British Columbia “Employer Health Tax” Now in Effect
As part of the British Columbia government’s plan to phase out Medical Services Plan (MSP) premiums, it has established the new “employer health tax” (EHT), which is now in effect. The EHT shifts some of the burden of subsidizing the B.C. health care system from individuals to employers.
Pursuant to the Employer Health Tax Act, SBC 2018 c. 42, employers who have a “BC payroll” (employers who pay employees from a permanent establishment in BC and employers with employees that report to work at a permanent establishment in BC) will be liable to pay the EHT unless they qualify for an exemption.
MSP premiums were reduced by 50% on January 1, 2018, and will be completely eliminated by 2020. In 2019, BC residents will still be required to make monthly MSP premiums payments. As a result, employers who pay MSP premiums for employees and their families will have to pay both the EHT and MSP (at the 50% reduced rate) in 2019. Enrollment in the MSP program will remain mandatory for all eligible BC residents, even when the premiums are eliminated in 2020.
As we reported in a previous blog post, the tax rate structure will be as follows:
- Employers with annual BC payrolls under $500,000 will be exempt from the EHT.
- Employers with annual BC payrolls between $500,000 and $1,500,000 will pay a reduced rate equal to 2.925% of the portion of remuneration that is over $500,000.
- Employers with annual BC payrolls over $1,500,000 will pay a tax equal to 1.95% of total remuneration.
Charities and not-for-profit organizations will benefit from a higher exemption amount and from other rules designed to lessen the tax burden. Associated employers will be required to share the $500,000 exemption amount.
If an employer is taxable in the 2019 calendar year, the employer will need to register for an employer health tax account using eTaxBC by May 15, 2019, and the first installment must be paid by June 15, 2019. All other employers must register by December 31, 2019 and file and pay their first return by March 31, 2020.