BC Government Announces Employer Health Tax Rules
Following its proposal in the February 20th provincial budget, the BC Government has now announced more rules and clarifications around the implementation of the Employer Health Tax, which will start on January 1, 2019. Those rules are explained below and in this Ministry of Finance EHT notice.
The Burnaby Board of Trade (BBOT) is pleased to see some of the clarifications provided, including a larger exemption (up to $1.5 million per location) for non-profits and charities, and confirmation that the tax will be applied marginally/progressively on businesses. However, the BBOT remains deeply concerned with this new tax and continues to oppose its implementation and propose amendments to help make the tax less damaging to small businesses, including increasing and indexing the exemption thresholds. Read the BBOT’s 4-point plan to oppose and fix the Employer Health Tax here.
The new rules confirm that the tax will be applied marginally, with the first $500,000 of payroll exempted from the 2.925% tax for businesses with payrolls up to $1.5 million. For businesses with less than $500,000 in payroll, no tax will be paid. For businesses with payrolls over $1.5 million, the tax is levied at 1.95% but applies to the full payroll.
The new rules also clarify what counts as ‘payroll’ and defines it as wages plus taxable benefits. This means the payroll calculations will include things like commissions, employer-paid retirement contributions, employer-paid gratuities, and maternity/paternity top-ups. A more full list is included in the Ministry of Finance notice.
The notice also announced that charities and non-profits will have an exemption from the tax on the first $1.5 million in payroll per location. For locations with payrolls between $1.5 and $4.5 million, the tax is levied at 2.925% on total payroll minus the $1.5 million. For locations with more than $4.5 million in payroll, the tax is levied at 1.95% on the total payroll.
Business and non-profits with tax owing will have to register and file an annual employer health tax return. Most businesses and non-profits will be required to pay the tax quarterly with the tax return due on March 31.
To read the full Employer Health Tax notice, click here or read the embedded document below.