Employer Health Tax in Canada: Rates, Remuneration, and Filing

The Employer Health Tax in Canada is a provincial payroll tax paid entirely by employers, not employees, and it is calculated on the total remuneration paid to workers attached to a permanent establishment in the province. Only Ontario and British Columbia use that exact name, though Quebec and Manitoba run parallel employer payroll levies of their own. What you owe, when you file, and whether you owe anything at all depends on which province’s payroll you’re running and how large it is.

Which Provinces Charge an Employer Health Tax

Ontario and British Columbia are the two provinces that impose a tax under the “Employer Health Tax” name, each with its own statute, rate table, exemption threshold, and filing calendar. Quebec charges employers a contribution to its Health Services Fund, calculated as a percentage of total remuneration that varies by payroll size and sector.¹ Manitoba imposes a Health and Post-Secondary Education Tax Levy on employers with a permanent establishment in the province.² The programs share a common purpose but not their rules. If you run payroll in more than one of these provinces, treat each obligation separately.

Ontario Rates and Exemption

Ontario uses a graduated rate structure tied to total Ontario remuneration for the calendar year:³

Up to $200,000: 0.98%
$200,000.01 to $230,000: 1.101%
$230,000.01 to $260,000: 1.223%
$260,000.01 to $290,000: 1.344%
$290,000.01 to $320,000: 1.465%
$320,000.01 to $350,000: 1.586%
$350,000.01 to $380,000: 1.708%
$380,000.01 to $400,000: 1.829%
Over $400,000: 1.95%

Private-sector employers can claim an exemption on the first $1,000,000 of Ontario payroll, which means many small businesses owe nothing. But if your organization (or your associated group) has combined annual payroll above $5,000,000, the exemption disappears entirely and EHT applies from the first dollar.⁴

British Columbia Rates and Exemption

B.C. takes a simpler three-tier approach. For the 2026 calendar year:⁵

$1,000,000 or less: no tax owed.
$1,000,000.01 to $1,500,000: 5.85% of the portion exceeding $1,000,000. An employer with $1,200,000 in B.C. remuneration would owe 5.85% of $200,000, or $11,700.
Over $1,500,000: the full 1.95% rate applies to total B.C. remuneration, not just the amount above the threshold.

The switch from a marginal calculation to a full-payroll calculation at $1,500,000 catches employers who plan around the threshold rather than through it.

What Counts as Remuneration

Both provinces define remuneration broadly, keyed to sections 5, 6, and 7 of the federal Income Tax Act.⁶ The categories that count include:

Cash compensation: salaries, wages, bonuses, commissions, signing bonuses, vacation pay, and termination pay in lieu of notice.
Taxable benefits: personal use of a company car (the standby charge and operating benefit), flat-rate car allowances, housing allowances, and low-interest employee loans where the interest saved is a taxable benefit.
Equity-based compensation: stock option benefits when deemed received by the employee.
Other payments: directors’ fees, employer contributions to employee profit-sharing plans, controlled tips paid through the employer, and taxable gifts or awards above $500.

Remuneration does not include pensions or annuities paid to retired employees. The working rule: if an amount appears as employment income on a T4, it almost certainly counts toward your EHT payroll total.

Remote Workers and Permanent Establishment

Where an employee sits physically is not the whole answer. In Ontario, EHT applies to remuneration paid to employees who report to an Ontario location, employees who are “attached” to an Ontario permanent establishment even if they work elsewhere, and employees paid from an Ontario office when they don’t report to any permanent establishment at all.⁷

A home office is generally not a permanent establishment. Ontario’s Ministry of Finance will treat one as such only when it is used regularly for important business functions such as in-person client meetings, the employee is required to maintain it as a condition of employment with the employer exercising control over it, and it is publicly identified with the employer’s business through signage or published addresses. Most work-from-home arrangements will not meet all three criteria.

The trickier case is a remote employee who reports to an Ontario-based supervisor. The ministry usually considers that employee attached to the supervisor’s Ontario permanent establishment, so their remuneration is subject to Ontario EHT even though the employee never sets foot in the province. For employees who split time between permanent establishments inside and outside Ontario, all remuneration is subject to EHT unless the employee works at the out-of-province location for 90% or more of the year.

Associated Employers Share One Exemption

Both provinces use section 256 of the federal Income Tax Act to decide whether employers are associated, and the rules extend beyond corporations to individuals, partnerships, and trusts, treating each as a corporation with one class of voting shares.⁸ Common triggers include one company controlling another, two companies controlled by the same person or group, or related individuals each controlling a separate company while one holds at least 25% of the other’s shares.⁹ Splitting operations across entities to claim multiple exemptions does not work under either province’s rules.

In Ontario, associated employers must enter into a written agreement allocating the $1,000,000 exemption among group members. One member files the Associated Employers Exemption Allocation form with the Ministry of Finance by March 15, but every member of the group must be listed on it, including those with no payroll or no allocated portion. Miss the deadline and the exemption is denied for the entire group. If combined Ontario payroll exceeds $5,000,000, no member qualifies for any exemption at all.

B.C. follows a similar structure: associated employers share whatever exemption the group qualifies for, and each employer’s allocation cannot exceed what it would have received as a standalone entity.

Charities and Non-Profits

Both provinces give more room to qualifying charities and non-profits. In British Columbia, a charitable or non-profit employer gets a $1,500,000 exemption instead of the standard $1,000,000. Qualifying entities include CRA-registered charities and organizations exempt from income tax under various provisions of the federal Income Tax Act, including labour organizations, amateur athletic associations, non-profit scientific research corporations, and clubs or societies operated exclusively for social welfare, civic improvement, or recreation.¹⁰ A charitable or non-profit employer must still register if B.C. remuneration exceeds $1,500,000.

In Ontario, registered charities can claim a separate exemption for each qualifying charity campus rather than being limited to a single $1,000,000. A qualifying campus must be a permanent establishment the charity exclusively occupies, uses solely for charitable activities, and publicly advertises with its address and phone number.¹¹

Registering, Paying Installments, and Filing

In Ontario, you register with the Ministry of Finance if you are not eligible for the exemption or if your payroll exceeds your allowable exemption. You can register online, by phone, or at a ServiceOntario centre, and you’ll need a 15-digit business number.¹² Monthly installments are required if total Ontario remuneration for the year exceeds $1,200,000.¹³ The annual return and any remaining balance are due by March 15 following the calendar year. If you have an active account, you must file even when the exemption wipes out your tax.

In B.C., you register through eTaxBC when your B.C. remuneration exceeds the exemption amount ($1,000,000 for most employers, $1,500,000 for charities and non-profits). If 2026 is your first year with a tax obligation, the registration deadline is December 31, 2026.⁵ Quarterly installments are required if your EHT liability for the previous calendar year exceeded $2,925, with 2026 installments due June 15, September 15, and December 15.¹⁴ The 2026 annual return and final payment are due by March 31, 2027.

Penalties for Filing Late

Both provinces use a similar penalty formula. In Ontario, a first-time late filing triggers 5% of the amount owing on the due date (if that amount is $1,000 or more), plus 1% of the amount owing for each complete month the return is late, to a maximum of 12 months. Repeat late filers face 10% upfront plus 2% per complete month, up to 20 months. Knowingly making a false statement carries a 25% penalty on the additional tax found payable.³

B.C.’s late-filing penalty is also 5% of the balance owing on the due date plus 1% per complete month (up to 12 months). For repeated failures after a written demand, the penalty doubles to 10% upfront plus 2% per month, up to 20 months. Interest is charged at prime plus 3% on late or deficient installments and on any outstanding balance.¹⁵

Disputing an Assessment

If you disagree with an Ontario assessment, you have 180 days from the date the assessment was mailed to serve a Notice of Objection on the Minister of Finance. The notice must describe each issue in dispute and set out the supporting facts and reasons, and it should be sent by registered mail to the Director of the Advisory, Objections, Appeals and Services Branch.¹⁶ If the Minister’s decision is unfavourable, you have 90 days from the mailing date of that decision to file a Notice of Appeal with Ontario’s Superior Court of Justice and serve a copy on the Minister.

In B.C., the first step is an appeal to the Minister of Finance using the province’s Appeal to Minister form. You should still pay the assessment while the appeal is pending, since unpaid amounts continue to accrue interest and may trigger collection action. Paying doesn’t mean you accept the assessment, and any overpayment is refunded with interest if the appeal succeeds. A further appeal is available if the Minister’s decision is still unsatisfactory.¹⁷

1
Revenu Québec. Health Services Fund Contribution – What You Need to Know
2
Province of Manitoba. Health and Post-Secondary Education Tax Levy
3
Government of Ontario. Employer Health Tax (EHT)
4
Government of Ontario. Employer Health Tax (EHT) – Tax Exemption
5
Government of British Columbia. Employer Health Tax Overview
6
Government of Ontario. Remuneration – Employer Health Tax (EHT)
7
Government of Ontario. Permanent Establishment – Employer Health Tax (EHT)
8
Government of Ontario. Associated Employers – Employer Health Tax (EHT)
9
Government of British Columbia. Employer Health Tax for Associated Employers
10
Government of British Columbia. Employer Health Tax for Charitable or Non-Profit Employers
11
Government of Ontario. EHT in Practice: Registered Charities Scenarios
12
Ontario.ca. ONT-TAXS Online
13
Ontario.ca. Ontario Code R.S.O. 1990, c. E.11 – Employer Health Tax Act – Section: Instalments
14
Government of British Columbia. Employer Health Tax Frequently Asked Questions
15
Government of British Columbia. Penalties and Interest for Employer Health Tax
16
Government of Ontario. Objection and Appeal Procedures for Ontario Taxes and Programs
17
Government of British Columbia. Tax Appeals