Employer Health Tax relief
Health tax exemption for Ontario employers
At a glance
Eligible Funding
- No Condition
Timeline
- Open Date : May 12, 2020
Financing Type
Tax Credits
Eligible Industries
- All industries
Grant Providers
- Government of Ontario
- Ontario Ministry of Finance
Status
Open
Overview
Access an exemption from paying the Ontario Employer Health Tax on the first $1 million of your annual remuneration (payroll).
Eligibility criteria
Eligible employers can qualify for an exemption from the Employer Health Tax (EHT) if they meet specific criteria:
- Employers must be defined as eligible under the EHT Act
- Employers must pay income taxes
- Annual Ontario payroll, including associated employers, must be less than $5 million or be a registered charity
- Employers must not be under the control of any level of government
Who is eligible
Eligible employers for the Employer Health Tax (EHT) grant in Ontario include companies that are defined under the EHT Act, pay income taxes, have an annual Ontario payroll less than $5 million, or are registered charities, and are not under the control of any level of government.
- Employers as defined under the EHT Act
- Employers that pay income taxes
- Employers with an annual Ontario payroll less than $5 million
- Registered charities
Eligible expenses
Eligible expenses for this grant include:
- Remuneration paid to employees
- Salaries, wages, bonuses, taxable benefits, stock options, etc.
Evaluation & selection criteria
There are evaluation and selection criteria for this grant. The criteria include:
- Employers are required to pay EHT on remuneration paid to employees who meet certain conditions
- Eligible employers must register for an EHT account with the Ontario Ministry of Finance
- An exemption amount is available for eligible employers based on their Ontario payroll
- Associated employers must share the tax exemption for the year and meet specific requirements
- Specific tax rates apply based on the level of Ontario payroll
How to apply
- Step 1: Determine if you are an eligible employer under the Employer Health Tax (EHT) Act.
- Step 2: Gather all necessary information about your organization including legal name, trade name, business address, Federal Business Number (BN), etc.
- Step 3: Register for an EHT account online, by phone, or in person at a ServiceOntario centre.
- Step 4: If required, enter into an agreement to share the tax exemption for the year with associated employers.
- Step 5: Keep records and books of account in compliance with the EHT Act and Regulations.
- Step 6: File EHT annual returns and payments on or before the deadline (March 15th).
- Step 7: Pay monthly instalments if your total Ontario remuneration exceeds $1.2 million for the year.
- Step 8: Request written interpretations if needed by contacting the Ministry of Finance.
Additional information
- Associated employers who are members of an associated group must enter into an agreement to share the tax exemption for the year by completing the Associated Employers Exemption Allocation form.
- There are special EHT rules for registered charities. For more information, visit the Registered Charities and Related Scenarios web page.
Apply to this program
Employer Health Tax (EHT) Grant Summary
The Employer Health Tax (EHT) is a payroll tax in Ontario designed to help fund healthcare by taxing employee remuneration. Eligible employers can benefit from an exemption amount, and this grant offers detailed guidance on eligibility, filing, and compliance requirements.
Comprehensive Guide to Ontario’s Employer Health Tax (EHT)
The Employer Health Tax (EHT) is a crucial component of Ontario's fiscal framework, aimed at ensuring the funding of healthcare services through the taxation of remuneration that employers pay to their employees. This detailed guide will walk you through all aspects of the EHT, from understanding its purpose to calculating your tax obligations, ensuring compliance, and filing returns. If you're an employer in Ontario, comprehending the intricacies of EHT can save you both time and potential penalties.
1. Introduction to EHT
The Employer Health Tax is a payroll tax levied on the wages, salaries, bonuses, taxable benefits, and other forms of remuneration that employers provide to their current and former employees. The revenue generated from this tax is channeled into the healthcare system, helping maintain and improve the province's medical infrastructure and services.
2. Who Pays EHT?
Employers with a permanent establishment in Ontario, who either physically report for work at such premises, are attached to such an establishment, or do not report to work but are paid through an Ontario establishment, are subject to EHT. However, eligibility criteria and exemptions play a significant role in determining who actually pays EHT.
3. EHT Exemption
With an exemption amount set at $1 million, adjusted periodically for inflation (next adjustment in 2029), many small to medium-sized businesses can benefit by reducing their EHT payable. Starting from 2020, the exemption was increased to $1 million due to the COVID-19 pandemic, a change made permanent in 2021. Employers must meet specific conditions to be eligible, such as having an annual Ontario payroll (including associated employers) of less than $5 million or operating as a registered charity.
4. Tax Rates and Calculation
EHT rates vary based on the employer's annual Ontario payroll amount, following a tiered structure. Here’s the breakdown:
- 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%
The EHT is calculated by subtracting the exemption amount (if applicable) from the total Ontario remuneration and applying the appropriate tax rate. For example, if an employer's total Ontario remuneration is $1,300,000, after the $1,000,000 exemption, they would pay EHT on $300,000 at a rate of 1.95%, resulting in $5,850 in EHT owing.
5. Registration Requirements
Employers exceeding the exemption threshold or those not eligible for it must register for an EHT account with the Ontario Ministry of Finance. The necessary information includes legal and trade names, business and mailing addresses, contact details, payroll start date and frequency, and the federal business number (BN).
6. Filing and Payment
Employers whose annual Ontario payroll surpasses the exemption amount, receive personalized returns, or are not eligible for exemptions must file an annual EHT return by March 15th of the following year. Monthly instalments are mandatory for employers with payrolls exceeding $1.2 million starting from 2021. These instalments can be made online, at participating financial institutions, or via mail.
7. Associated Employers
Employers connected through ownership or operational relationships must share the exemption amount. They need to file an Associated Employer Exemption Allocation form and ensure compliance with the associated employer rules, including the total cumulative payroll and appropriate instalment payments.
8. Special Rules for Registered Charities
Registered charities enjoy unique EHT benefits, often qualifying for full exemption. Detailed information is available on the Ontario Ministry of Finance’s dedicated charity webpage.
9. Compliance and Audits
Employers must maintain accurate records to demonstrate compliance. The Ministry of Finance conducts audits to verify adherence to EHT regulations. Non-compliance can result in penalties, interest, and fines.
10. Penalties, Interest, and Fines
Failure to file returns or pay EHT on time can attract significant penalties and interest. Penalties include a base percentage of the amount owing plus increment percentages for each complete month of delay. For repeated offenses, penalties can double. Interest accrues at variable rates set quarterly, while severe infractions might lead to substantial fines and imprisonment.
11. COVID-19 Relief Measures
To ease the burden during the COVID-19 pandemic, Ontario provided interest and penalty relief between specific periods in 2020 and 2022. Employers unable to file or remit taxes during these periods did not face penalties or interest for delays.
12. Dispute and Appeals Process
If disagreements arise regarding EHT assessments, employers can first engage with Ministry staff for clarification. If unresolved, filing a formal Notice of Objection within 180 days of the assessment is the next step. Subsequently, if the objection decision is unsatisfactory, a Notice of Appeal can be lodged with the Ontario Superior Court of Justice within 90 days of the objection decision.
13. Confidentiality and Authorizations
The Ministry of Finance ensures confidentiality of employer information, protected under the Freedom of Information and Protection of Privacy Act. Third-party representatives, such as accountants and lawyers, require explicit written consent or authorized access through ONT-TAXS online to handle inquiries on behalf of employers.
For further assistance, employers are encouraged to contact the Ministry of Finance directly or refer to relevant forms and publications available online. By understanding and complying with the EHT, employers can avoid penalties and contribute to the province’s healthcare funding initiatives efficiently.
