BC Employer Health Tax

Affinity

The 2018 provincial budget announced the elimination of medical service plan premiums and the establishment of a new tax known as the Employer Health Tax (“Health Tax”), which will go into effect on January 1, 2019. Once the Health Tax comes into place the provincial government expects to generate $1.9 billion of revenue annually. Below is a discussion of this Health Tax and what it could mean for your business.

Analysis

The Health Tax applies to all businesses (partnerships, corporations and other entities) who have B.C. payroll which is defined to include:

  • Any payment to employees who report to work at a permanent establishment of their employer in B.C.; and
  • Any payment to employees who do not report to work at a PE of their employer in B.C. but are paid from or through a P.E. in B.C.

Furthermore, payroll used in the Health Tax calculation will include employment income and benefits as considered under the Income Tax Act. This means that bonuses, commissions, vacation pay, director fees and employer paid RRSP contributions would be included in the calculation. In summary, any items that would be reported on a T4 – statement of renumeration would be considered (including taxable benefits).

Contributions to the following types of plans will not be included in the Health Tax calculation:

  • Registered pension plans
  • Retirement compensation agreement
  • Deferred profit-sharing plans
  • Extended health plans
  • Pension, annuity or superannuation by an employer to a retired employee

The gradual rate of tax for businesses would be as follows:

Annual BC Payroll Tax Rate
$500,000 or less 0%
$500,001 to $1,500,000 2.925%
$1,500,001 or above 1.95%

For example, a business with a payroll of $1,250,000 would have a Health Tax bill as follows:

Wage Amount Tax Amount
First $500,000 0%
$500,001 to $1,250,000 2.925% * ($750,000) = $21,938

On a wage bill of $1,250,000, an employer would have to pay a Health Tax of $21,938. As a percentage of payroll this amounts to 1.76%. As payroll rises so does the tax as a percentage of payroll, topping out at a rate of 1.95% (for payroll of $1,500,000 and above). It is important that businesses budget for this additional amount going forward.

Other Considerations

  • Sole proprietors – any profits earned through the operation of their business is not subject to the Health Tax.
  • Self-employed individuals who carry on business through a corporation –any payroll (as defined above) paid to the owner will be subject to the Health Tax. Dividends paid out of after-tax profit will not be considered payroll and will not be subject to the Health Tax.
  • Independent Contractors are not employees of the business and any amounts paid to them will not be subject to the Health Tax.

Registration and payment

Registration for filing and paying Health Tax will start in January 2019 and there is a requirement to file and pay online. In addition, quarterly installments will be required on:

  • June 15th,
  • September 15th,
  • December 15th and,
  • March 31st (due date to file the Health Tax return)

Further information on this Health Tax is expected to be released in the fall of 2018. If you have any questions, please feel free to contact us.

What our clients had to say

We have used Affinity for our small business and personal taxes and they have been excellent. Great service. Iqbal looks after us.
Robert Napoli
Robert Napoli
22:31 22 Mar 19
HIGHLY RECOMMEND for small businesses or just starting out!! Just got off the phone with Mandeep and I couldn't be happier. She answered all my questions and told me about things I never even thought of. We are a new, small business and she informed me in all the ways I could make it easier and more cost efficient. SO looking forward to meeting with her next week, she was my first call and she will be my last! Thanks for everything Mandeep!!
Nimphus 2000
Nimphus 2000
16:59 10 Aug 18
I contacted Mandeep Tung to solicit some tax advice. Mandeep instantly understood and dissected the situation and provided clear and valuable advice which was tailored to my situation. I unhesitatingly recommend her services.
Martin Sheard
Martin Sheard
16:58 10 May 18
I was introduced to Affinity Accounting through a friend. I had such a great experience working with a Mandeep! I highly recommend working with Affinity Accounting. She made it so simple. I only had to pop in the office once! The office was beautiful.
Prem Dhesi
Prem Dhesi
05:21 17 Apr 18
Modern office is nice to visit, helpful staff. My tax return was handled efficient for a fair price. I’ll be back next year.
D Johnson
D Johnson
19:47 12 Apr 18
We are very happy with the firm particularly with Iqbal Shanghera. This is our first year with them. He has done a fantastic job of filing our returns both personal and corporate. He is always prompt, timely and goes out of the way to accommodate us. He is very friendly and very knowledgeable. I will strongly recommend the firm to anybody without hesitation.
Ramani Ramaseshan
Ramani Ramaseshan
04:50 08 Apr 18
Excellent informative service.I would for sure use them again.
douglas wang
douglas wang
14:00 17 May 17
Very knowledgeable and easy to talk to.Definitely coming back next year for my taxes.
Ravi Reddy
Ravi Reddy
16:56 08 May 17
This is the second year that Iqbal did my taxes, he is very professional and did everything quickly.He answered many of my questions throughout the year as I sold a rental property.
Harry D
Harry D
16:09 08 May 17
i really like the service that they provide . they are very polite and helpful and they have a solution for every question..
Manjinder Singh
Manjinder Singh
16:00 08 May 17
The expertise of the Tung Shanghera firm has provided me with tax planning strategies that not only save me money but have provided me with guidance in how to best proceed with aspects of my investment and business interests. The service standard was also excellent and the firm always addressed my inquiries thoroughly and promptly. Highly recommended!
J.S Gill
J.S Gill
00:04 04 Mar 17

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