As we discussed in our previous article about the new Employer Health Tax, the NDP government announced its new tax would take effect starting January 1st 2019. The BC Employer health tax is designed to assist the government in eliminating MSP premiums paid by employees scheduled for January 1st, 2020. The government will be releasing detailed legislation this fall, but in advance of that they have released additional details about the implementation of this new tax.
The new tax will only apply to employers with a payroll more than $500,000 annually. This tax also only applies to payments made to employees reporting to an employer’s permanent establishment in BC. Or, payments to employees who do not report to a permanent establishment but are paid through a permanent establishment in BC. Complete details will emerge in the coming legislation, but the BC payroll tax does not apply to employees who report for work at a permanent establishment outside of BC. For example, some business owners have multiple locations across Canada, and this tax is designed only to affect salaries and benefits paid to BC employees.
Side note, this tax is not the first of its kind in Canada. Manitoba, Ontario, Quebec and Newfoundland already have a similar tax in affect. Each province has a different tax rate and can be as high as 4.26% as it is in Quebec this year. Compared to BC’s proposed rate of 0.98% to 1.95%.
What income is subject to the BC Employer Health Tax?
Payroll amounts subject to this new tax include all taxable employment income. Some examples include:
- Salaries and wages (and advances)
- Bonuses, commissions or other performance-based income
- Vacation pay
- Taxable allowances or benefits
- Employer-paid contributions to an RRSP
- Employer-paid group life insurance premiums
There are exclusions to the BC Employer Health Tax, these items are not subject to additional taxes:
- Registered pension plan contributions
- Private health services plan contributions
- Deferred profit sharing plan contributions
- Retirement compensation arrangement contributions
- Supplementary unemployment benefit plan contributions
The BC Employer Health Tax requires online filing and payment. If your payroll is over $600,000m payments are to be made quarterly in the online system. Keep in mind, this tax only applies to employee remuneration, and payments made to independent contractors are not subject to this new tax. If you are a sole proprietorship or part of a business partnership, your compensation is treated as “business income,” and is not subject to this new tax.
DENT understands you will likely have many questions as to how this new tax affects your business, group benefits plan and overall financial outlook for 2019. We encourage you to contact us today to discuss the details and how we can assist in preparing your business for the future.
The information in this material is derived from various sources. Material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. This article is not a substitute for tax advice from a licensed accountant. Please contact your accountant for tax advice before acting on any of the ideas above. Before acting on any of the above, please contact us for benefit, pension and insurance advice based on your corporate or personal circumstances.