Introduction to Employer Health Tax
The Employer Health Tax (EHT) is a provincial tax in Ontario designed to fund the province’s healthcare system. Starting in 2020 and effective through 2028, this tax is applicable to most employers with a payroll exceeding $1 million. For business owners in Ontario, understanding the EHT is crucial, as it impacts financial planning and operational costs. This article aims to provide a comprehensive overview of the EHT, including its definition, exemptions, registration process, and filing requirements.
Definition of Employer Health Tax
The Employer Health Tax is levied on employers based on their total Ontario payroll. This tax ensures that employers contribute to the funding of the province’s healthcare system, thereby playing a part in maintaining public health services. The tax is calculated as a percentage of the total remuneration paid to employees and is intended to alleviate the burden of healthcare costs funded through other means, such as taxation.
Importance of Employer Health Tax for Business Owners
For business owners, the EHT represents both a responsibility and a financial consideration. Understanding the tax is essential for compliance and for making informed budgeting decisions. Moreover, non-compliance can lead to penalties, which can significantly impact a business’s financial health. Therefore, staying informed about the EHT can help business owners effectively plan their payroll expenses and avoid unintended liabilities.
Exemptions from Employer Health Tax
Eligibility Criteria for Exemptions
Not all employers are subject to the Employer Health Tax. Certain exemptions apply, which can significantly reduce tax liability. For instance, as of 2020, employers with a total annual payroll of less than $1 million are exempt from paying the EHT. This exemption is particularly beneficial for small businesses and startups, allowing them to allocate funds to other critical areas of their operations.
Types of Employers Who May Be Exempt
Employers that may qualify for exemptions include non-profit organizations, charities, and certain public sector entities. Additionally, specific sectors such as agriculture or construction may have different regulations regarding EHT exemptions. Understanding these nuances in eligibility can provide substantial financial relief and allow for more strategic business planning.
How to Register for Employer Health Tax
Steps to Register as an Employer
Registering for the Employer Health Tax is a straightforward process. Business owners must first determine if their payroll exceeds the exemption threshold. If it does, they can complete the Application for Employer Health Tax Registration form found in the Central Form Repository of the Government of Ontario’s website. Before you register for the Employer Health Tax, you must have the following information for your organization:
- Employer type (e.g. associated, multiple accounts or public sector employer)
- Legal name
- Trade name
- Business address
- Mailing address
- Telephone and fax numbers
- Name of contact person and authorized representative
- Payroll start date
- Payroll frequency
- Federal business number (BN)
Necessary Documentation for Registration
The documentation required for registering for the EHT typically includes the business registration documents, payroll records, and identification numbers such as the Business Number (BN) issued by the Canada Revenue Agency (CRA). Having these documents at hand can facilitate a smooth registration process and ensure compliance with the provincial requirements.
Filing the Employer Health Tax Return
Where to Find the Return Form
The Employer Health Tax return form can be found in the same repository as the registration form. Business owners should download the most current version of the form to ensure they have the latest guidelines and requirements. It is advisable to familiarize oneself with the form in advance to streamline the filing process.
How to Fill Out the Return Form
Completing the Employer Health Tax return form requires precise calculations based on total payroll expenses. In addition to the information used for the registration form, employers will need to have the following at hand to complete the return:
- Total Ontario remuneration
- Exemption (if applicable)
- Tax rate
- Installments paid
Conclusion
Summary of Key Points
In summary, the Employer Health Tax is a significant consideration for business owners in Ontario. Understanding its definition, exemptions, registration process, and filing requirements is crucial for compliance and effective financial management. By staying informed, business owners can better navigate the complexities of the EHT and make strategic decisions for their organizations.
Still have questions?
At GHRC we have worked with businesses across Ontario for over 30 years to meet their employment and payroll needs. If you need further assistance navigating the complexities of the EHT for your business, use the contact form below to reach out to see how we can help.
FAQs
What is the Employer Health Tax rate?
The Employer Health Tax rate varies based on the total payroll amount. Employers should refer to the Ontario Ministry of Finance for current rates.
Are there penalties for late remittance of the Employer Health Tax?
Yes, late remittance can result in interest charges and penalties. These charges and penalties become more severe for repeat offenders. It is crucial to adhere to the filing deadlines to avoid these consequences.
Can an employer claim back EHT if they mistakenly overpay?
Employers who believe they have overpaid can request a refund from the Ontario Ministry of Finance. Supporting documentation will be required to process any claims.
Is the Employer Health Tax applicable to all businesses?
No, businesses with a total payroll of less than $1 million are exempt from the EHT. Certain organizations such as non-profits and charities may also be exempt.
How often do I need to file the Employer Health Tax return?
Starting in 2021, employers with a payroll over $1.2 million must pay monthly instalments while employers with payroll under $1.2 million can pay annually.
