BC Employer Health Tax (EHT): A Complete Guide for Vancouver Businesses

The BC Employer Health Tax (EHT) is a payroll tax introduced in British Columbia in 2019 to fund the provincial health care system after the elimination of MSP premiums. If your business has employees in BC, you may have EHT obligations — and the rules have some nuances that catch employers off-guard. Here’s what you need to know.

What Is the BC Employer Health Tax?

The BC EHT is an annual tax paid by employers based on the total remuneration they pay to employees who report for work at or are paid from a permanent establishment in British Columbia. It is a tax on the employer — not on the employee — and cannot be deducted from employee paycheques.

The EHT applies to businesses, non-profits, charities, and other organizations with BC payroll above a certain threshold.

EHT Thresholds and Rates

The EHT has two key thresholds for 2024:

Exemption Threshold: $1,000,000

If your total BC remuneration for the calendar year is $1,000,000 or less, you are exempt from EHT and don’t need to register or file.

Reduced Rate: $1,000,001 – $1,500,000

If your total BC remuneration is between $1,000,001 and $1,500,000, you pay EHT at a reduced rate calculated as:

EHT = 2.925% × (BC remuneration − $1,000,000)

This phase-in means a business with $1,200,000 in payroll pays: 2.925% × $200,000 = $5,850

Full Rate: Over $1,500,000

If your total BC remuneration exceeds $1,500,000, the full EHT rate of 1.95% applies to your entire payroll (no exemption):

EHT = 1.95% × total BC remuneration

A business with $2,000,000 in payroll pays: 1.95% × $2,000,000 = $39,000

Associated Corporations: The Important Catch

If your business has associated corporations (related companies under common control), the $1,000,000 exemption threshold must be shared among all associated corporations. You don’t each get a separate $1,000,000 exemption.

This means a group of associated companies must designate which entity claims the exemption and file a form annually. Failing to coordinate this correctly can result in EHT owing that wasn’t anticipated.

What Counts as “Remuneration” for EHT?

Remuneration for EHT purposes is broad and includes:

• Salaries and wages
• Bonuses, commissions, and overtime
• Vacation pay
• Taxable benefits (company cars, employer-paid parking, etc.)
• Tips controlled by the employer
• Directors’ fees paid to directors who are employees

Not included:

• Dividends paid to shareholders
• Amounts paid to independent contractors (only T4 employment income counts)
• Reasonable allowances (mileage, per diems)

Who Is an “Employee” for EHT?

EHT applies to employees who report for work at a BC establishment or, if they don’t report to any establishment, are paid from a BC establishment. This covers:

• Full-time and part-time employees based in BC
• Remote employees working from home in BC (if your business has a BC permanent establishment)
• Temporary workers
• Students and co-op students on payroll

Independent contractors paid via T4A (not T4) are not subject to EHT. However, be careful: if workers you’ve classified as contractors would be reclassified as employees by the CRA (see our article on contractor vs. employee), their remuneration would retroactively become subject to EHT.

EHT Registration

You must register for EHT if your BC remuneration exceeds the $1,000,000 threshold (or if you expect it to). Register through BC eTaxBC at etaxbc.gov.bc.ca.

New businesses must register when they expect their BC remuneration to exceed the threshold in the current calendar year. If you’re unsure whether you’ll exceed the threshold, it’s prudent to monitor your payroll quarterly and register before you cross it.

EHT Filing and Payment

Instalments

If your EHT for the prior year exceeded $2,925 (or you expect to exceed this threshold in the current year), you must make monthly instalment payments by the last business day of each month.

Monthly instalment = Prior year EHT ÷ 12

If your prior year EHT was $36,000, your monthly instalment is $3,000, due by the last business day of each month.

Annual Return

Even if you make monthly instalments, you must file an annual EHT return by March 31 of the following year. The return reconciles your actual payroll to your instalment payments, and you pay any balance owing (or receive a credit/refund).

Exemption Filing

If your associated corporations are sharing the exemption, a designated corporation must file an EHT exemption allocation annually by December 31 of the current year using Form EHT-7.

EHT and Remote Work

Since the rise of remote work, many Vancouver businesses have employees working from home across BC and other provinces. EHT applies only to employees who work in BC.

If a remote employee lives and works in Alberta (another province), they are generally not subject to BC EHT — their remuneration isn’t from a BC establishment for EHT purposes, even if the employer is headquartered in Vancouver. However, if that employee reports to a BC office periodically or is paid out of a BC payroll account, the rules get more complex.

For companies with hybrid or distributed teams across provinces, get advice on how to allocate payroll for EHT purposes.

Non-Profit and Charity EHT

Registered charities and non-profit organizations are subject to EHT but have a separate $1,000,000 exemption per location (rather than per entity). A charity operating two locations in BC gets up to $2,000,000 of payroll exempt from EHT.

Penalties for Non-Compliance

Failing to register, file, or pay EHT on time results in penalties:

• Failure to register: Penalty up to 10% of tax owing
• Late filing: 5% of unpaid tax, plus 1% per additional month (maximum 12 months)
• Late payment: Interest at the BC prescribed rate

How EHT Affects Your Business Budgeting

For businesses approaching the $1,000,000 payroll threshold — common for Vancouver businesses with 8–15 employees at typical compensation levels — EHT can be a significant new cost. A business that crosses from $999,000 to $1,100,000 in payroll suddenly faces $2,925 in new tax in the first year.

As payroll grows into the $1.5M+ range, EHT becomes a fixed 1.95% cost of every dollar of payroll. Budget for it explicitly when making hiring plans.

Working With a Vancouver Bookkeeper on EHT Compliance

EHT is straightforward once you’re set up, but registration timing, associated corporation rules, and remote employee allocation have nuances. Hailstone Technologies helps Vancouver businesses understand their EHT obligations, register on time, and manage instalment schedules. Contact us to discuss your payroll compliance needs.