BC Employer Health Tax
BC's Employer Health Tax (EHT) is a payroll tax on BC remuneration above a $1,000,000 exemption for regular employers, with a graduated notch rate between $1M and $1.5M and a flat 1.95% on payroll above $1.5M.
Definition
The BC Employer Health Tax (EHT) is a provincial payroll tax imposed on employers under the Employer Health Tax Act (BC). It replaced Medical Services Plan (MSP) premiums when MSP was eliminated on January 1, 2020. EHT is calculated on BC remuneration paid in the calendar year and is filed annually through eTaxBC, with instalments required for larger employers.
Key rules
2026 EHT thresholds and rates for regular (non-charitable) employers:
Key operational rules:
- The $1,000,000 exemption threshold was raised from $500,000 effective January 1, 2024. Charitable and non-profit employers have a different structure with a higher exemption applied per qualifying location.
- BC remuneration includes salaries, wages, bonuses, commissions, taxable benefits, and directors' fees paid to employees who report for work at a BC establishment or who are paid from a BC establishment.
- Associated employers must share the $1,000,000 exemption. The allocation is made on the EHT return.
- Dividends are NOT employment remuneration and are not subject to EHT; this is a key advantage of dividend-based compensation for owner-managers below the payroll tax threshold.
- Annual EHT return is due March 31 of the year following the calendar year. Employers with prior-year EHT over $2,925 must make quarterly instalments (June 15, September 15, December 15, and the March 31 final payment).
A one-person BC incorporated corporation paying the owner a $120,000 salary has BC remuneration of $120,000, which is well below the $1,000,000 exemption. No EHT is owing and no EHT return is required unless remuneration exceeds the threshold.
Example
A BC corporation has 2026 BC payroll of $1,250,000 (and is not associated with any other employer).
- Amount above the $1,000,000 exemption: $1,250,000 - $1,000,000 = $250,000.
- EHT at the notch rate: $250,000 × 5.85% = $14,625.
Because prior-year EHT exceeded $2,925, the corporation must make three quarterly instalments of $3,656.25 each (June 15, September 15, December 15, 2026) and pay the balance on March 31, 2027. Penalty and interest apply to missed instalments.
For a second example at $2,000,000 BC payroll:
- EHT at the flat rate: $2,000,000 × 1.95% = $39,000. No exemption applies because payroll exceeds $1.5 million.
Common mistakes
- Confusing EHT with WorkSafeBC. They are separate taxes administered by separate agencies with different bases and rates.
- Forgetting that associated corporations share a single $1,000,000 exemption. Two $800,000 associated payrolls do not both qualify for the full exemption.
- Missing the March 31 annual return deadline. Late filing triggers penalty of 5% of unpaid EHT plus 1% per month, maximum 12 months.
- Including dividends in the EHT base. Dividends paid to shareholder-employees are not employment remuneration.
Related concepts
Authority
- Employer Health Tax Act (BC), SBC 2018, c. 42
- Employer Health Tax Regulation, BC Reg 269/2018
- BC Ministry of Finance EHT Notice 2024-004
See also
Related entries
WorkSafeBC Registration
BC incorporated companies, including one-person corporations, must register with WorkSafeBC; active shareholders who perform work are treated as workers under the Workers Compensation Act.
WorkSafeBC Premiums
WorkSafeBC premiums are assessed on insurable earnings per classification unit; the 2025 average base rate was approximately $1.55 per $100 of assessable payroll, with quarterly reporting and payment.
Payroll Account (RP)
The RP program account is the CRA identifier a corporation must open before it can remit source deductions for employees.
Ontario Employer Health Tax
The Ontario Employer Health Tax (EHT) is an employer-paid payroll tax ranging from 0.98% to 1.95% on total Ontario remuneration, levied under the Employer Health Tax Act to fund the province's health system.
This entry is for general reference. It does not constitute professional tax advice. Consult a qualified Canadian accountant for your specific situation.