With tax season approaching, as well as the first employer tax return due on March 31, 2020, let’s take a quick moment to review some important parts of the new employer health tax and what it’s implications are for businesses in British Columbia.
What is the employer health tax in British Columbia?
The BC employer health tax is an annual tax for businesses based on an employer’s remuneration (total amount paid) to it’s employees in BC in a calendar year. It took effect on January 1, 2019 and is intended to replace the now-defunct Medical Services Plan premium (MSP) paid by individuals in BC. Essentially, this means medical services premiums in BC are now covered by businesses instead of individuals.
Does my business need to pay the employer health tax?
If your business had a BC-based payroll (remuneration) greater than $500,000, then you will need to register and pay the employer health tax. If you are a charitable or non-profit employer, then the exemption amount is $1,500,000.
Any payroll is considered BC remuneration if it originates from the employer’s BC-based business. This includes payroll for both employees who are physically present and working remotely, even in other jurisdictions. The official residence of the employee does not matter in the calculation, only whether the source of the remuneration came from an employer’s permanent business establishment in BC.
How much employer health tax will my business pay?
If your business had BC payroll below $500,000, you do not pay the health tax.
If your business had BC payroll between $500,000.01 and $1,500,000, you receive an exemption amount of $500,000 resulting in a reduced tax amount calculated as:
2.925% x (BC payroll – $500,000)
If your business had BC payroll over $1,500,000, you are not entitled to the exemption and the tax is calculated on the full amount:
1.95% x BC payroll
How much employer health tax will my charitable or non-profit organization pay?
Similarly, if your charitable or non-profit organization had BC payroll less than $1,500,000, you do not pay the health tax.
If your organization had BC payroll between $1,500,000.01 and $4,500,000, you receive an exemption amount of $1,500,000 resulting in a reduced amount calculated as:
2.925% x (BC payroll – $1,500,000)
Charities and non-profits with BC payroll greater than $4,500,000 pay the full amount:
1.95% x BC payroll
How do I pay the employer health tax?
You must register your business for an employer health tax account through eTaxBC. You will need some information about your business to register including your federal business number, mailing address, date your permanent establishment started in BC, and your incorporation number (if incorporated).
Some applicants might need additional information such as:
- A registered charity number
- Incorporation documents (if incorporated outside BC)
- Your partnership agreement (if a partnership)
Keep in mind the deadline for the employer health tax return is due March 31, 2020. There may be special circumstances if your business is a joint venture or has seasonal employees. It is always best to speak with a trusted accounting services adviser to ensure no steps are missed, and that you don’t pay more than you have to!
Fernandez Young LLP, Charted Professional Accountants in Downtown Vancouver has more than 30 years experience delivering advice that matters on a wide range of tax-related matters. Fernandez Young is also a founder member of FY International, with offices in over 38 countries.
Contact us here for more information.