The Province of British Columbia (BC) will be introducing a new tax that will to take effect January 1, 2019. The purpose of this new tax is to move toward eliminating payments to Medical Services Plan (MSP) premiums and instead transition towards a new tax called Employer Health Tax (EHT).
The BC government admits the administration of MSP premiums has been costly and inefficient to taxpayers. As BC transitions to the EHT system, the government expects to see administration savings of over $50 million annually on a continuous basis. These results of the new EHT do not increase revenues for the government; rather the results will decrease taxes for residents of British Columbia by $800 million per year. Families will save upwards of $1,800, while individuals save upwards of $900 a year.
For 2018, MSP premiums will be reduced by 50% and fully eliminated by January 1, 2020.
Who will pay the new Employer Health Tax?
Employers with an annual BC payroll of over $500,000 will pay on an annual basis. For Employers with an annual BC payroll over $600,000 they will be required to pay quarterly installments. The good news is up to 85% of businesses in BC will not be required to pay the Employer Health Tax.
Business Tax Rate Calculations:
- $500,000 or less will not pay EHT
- Between $500,000.01 and $1,500,000 will pay the tax as calculated:
2.95% x (Payroll – $500,000)
- Greater than $1,500,000 will pay 1.95% of the total payroll:
1.95% x Payroll
Which Charitable and Non-Profit organizations will pay Employer Health Tax?
Charitable organizations with BC payroll are handled differently. Some have several locations and each handles their own payroll. Only the Charity or Non-Profits that have a BC payroll over $1,500,000 at one location will be required to pay EHT annually. For charities that have a location BC payroll over $1,600,000 a year will be required to pay quarterly installments.
Charity and Non-Profit Tax Rate Calculations:
- $1,500,000 or less will not pay EHT
- Between $1,500,000.01 and $4,500,000 taxes are calculated:
2.925% x Payroll for the specific location
- Greater than $4,500,000 taxes are calculated:
1.95% x Payroll for the specific location
There are also special circumstances that are subject for the employer to pay the EHT such as bonuses, commissions, and gratuities. If you are approaching the payroll limits and need more information, give us a call. We are here to help you to get a better grasp of this new Employer Health Tax.