What is the Ontario Employer Health Tax?

What is Employer Health Tax (EHT)?

The Employer Health Tax (EHT) is a payroll tax that Canadian employers in certain provinces, including Ontario, pay to help fund public healthcare, post-secondary education, and other important provincial services. It applies to most employers (and in some provinces, employees), with specific thresholds to determine how much is owed.

What is Ontario Employer Health Tax for?

The Ontario Employer Health Tax (EHT) helps support the province’s healthcare system. It ensures that Ontario employers contribute to funding healthcare services by requiring them to pay a tax on all remuneration provided to their employees. This system divides the burden of supporting healthcare infrastructure between employees and employers.

Who pays Ontario Employer Health Tax?

Employers with a permanent establishment in Ontario who exceed the allowable exemption are required to pay the Employer Health Tax.

In other words, any employer whose business is based in Ontario or whose employees do the majority of their work there, and whose annual Ontario payroll exceeds the exemption threshold, must pay EHT. Ontario employers calculate and remit the tax based on their total remuneration.

Who is exempt from Ontario Employer Health Tax?

The exemption amount is currently $1 million.

The government of Ontario raised it to $1 million in 2020 due to special circumstances caused by the COVID-19 pandemic, but in 2021, made the increase permanent. The EHT exemption threshold is scheduled for an inflation adjustment on Jan. 1, 2029.

Employers can claim an EHT tax exemption if they:

• Are considered eligible employers as defined by the EHT Act
• Pay income tax
• Have a total annual Ontario payroll under $5 million (including payroll of any associated employers)
• Are a registered charity

The exemption acts as a tax credit for many of Ontario’s small businesses, giving them a way to lower their payroll tax liability.

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How to calculate and pay Ontario Employer Health Tax

If your total Ontario remuneration is more than the allowable exemption amount (currently $1 million), you need to register and pay EHT. Here’s what to do.

How to register for an EHT account

First, you need to register for an EHT account with the Ontario Ministry of Finance. 

You can register online, by phone (by calling 1-866-ONT-TAXS), or by visiting a ServiceOntario centre. You will need:

• Your business’ legal name, trade name, address, mailing address, phone and fax numbers
• The name of a business contact or authorized representative
• Your payroll start date and frequency
• Your federal business number (BN)

How to calculate Ontario Employer Health Tax

The tax rate you use is based on your total payroll before deducting any exemption. To calculate the amount of tax you pay, deduct your exemption from your total Ontario remuneration and multiply that amount by your applicable tax rate.

If you have more than $5 million in total payroll, no exemption is available.

Example: An Ontario employer has $1,300,000 in total Ontario remuneration before deducting any exemption this year. Because their payroll is over $400,000, their EHT tax rate is 1.95%.

• $1,300,000 - $1,000,000 (exemption) = $300,000
• $300,000 x 1.95% = $5,850 in EHT

How to pay Ontario Employer Health Tax

Employers must remit their EHT payments to the Ontario Ministry of Finance. There are multiple ways you can make your remittance:

• Online using ONT-TAXS
• In person at a ServiceOntario centre
• through online banking or in person at participating Ontario financial institutions (annual, final and special returns are not accepted at financial institutions)

When is Ontario Employer Health Tax due?

Once you register for your EHT account, you’ll start receiving EHT returns from the Ministry of Finance. Then, your EHT annual return and payment is due no later than March 15th each calendar year. 

As of the 2021 tax year, any business with payroll over $1,200,000 must make instalment payments. Monthly instalments can be paid:

• Online using ONT-TAXS
• In person at a ServiceOntario centre
• through online banking or in person at participating Ontario financial institutions

by mail to:
Ministry of Finance
33 King St W
PO Box 620
Oshawa ON L1H 8E9

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Frequently asked questions about Ontario Employer Health Tax

Want to learn more about the Ontario Employer Health Tax? Find additional information in the FAQs below.

What records do employers need to keep related to EHT?

Under the Employer Health Tax Act, employers are required to keep detailed records that support their EHT filings. This includes payroll records, remuneration details for all employees, and records of any applicable exemptions. Employers should also retain information on their total Ontario remuneration, along with documents related to the calculation and payment of EHT. Keeping these records organized and up to date is crucial for compliance and auditing purposes under the EHT Act.

Can an employer dispute an EHT assessment?

If an employer disagrees with an EHT assessment made by the Ministry of Finance, they can file a Notice of Objection. This formal process allows employers to challenge the assessment and present evidence to support their position. The notice must be filed within 180 days of receiving the assessment, and the Ministry will review the objection to determine whether adjustments to the assessment are warranted.

What counts as remuneration under the EHT Act?

Remuneration under the EHT Act includes salaries, wages, bonuses, taxable benefits, stock options, and any other compensation provided to employees. Employers must include all forms of compensation when calculating their total Ontario remuneration to ensure they are accurately calculating their Employer Health Tax obligations.

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