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BC Employer Health Tax Summary

March 14, 2019

BC’s new Employer Health Tax (“Health Tax”) is in effect now – as of January 1, 2019

  • For 2019 – the BC government is collecting BOTH the new Health Tax and 50% of the MSP premiums (it collected 50% of the premiums for 2018). MSP is completely phased out at the end of 2019.

How much is the Health Tax?

It’s calculated as a percentage (%) of “B.C. Remuneration” for the associated employer group (see Note 1) with permanent establishments in BC.

BC Remuneration  
(together with associated employers in BC)
Note 1 and 2
Health Tax Rate
on BC Remuneration  
Less than $500,000Nil
(not required to register)
$500,000 to $1,500,0002.925%  
on amounts over $500,000
More than $1,500,0001.95%  
on total BC Remuneration; not just over $500,000
The dollar amounts above in Column 1: Notes:
  • Include associated corporations for Federal income tax purposes and sole proprietors, partnerships (but not joint ventures) and trusts, which are deemed to be companies with one class of voting shares for this Health Tax.
  • are pro-rated when the employer is a part-year employer.

2.

BC registered charities or non-profit employers have different dollar thresholds and brackets. Please contact DMCL for more information.

Examples

BC Remuneration (together with associated employers in BC)Health TaxMarginal Health Tax Rate on next $1 of BC Remuneration
$500,000nilnil
$750,000$7,3122.925%
$1,000,000$14,6252.925%
$3,000,000$58,5001.95%
$5,000,000$97,5001.95%

What’s included in “BC Remuneration”?

  • Generally, it is BC payroll reported on the employee’s T4 or T4A slip.
    • It includes all payments, benefits or allowances that must be included in the income of an employee under sections 5 (salary, wages, bonuses, director’s fees), 6 (employee benefits) or 7 (stock options)* of the Income Tax Act (Canada)

* Fortunately, per BC Finance Rulings – the stock option benefit included is the section 7 stock option benefit (code 38 of amount in box 14 on a T4) less any amount of the 50% deduction that may be available under section 110(1)(d) or (d.1) (code 39 or 41 on a T4)

  • Watch – BC Remuneration also includes remuneration paid to:
    • Employees who do not work in BC but are paid from a BC permanent establishment (i.e. office/warehouse/head office/registered office/place where there is substantial machinery/equipment/land owned or leased);
    • Management or sales personnel who can enter into contracts in BC or fill orders from inventory in BC.
  • What’s NOT included? See the “Remuneration” link below for other exclusions some of which include:
    • Dividends (PLANNING POINT – An owner manager may want to reconsider receiving more dividends (versus a higher salary and bonus) when the company’s payroll (together with associated employers) exceeds $500,000 but watch the Tax on Split Income or “TOSI” rules on dividends).
    • Self-employed individuals’ business or consulting income (whether the payer or the recipient) (NOTE – there are other legal and business considerations on whether the arrangement is or should be an employer/employee relationship instead)
    • Employer-paid contributions or premiums to a:
      • Private health services plan (employers make contributions to a plan to fund employee’s qualifying medical expenses, deductible to the employer and not a taxable benefit to the employee)
      • Deferred profit-sharing plan (employers contribute/share profits with employees; deductible to the employer and employees are taxed when they later receive funds from the plan)
      • Retirement compensation arrangement (generally a retirement savings plan for owner/managers and key employees with tax deductible employer contributions but a 50% a company prepaid refundable tax; employees are taxed when they receive funds from the plan)
      • Registered pension plan
    • Retiring allowances and severances
  • REGISTRATION:  The employer will need to register for the tax by May 15, 2019, if instalments are required (see below – based on 2018 payroll) , or by Dec 31, 2019, if no instalments are needed.
  • ANNUAL FILING AND PAYMENT OF THE TAX is due March 31 of the following year (i.e. March 31, 2020).  Must file electronically through eTaxBC.  Late filing is subject to a penalty of 5% of the Health Tax unpaid as at March 31, plus 1% per month after that.  Interest is charged on late payments.
  • Instalments:
    • 1st instalment is due June 15, 2019.
    • Required if prior year Health Tax is more than $2,925.
    • The 2019 calendar year is based on your 2018 payroll as if the Health Tax were in effect January 1, 2018.
    • Each quarterly instalment is 25% of the lesser of the previous year’s Health Tax or 25% of the current year’s estimated Health Tax (if you use the estimated tax method, interest applies to unpaid/low installments).
    • Due June 15, Sept 15, Dec 15 with the final payment made with the annual return on March 31 (2020).

Links:

This is general information only.  Please contact your DMCL advisor. for how this impacts your business and if you have any questions.