1.5 million will pay reduced rates (2.925% x (Payroll - $500,000)
- Businesses with less than $500,000 in payroll will be exempted from paying the tax
3 things you need to know
1. How is my payroll defined?
Payroll (also known as remuneration) is employment income and taxable benefits under the Income Tax Act (Canada) and includes:
- Salary and wages
- Advances in salary and wages
- Payments for casual labour
- Bonuses, commissions and other similar payments
- Vacation payments
- Gratuities or tips paid through an employer
- Taxable allowances and benefits
- Directors’ fees paid to directors of corporations
- Amounts paid by an employer to top up benefits (e.g. top up for maternity or paternity leave)
- Stock option benefits
- Employer-paid contributions to an employee’s Registered Retirement Savings Plan
- Employer-paid group life insurance premiums
Employer paid contributions or premiums that are not subject to the employer health tax:
- Registered pension plan contributions
- Private health services plan (i.e., extended health) contributions
- Supplementary unemployment benefit plan contributions
- Deferred profit sharing plan contributions
- Retirement compensation arrangement contributions
Additionally, pension, annuity or superannuation payments paid by an employer to a retired employee are not included within payroll.
*The EHT is only levied on employee remuneration, therefore payments made to independent contractors will not be liable to EHT.
2. How do I register?
Employers with B.C. payroll greater than $500,000 will be required to file and pay employer health tax online. Charities and non-profit employers with a payroll over $1,500,000 (per location) will also have to register online. Registration for filing and paying employer health tax will start in January 2019. You can register and find more information here.
If you are subject to pay an instalment for employer health tax in the 2019 calendar year, you must register by May 15, 2019.
All other employers that are required to register must register by December 31, 2019.
If your employer health tax in the previous calendar year exceeded $2,925 (e.g. employers with B.C. payroll over $600,000 OR charities and non-profit employers with B.C. payroll over $1,600,000), instalment payments are required in the 2019 calendar year. The previous year’s tax is considered the amount of tax that would have been payable if the employer health tax were in force January 1, 2018.
If you fall under this category, you must make quarterly instalment payments based on the lesser of:
- 25% of the previous year’s tax, or
- 25% of the current year’s estimated tax
The instalment payment due dates are:
- June 15
- September 15
- December 15
- March 31 – Final payment with return
What is required for registration?
To register, all applicants will require the following information:
- Your federal business number (BN)
- A mailing address and business location address (if different)
- Permanent Establishment date
- Your incorporation number and date, if your business is incorporated
Some applicants will require additional documentation:
- Registered Charity
- Registered Charity Number
- Incorporated outside of B.C.
- A copy of your incorporation documents
- A copy of your partnership agreement
3. How do I pay?
You can bay online using eTax BC, or us a bank or financial institution. The three ways you can make a payment through your bank or financial institution are:
- Electronic funds transfer
- Bill payment service
- Wire transfer
Further Questions? Contact the B.C. government at 1-877-388-4440 (option 1) to ensure your enrollment goes smoothly.
You can also contact CFIB’s Business Resources Department at 1-888-234-2232