ISSUE 13 | JULY 2018
EMPLOYER-PAID BENEFITS TO BE SUBJECT TO NEW B.C. HEALTH TAX
The British Columbia (BC) Budget 2018 included the elimination of Medical Services Plan (MSP) premiums by January 1, 2020 and the introduction of a new Employer Health Tax (EHT) that takes effect on January 1, 2019. This bulletin is a reminder of the upcoming change effective January 1, 2019 and to provide further details about the Employer Health Tax before it takes effect next year. The BC government will begin levying the new EHT in January 2019 as it phases out the province’s MSP premiums. The elimination of MSP premiums is a positive step as BC is the only province in Canada charging healthcare premiums, which are complex and expensive for employers and the government to administer. However, since the EHT comes in one year before the elimination of the MSP premiums, employers that cover the premiums will end up paying both in 2019.
The new EHT will be an incremental tax based on company payroll. Employers with annual BC payroll below $500,000 will be exempt from the tax. Employers with annual BC payroll above $500,000 but less than $1.5 million will pay 2.925% on the portion exceeding $500,000 and employers with payroll above $1.5 million will pay 1.95% of total payroll. Employers will be required to file and pay the EHT online. Registration for filing and payment will start in January 2019 with more details available after the legislation is enacted in the fall of 2018.
As the new EHT is a payroll tax, the BC government has issued a notice that the EHT will apply to employment income and taxable benefits under the Income Tax Act (ITA), including:
- Salary and wages including bonuses and commissions;
- Vacation payments;
- Taxable allowances and benefits;
- Directors’ fees paid to directors of corporations;
- Amounts paid by an employer to top up benefits including maternity and parental leave;
- Stock option benefits;
- Employer contributions to a group RRSP account must include those reported contributions as payroll employment income or remuneration for the purposes of calculating and remitting prescribed EHT;and
- Employer paid premiums to a group life insurance and group sickness of accident insurance that includes accidental death and dismemberment and critical illness.
Payroll items not subject to the new tax include:
- Employer contributions to registered pension and deferred profit-sharing plans;
- Employer contributions to private health services plan; and
- Employer contributions to retirement compensation arrangements.
* Note, this is an information bulletin only. Refer to the Ministry of Finance Employer Health Tax Notice [https://www2.gov.bc.ca/gov/content/taxes/employer-health-tax] for additional details and the precise legislation will be introduced in the fall.