The Budget Measures Implementation (Employer Health Tax) Act, 2018 (“EHT”), received royal assent on November 8, 2018.
The EHT imposes an annual tax on the remuneration paid by employers to or on behalf of British Columbia employees. The tax will commence on January 1, 2020. The EHT will replace Medical Services Plan premiums in British Columbia borne by individuals with an employer-funded model.
The EHT tax rate will vary depending on the total remuneration paid by an employer in BC in a calendar year. Employers whose remuneration to BC employees does not exceed $500,000 in a calendar year are exempt from the tax. Employers whose remuneration to BC employees does not exceed $1,500,000 in a calendar year, will pay a tax rate of 2.925% of the amount by which the remuneration exceeds $500,000. Otherwise, tax is paid at a rate of 1.95% of total BC remuneration. Special provisions apply for charitable and non-profit employers. The EHT prorates these thresholds for employers who have a permanent establishment in British Columbia for only part of a calendar year.
It is important to note that the EHT establishes significant penalties for employers who fail to file a tax return for a calendar year within the time required. The penalty equals 5% of the unpaid tax payable for the calendar year plus an additional amount calculated in the following way:
1% x (the unpaid tax payable for the calendar year) x (the number of months, not exceeding 12 months between the date the return was supposed to be filed and the date the return was filed or the date the employer is assessed a penalty).
The EHT also provides an appeal process of an assessment or a determination. An appeal may be made to the minister and, thereafter, to the Supreme Court.
If you have questions regarding this article, please contact Reut Amit.