Employer Health Tax 101
By: RBS LawyersIn addition to the amendments to the Employment Standards Act that were discussed in our last blog entry, the B.C. government has introduced a new Employer Health Tax (the “EHT”) in January of this year.
Why is the EHT being implemented?
The government hopes that the EHT will help their efforts to eliminate the Medical Service Plan premiums paid by all individuals. With this new tax, the government hopes to completely eliminate MSP premiums by January 2020.
Who will be affected?
Employers who will be affected by the EHT include individuals, corporations, partnerships, trusts and governments. The EHT also applies to charitable or non-profit employers, however, their tax is calculated in different ways.
The income of employees and former employees who either work for, or are paid through, a permanent establishment in B.C. will be subject to the EHT. This encompasses all payments, benefits or allowances that must be included in the employee’s income under sections 5, 6, or 7 of the Income Tax Act.
Certain employer paid contributions (i.e., for registered pension plans and deferred profit sharing plans) are not subject to the EHT. The same is true of fees paid by employers to independent contractors.
Remuneration declared in 2018, but not paid until 2019, may also be subject to the EHT in 2019.
How much will employers have to pay?
Employers with B.C. remuneration greater than the $500,000 exemption amount in a calendar year, must register for the EHT. The specific taxation rates are as follows:
- Employers with remuneration of $500,000 or less are exempt from the EHT.
- Employers with remuneration between $500,001 and $1,500,000 (notch rate amount) pay a reduced tax of 2.925% of the portion of B.C. remuneration that is above the $500,000 exemption.
- Employers with remuneration greater than $1,500,000 will pay tax at 1.95% of total B.C. remuneration.
Employers who are associated with other employers and if the combined B.C. remuneration of the associated employers is between $500,000.01 and $1,500,000, the employer must share the $500,000 exemption. If the combined B.C. remuneration of the associated employers is greater than $1,500,000, then no exemption is available to any of the employers.
Charities and non-profit employers may be eligible for a $1,500,000 exemption for each location.
How can employers calculate how much they owe?
The government has a helpful calculator on their website. Employers are also recommended to consult with their accountant if they are unsure of the exact calculation.
What deadlines should employers be aware of?
The government has listed a number of important deadlines associated with the EHT on their website:
- January 7, 2019 – Registration is open
- May 15, 2019 – Deadline to register if you are required to pay instalments in the 2019 calendar year
- June 15, 2019 – First instalment payment due date
- December 31, 2019 – Deadline to register for all other taxable employers
- March 31, 2020 – Deadline to file and pay your first return
If you have any questions about the EHT, please feel free to reach out one of the members of our Employment & Human Rights team.
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Employers of all sizes, including charities and not-for-profit organizations, are now eligible for the federal government’s new Canada Emergency Wage Subsidy (CEWS) if they meet the qualifying criteria. The previous wage subsidy program remains available but applies only to small or medium size businesses.
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Employee or independent contractor: which one are you? You might even be a dependent contractor. This intermediate category of “dependent contractor” has emerged over the last few years. Unlike an independent contractor, a dependent contractor must be provided with reasonable notice of termination of the contractor relationship. To determine whether a person is an employee or a contractor, the CRA and the Courts look at the substance of the relationship as a whole, which is exactly what the BC Supreme Court did in the case of Glimhagen v. GWR Resources Inc., 2017 BCSC 761
