Temporary Employer Health Tax Exemption

What is it?

  • The Employer Health Tax (EHT) is a payroll tax paid by employers based on their total annual Ontario remuneration, and has a top rate of 1.95 per cent.
  • On March 25, 2020, the Ontario government announced it is increasing the Employer Health Tax (EHT) exemption for 2020 from $490,000 to $1 million. The measure is retroactive to January 1,2020. With this plan, more than 90 per cent of private-sector employers would not pay EHT in 2020.

Who is eligible?

  • Eligible private-sector employers with annual payrolls up to $5 million would be exempt from EHT on the first $1 million of total Ontario remuneration in 2020. The maximum EHT relief from the exemption would increase by $9,945 to $19,500 for 2020 for eligible employers. The exemption would return to its current level of $490,000 on January 1, ‘21
  • Private-sector employers (except registered charities) with total annual Ontario remuneration over $5 million, and public-sector employers are not eligible for the increase exemption, just as they are not eligible for the exemption.
  • Only the exemption amount is changing; eligibility for the tax exemption, tax rates and everything else remains the same.

How to apply?

  • You will begin making your instalment payments after your payroll has exceeded the new $1 million exemption level.
  • If your business no longer needs to make instalment payments as a result of the increased exemption amount, you do not need to contact or notify the Ministry of Finance.
  • Tax filing and remittance deadlines will remain the same. However, beginning April 1, 2020, penalties and interest will not apply to Ontario businesses that miss any filing or remittance deadline under select provincial taxes. This will continue for a period of five months.
  • If a business is unable to file their return or remittance during the relief period, they do not need to contact or notify the Ministry of Finance. Penalties and interest will be waived automatically for all late returns or remittances by Ontario businesses during the relief period.

Reference: https://www.fin.gov.on.ca/en/guides/eht/foremployers.html