A new health tax regime in British Columbia, Canada
Regulatory update 2 minute read

A new health tax regime in British Columbia, Canada

17 January 2019

The province of British Columbia in Canada has passed new health tax regime that will affect both employers and employees.

The province of British Columbia in Canada has passed new health tax regime that will affect both employers and employees.

Starting on January 1, 2019, Employer Heath Tax (EHT) was introduced to replace and eliminate (by 2020) the Medical Service Plan (MSP). The EHT will be a tax levied on the employer’s payroll as opposed to the MSP where premiums were levied on the employees.

Previously, the MSP consisted of tiers of different premiums which allowed employers the choice of paying their employee’s premiums. If not, the individuals or families would have to pay themselves. This new system will put the health tax entirely on the employers.

The goal of the EHT is to help individuals in British Columbia make life more affordable by shifting the tax away from employees and onto the businesses.

Who will be affected by EHT?

Employees will be happy with the change as they will see more money in their pay checks. As for the employers in B.C. with payrolls greater than $500,000, they will have to file and pay EHT for their employees. Businesses with payrolls less than $500,000 are exempt from EHT.

If employers in B.C. are already paying the MSP for their employees, they will still need to continue to pay it until 2020, in addition to the EHT. This means that some businesses will be paying into both programs ultimately increasing their financial obligation. Businesses will have to be aware of this change when analysing their budgets for their B.C. payroll.

Tax rates

Depending on the size of their payroll, all businesses will have to pay EHT premium rate of 1.95%. Businesses with payrolls ranging from $500,000.01 and $1,500,000 pay the reduced tax amount.  For example, a business with an annual B.C. payroll of 750,000 will pay the tax of 750,000- 500,000 (the remuneration) x 2.925%. All payrolls larger than $1,500,000 pay tax on their local B.C. remuneration with no exemption.

The payroll calculation for businesses includes, salaries, wages, advances, bonuses, casual labour, vacation, tips and gratuities, commissions, taxable allowances and benefits, director’s fees, stock options, employer-paid RSP plans and group life insurance premiums.

Registration for EHT has started and there is an option of monthly or annual payment with companies needed to be registered by May 15, 2019.

The EHT is a mandatory tax and being compliant is as important as paying all other payroll taxes. Failure to comply will result in interest and penalties on your business. 

Get help

Planning for this change and making the necessary adjustments to your budgets and payroll can be complex and challenging. During this transition period, it is important to work with a local partner like TMF Canada, that understands the intricacies of the new law. Our payroll, accounting and tax experts can help with processing the monthly installments for the EHT as well as filing the annual return. Understanding local law, regulations, processes and requirements is what we excel at. Talk to us to see how we can help your business.  

Written by

Debby Marandola

Account & Tax Manager

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