Ontario is thought to have one of the best healthcare systems in the world, providing qualified residents access to a variety of emergency and preventative medical services free of charge. And while at face value this may be true, access to high-quality care across the province, and Canada more broadly, does indeed come at a price.
It is true that residents can see a general practitioner or make a trip to a hospital’s emergency department and not pay a dime out of pocket, but it’s taxpayer money and government subsidies that make this possible.
The Ontario Health Insurance Plan, or OHIP, is the government-run insurance plan that gives qualified residents access to free healthcare-related services. OHIP is funded by a payroll deduction tax, or health tax, that requires all employed residents, businesses and the Government of Canada to pay their share.
Looking to expand into Canada and hire some Ontario-based talent? We’ve got everything you need to know about the Ontario Health Tax.
What is a Health Tax?
Employer Health Tax (EHT) is a payroll tax on any payout to an employee (think: bonuses, salaries, hourly wages and stock options). It is automatically deducted from an employee's paycheque, with the amount varying from province to province. In Ontario, the amount deducted depends on the total amount of remuneration your particular company doles out to employees who reside in the province.
Here is a handy chart from the Government of Ontario website to help illustrate rates and how to calculate:
- Up to $200,000.00: 0.98%
- $200,000.01 to $230,000.00: 1.101%
- $230,000.01 to $260,000.00: 1.223%
- $260,000.01 to $290,000.00: 1.344%
- $290,000.01 to $320,000.00: 1.465%
- $320,000.01 to $350,000.00: 1.586%
- $350,000.01 to $380,000.00: 1.708%
- $380,000.01 to $400,000.00: 1.829%
- Over $400,000.00: 1.95%
How to Calculate EHT: Your Annual Ontario Payroll (after deducting your tax exemption) X Your Tax Rate. E.g. If you have $175,000 of Ontario payroll, with no tax exemptions, you would have a tax rate of 0.98%, and would pay EHT of $1,715 for the year.
The tax rate you use is based on the level of your Ontario payroll before you have deducted any tax exemption. There is no tax exemption amount available if you or your associated group of employers has more than $5 million of annual payroll. Think you might qualify for an exemption? Keep reading to find out!
Who Pays It?
Employers required to pay EHT include those who:
- physically report for work at your permanent establishment in Ontario
- are attached to your permanent establishment in Ontario
- do not report to work at any of your permanent establishments (for example, they work from home) but are paid from or through your Ontario permanent establishment
A permanent establishment involves a fixed place of business in Ontario. This could include an office space or a headquarters, among other things.
Exemptions
Eligible employers, as defined under the EHT Act, who have an annual payroll below your defined exemption amount do not have to pay EHT.
How to Register
As an employer paying Ontario-based employees and contractors, you can register by:
- Going Online
- Calling 1-866-ONT-TAXS (1-866-668-8297) to make an appointment with a Ministry of Finance representative
- Using a self-help workstation at a ServiceOntario centre
Managing local employment compliance, taxes (including EHT), benefits, payroll, and more for your Ontario-based employees can be challenging, particularly if you’re just beginning to expand into the market.
Make it easy with Borderless. We handle all of that stuff for you, so you stay compliant. Book a demo today and see how Borderless's global employer of record services can work for your business.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
