BC Employer Health Tax (BC EHT) – What it is, how to register and how it is calculated.

Jan 24, 2021 | Canadian Tax Topics

What is the BC Employer Health Tax?

The BC Employer Health Tax is an annual payroll tax that came into effect on January 1, 2019. It is tax that is separate from Medical Services Plan (MSP) premiums and current payroll source deductions. The BC EHT calculation is based on remuneration/wages paid to employees who report for work at or are paid from a permanent BC establishment.

The BC government replaced the Medical Services Plan (MSP) premiums paid by individuals with the BC Employer Health Tax paid by employers.  On January 1, 2020, Medical Service Plan (MSP) premiums were discontinued, and the BC Employer Health Tax was in place.  Employers required to pay the BC Employer Health Tax and who were also paying MSP premiums for their employees, had pay both the tax and the MSP premiums for that calendar year.

The BC Employer Health Tax is a legitimate business expense and an allowable income tax deduction.

 

How do we register and get set up with a BC Employer Health Tax account?

The BC Employer Health Tax is operated through eTaxBC and employers with BC remuneration/wages above $500,000 in the calendar year are required to register, set up for and pay the BC EHT.  To register and get set up with an account involves two steps:

  1. Register for the BC Employer Health Tax through eTaxBC to receive a BC EHT account number.
  2. Enroll for access to eTaxBC in order to manage the BC Employer Health Tax account ie: file returns and make payments online.

 

Who pays the BC Employer Health Tax and how is it calculated?

To determine if you are required to pay the BC Employer Health Tax you need to calculate your gross BC remuneration/wages. The list of inclusions, exclusions and special circumstances for this calculation is extensive.  For specific answers go to the CRA website page Determining Remuneration for the BC Employer Health Tax to review the the definitions.  A simplified way to estimate a company’s BC remuneration/wages is to include all amounts that would normally be included on employee T4 slips.

If an employer has BC remuneration/wages:

  • less than $500,000 – they are not required to pay or register for the BC Employer Health Tax.
  • between $500,000.01 and $1.5 million – they are required to register and pay the BC Employer Health Tax calculated using the following formula:  2.925% X (remuneration/wages – $500,000)
  • greater than $1.5 million – they are required to pay the BC Employer Health Tax calculated using the following formula:  1.95% X total remuneration/wages.

 

What is the exemption amount and how is it used in calculating the BC Employer Health Tax amount?

The BC Employer Health Tax has an exemption amount of $500,000.  It is used to determine which companies need to register for and pay the BC Employer Health Tax.  It is also used in calculating the tax owed.  Employers with remuneration/wages greater than $1.5 million do not qualify for the $500,000 exemption but pay a reduced BC Employer Health Tax rate of 1.95%.  See the section above for guidelines.

 

What are some BC Employer Health Tax calculation examples?

BC remuneration/wages of:

  • less than $500,000 calculates as: 2.925% * (500,000-500,000) = $0.00
  • $900,000 calculates as: 2.925% * (900,000-500,000) = $11,700.00 for the year or 11,700.00 / 4 = $2,925 per quarter.
  • $1,700,000 calculated as: 1.95% * 1,700,000 = $33,150 per year or 33,150 / 4 = $8,287.50 per quarter.

For help in estimating your BC EHT amount go to the BC Employer Health Tax Calculator on the government of BC website.

 

Are we required to pay BC Employer Heath Tax installment payments? When are payments due?

  • When the annual BC Employer Health Tax is greater than $2,925, quarterly installment payments are required.  Installment due dates are: Jun-15, Sep-15, Dec-15, and Mar-31.
  • Annual payments are required for all other companies.  Review the BC Employer Health Tax calculation examples as outlined above.

Companies that had to make installment payments in 2019, were required to register for the BC EHT by May-15-2019.  All other companies were required to register by Dec-31-2019.

 

 

 

 

 

 

 

 

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