Good afternoon Amanda,
Thanks for your inquiry.
Please see my comments below. I don’t think an advance ruling is required.
Should you have any additional questions, please feel free to let us know.
Best regards,
ITBTaxQuestions
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From: Amanda Birch
Sent: March 14, 2019
To: ITBTaxQuestions FIN:EX
Subject: Registration Requirement
Couple of questions - and please advise if I should send this in for an advance ruling:
- I would like to know at what point do I need to register my clients for the Employer Health Tax Account, is it as soon as they reach the $500,000 Remuneration? For example, I have a client that had $420,000 in payroll for the 2018 year... they might reach $500,000 by December, they might not.
If your client will potentially be required to make installment payments, they will need to register by May 15, 2019, otherwise, must register by December 31, 2019. Based on the information you provided, if your client’s BC remuneration is at a risk of over $500,000 later in the year, you can have them registered by December 31, 2019.
- Or what if they reach $500,000 in September and by December they are just over $600,000. Will they be penalized for not making an installment?
The calculation of the installment payments is based on the LESSER of:
- 25% of the previous year’s tax, or
- 25% of the current year’s estimated tax
Since your client’s EHT using 2018 BC remuneration is zero, your client is not required to make installment payment and therefore, no penalty will be assessed. However, if your client is required to make installment payments but did not, there will be interest charged on the amount that is under-installed.
- If they register because they are over the $500,000 in 2019 but then drop to $450,000 for 2020 what happens then?
If they think that their BC remuneration will be less than $500,000 threshold for the subsequent years, they can request us to close the account and reactivate the account when needed. Or just file a Nil return
- Finally in the list of inclusions/exclusions there is no mention of shareholder dividends on either side. For employers who receive a salary/dividend mix are the dividends included in remuneration?
No, dividend is not subject to EHT because it is not considered a taxable benefit under Section 5, 6, or 7 of the Income Tax Act (Canada), but the salary is subject to EHT.
