Bill 44, Budget Measures Implementation (Employer Health Tax) Act, 2018 received first reading in the British Columbia legislative assembly on October 16. If enacted, Bill 44 will introduce an employer health tax (EHT) or “payroll” tax on employers’ payrolls commencing in the 2019 calendar year. More specifically, the EHT will apply to remuneration paid to employees who report to work at a BC permanent establishment or who receive remuneration through a BC permanent establishment. The EHT will not apply to employers with payroll in BC under $500,000. In general, employers with payroll over $1.5 million will pay the maximum rate of 1.95% on their total BC payroll. For employers with BC payroll between $500,000 and $1.5 million, the tax rate will be 2.925% calculated on their total BC payroll after deducting an initial $500,000 exemption. The EHT was introduced to help offset the loss in revenues resulting from the elimination of the Medical Services Plan (MSP) premiums currently paid by individuals resident in British Columbia. The BC government reduced MSP premiums by 50% effective January 1, 2018, and plans to fully eliminate them effective January 1, 2020.

A Tax Alert prepared by Ernst & Young Canada, and attached below, provides additional details.

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Full text of this Tax Alert