Employer Health Tax (EHT)

Overview

The Employer Health Tax (EHT) is a payroll tax on remuneration (for example, salaries, wages, bonuses, taxable benefits, stock options etc.) that employers in Ontario provide to current and former employees.

The purpose of this tax is to assist in providing the government with revenue to fund health care in Ontario.

Who pays EHT

You must pay EHT if you have employees who either:

• 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

If your Ontario payroll exceeds your allowable exemption amount, you will have to pay EHT .

You do not have to pay EHT , if you are an eligible employer, as defined under the EHT Act, who has annual payroll below your exemption amount.  

EHT tax exemption

The Ontario government has increased the EHT exemption for 2020 from $490,000 to $1 million due to the special circumstances caused by the coronavirus (COVID-19) in Ontario. In the 2020 Ontario Budget, the government announced it was making the EHT payroll exemption increase permanent.

The EHT exemption is indexed to inflation every five years and the next adjustment had been scheduled for 2024. Given the doubling of the exemption threshold starting in 2020, the government moved the next scheduled adjustment for inflation to January 1, 2029.

For 2019, Ontario provided EHT relief for small eligible employers through a tax exemption on the first $490,000 of total Ontario payroll each year. For 2014 – 2018, the tax exemption was $450,000.

You can claim the tax exemption if:

• you are an eligible employer as defined under the EHT Act
• you pay income taxes
• your Ontario payroll for the year (including the payroll of any associated employers) is less than $5 million or you are a registered charity
• you are not under the control of any level of government
• your board of directors does not include any municipal representatives

EHT tax exemption example

If you are an eligible employer with a total Ontario payroll of $1,800,000 per year, you would claim the EHT tax exemption on the first $1,000,000 and pay EHT on the remaining $800,000 of your payroll for the year.

Learn more about the EHT tax exemption.

Tax rates and how to calculate EHT

Rates

Calculate your EHT

Your EHT is calculated by multiplying your Ontario payroll for the year – after deducting your tax exemption – by your tax rate. 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.

For example, an employer with $175,000 of Ontario payroll, and who does not have any tax exemption, would have a tax rate of 0.98%, and would pay EHT of $1,715 for the year.

Register for an EHT account

It is your responsibility to register for an EHT account with the Ontario Ministry of Finance if you are an employer who is either:

• not eligible for the tax exemption
• eligible for the tax exemption but your payroll exceeds your allowable exemption

Once you register for EHT we will begin to send you annual returns.

Before you register for EHT

You must have the following information for your organization:

• legal name
• trade name
• business address
• mailing address
• telephone and fax numbers
• name of contact person or authorized representative
• payroll start date
• payroll frequency
• federal business number (BN)
• employer type (for example, associated, multiple accounts or public sector employer)

Out-of-province employers

If you are an out-of-province employer, establishing a permanent establishment in Ontario for less than 24 months, it is important that you contact the Ministry. Please call 1-866-668-8297 to discuss requirements for your account registration.

Multiple accounts

An employer may set up separate payrolls for each payroll centre or payroll type and can report them separately by setting up multiple EHT accounts under one BN. A different extension number (e.g., TE0001, TE0002) will be assigned to each account.

A multiple accounts employer must file separate instalments and annual returns for each account.  Eligible employers with multiple accounts must allocate the exemption between their accounts.

The tax rate for a multiple account employer is based on the combined Ontario payroll of all the employer's accounts.

How to register

You can register:

• online
• in-person by 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

EHT account inquiries

Online inquiries

Employers can access their EHT accounts anytime by using ONT-TAXS online.

Phone or mail inquiries

When you make account-related inquiries by phone or by mail, you will be required to prove authorization by providing the following information:

• employer's name, address, and federal Business Number (BN)
• your name, telephone number and position in the employer's organization, or your position as a representative of the employer.

File an EHT return

Who needs to file

You must file an EHT annual return if:

• your annual Ontario payroll is greater than your tax exemption (or prorated portion of your exemption for partial year eligible employers)
• you:
  • are not eligible for the tax exemption and have an Ontario payroll, or
  • remitted EHT instalments for the year, or
  • are a member of an associated group and the group's cumulative Ontario payroll exceeds the EHT exemption amount, or
  • received a personalized return.

How to file and pay EHT

We will mail you a personalized annual return with an addressed return envelope.

Once you receive it, file your EHT annual return and payment on or before March 15th:

• through ONT-TAXS online https://www.fin.gov.on.ca/en/services/onttaxs/index.html
• in person at certain ServiceOntario centres
• by mail to:
  Ministry of Finance
  33 King St W
  PO Box 620
  Oshawa ON L1H 8E9

If you did not receive a return, and your Ontario payroll for the year exceeds your allowable exemption amount, call us at 1-866-ONT-TAXS (1-866-668-8297) to request a copy of your personalized return. To ensure accurate processing, please file an original, preprinted form whenever possible. Alternatively, an online generic employer health tax return is available on the ministry's website. Please access the form and follow the included instructions for completion and filing of the completed return.

Keep records and books

Employers must keep records and books of accounts with information confirming you are complying with the EHT Act and Regulations.

Visit ontario.ca/recordretention for more information.

Pay monthly instalments

Starting in the 2021 tax year, the Employer Health Tax Act requires Ontario businesses with payroll over $1,200,000 to pay monthly instalments. Prior to 2021, employers were required to make monthly instalment payments when their annual Ontario payroll exceeded $600,000. Instalment payments may be made:

• through ONT-TAXS online https://www.fin.gov.on.ca/en/services/onttaxs/index.html
• in person at certain ServiceOntario centres
• at participating Ontario financial institutions (check with your bank) 
• by mail to:
  Ministry of Finance
  33 King St W
  PO Box 620
  Oshawa ON L1H 8E9

If total Ontario remuneration is greater than $1.2 million for 2021 and later

You must pay monthly instalments, and file an annual return on or before March 15th of the following calendar year.

If total Ontario remuneration is less than $1.2 million for 2021 and later years

You do not have to pay monthly instalments. File your annual return and pay EHT on or before March 15th of the following calendar year.

How to calculate the EHT instalment

The requirement for instalment payments is based on the employer's payroll from the prior year.

If you're a new employer, in your first or second year of operation, estimate your annual payroll for the current year and use that amount to determine if you will have to make instalment payments. If your estimated annual payroll is over $1.2 million ($600,000 for 2020 and prior years) then instalment payments are required as soon as your payroll exceeds the instalment threshold for the year.

Instalment Example for 2021:

If you have regular monthly payroll of $210,000 per month, you will use up your $1,000,000 exemption after 5 months. That means your payroll costs starting in May 2021 will begin to be subject to EHT . However, you do not need to start making monthly instalment payments until your payroll exceeds the instalment threshold of $1,200,000, which would happen in June. By the end of June, there would be $260,000 in taxable payroll ($210,000 monthly payroll x 6 months - $1,000,000 exemption), which should be multiplied by your EHT tax rate (1.95%). The June monthly instalment would be $5,070, due by July 15th. To calculate your instalment for each month from July onwards, take your taxable payroll amount ($210,000) and multiply it by your EHT tax rate (1.95%) for a monthly instalment of $4,095 ($210,000 × 1.95%).

Audits

Auditors may carry out audits at your place of business to ensure that you're in compliance with the EHT Act and Regulations.

Learn what to expect during an Ontario Ministry of Finance audit.

Penalties, interest and fines

COVID-19 Relief

Between April 1, 2020 and October 1, 2020, and again between January 1, 2022 and July 1, 2022, Ontario provided interest and penalty relief for Ontario businesses who were unable to file or remit their provincial taxes on time, due to the special circumstances caused by the COVID-19 in Ontario. During these time periods, penalties and interest do not apply to any late Employer Health Tax instalments, returns, or short-paid payments.

Penalties

Penalties are applied if you do not file, or you do not otherwise meet your obligations under the Employer Health Tax Act. If you do not file your instalment, or your annual return by March 15th, you may be charged a penalty.

An instalment is considered delivered either on the date:

• the Ministry of Finance receives it
• it is submitted online in ONT-TAXS online
• a participating financial institution (check with your bank) in Ontario receives it along with your payment (annual, final and special returns are not accepted at financial institutions)

An annual return is considered delivered either on the date:

• the Ministry of Finance receives it
• it is submitted online in ONT-TAXS online

Failure to deliver a return

The penalty for failing to deliver a return on time is calculated as follows:

• 5 per cent of the amount owing on the date the return is due, if the amount owing is $1,000 or more, plus
• 1 per cent of the amount owing multiplied by the number of complete months, to a maximum of 12, from the date the return is due to the date the return is received by the Ministry of Finance.

Repeated failure to deliver returns

The penalty for a repeated failure to deliver returns on time is calculated as follows:

• 10 per cent of the amount owing on the date the return is due, if the amount owing is $1,000 or more, plus
• 2 per cent of the amount owing multiplied by the number of complete months, to a maximum of 20, from the date the return is due to the date the return is received by the Ministry of Finance.

This penalty applies to employers who:

• have received a demand for the return, and
• have been assessed a late-filing penalty for failing to deliver a return on time for any of the previous three years.

Failure to deliver a statement

The penalty for failing to deliver a monthly remittance statement on time is:

• 5 per cent of the instalment owing on the date the statement is due, if the amount owing is $1,000 or more.

Failure to complete information

The penalty for not completing the information required on a return or statement is:

• 1 per cent of either the tax or the instalment owing, or
• $50, whichever is greater, up to a maximum of $200.

The penalty for not completing the information required on any other document is $50.

Making false statements

The penalty for knowingly making or participating in the making of an incorrect statement or an omission in a return, certificate, or other document is 25 per cent of the additional tax found to be payable.

Interest charged

Interest is charged if you do not pay on time. Interest is charged on any outstanding balance on your account at a rate set by the Ministry of Finance.

Interest rates may change every 3 months, at the beginning of January, April, July and October.

Fines

In addition to these penalties, persons convicted of offences under the EHT Act may be liable to substantial fines and/or imprisonment imposed by the courts.

Making false statements etc.

An employer is guilty of an offence if the employer:

• makes, participates in, or agrees to making false or deceptive:
  •  statements in a return, remittance statement or other document
  •  entries in records or books of account
• destroys, alters, or otherwise disposes of records or books of account to evade payment of tax
• omits or agrees to the omission of material information in records or books of account, or
• wilfully, in any manner, evades or attempts to evade compliance or payment of tax.

In addition to any other penalty, on conviction, the employer is liable to:

• a fine of at least $500 or 25 per cent of the amount of tax payable, whichever is greater, but not more than double the amount of tax payable
• imprisonment for a term of not more than two years, or
• both a fine and imprisonment.

Obtaining or attempting to obtain a refund by fraudulent means

An employer who obtains or attempts to obtain a refund of tax by deceit or by any other fraudulent means is guilty of an offence.

On conviction, the employer is liable to:

• a fine of at least $500, but not more than double the amount of refund or rebate obtained or sought
• imprisonment for a term of not more than two years, or
• both a fine and imprisonment.

Failure to deliver a return

• An employer who fails to deliver a return or to supply information or produce material as required is guilty of an offence.
• On conviction, the employer is liable to a fine of at least $50, but not more than $500, for each day or partial day on which the offence occurs or continues.

Failure to keep records

• An employer who fails to keep and retain records, books of account and source documents is guilty of an offence.
• On conviction, the employer is liable to a fine of at least $50, but not more than $500, for each day or partial day on which the offence occurs or continues.

Obstructing an auditor

• An employer who obstructs an auditor or withholds any information that is relevant for the purposes of determining compliance is guilty of an offence.
• On first conviction, the employer is liable to a fine of at least $50, but not more than $5,000. On each subsequent conviction, the employer is liable to a fine of at least $100, but not more than $10,000.

Failing to comply with the Act or the regulations

• An employer who contravenes or fails to comply with any provision of this Act or regulations is guilty of an offence.
• On conviction, where no other fine is provided by the Act, the employer is liable to a fine of not more than $5,000 for each day or partial day on which the offence occurs or continues.

Offence by director, officer or agent

• Where a corporation is guilty of any offence, any officer, director, or agent who directed, authorized, or agreed to the commission of the offence is guilty of that offence.
• On conviction, the officer, director or agent is liable to the punishment for the offence, whether or not the corporation has been prosecuted or convicted.

Dissolution of corporations

When a corporation is in default of complying with the EHT Act, notice may be sent by registered mail, or by publication in The Ontario Gazette, that an order dissolving the corporation will be issued unless the corporation remedies its default within 90 days.

Understanding your Monthly Account Summary/Notice of Assessment

In the Year - to - Date Summary section, payments are displayed in the Credit/Payment Applied column.

If your payment is greater than the Instalment Amount

The amount displayed in the Credit/Payment Applied column (A) will never exceed the Instalment Amount. If the payment amount is greater than the Instalment Amount, the credit will be displayed in the Balance column (B) of the Year-to-Date Totals. The total payment is displayed at the top of the Account Summary/Notice of Assessment (C). The credit will also be noted on line 3 of the Employer Health Tax Instalment Statement (D).

Example 1

September 2011 Instalment Amount is $1,365.00 with a $1,565.00 payment. The October Account Summary/Notice of Assessment will reflect this as follows:

If your payment is less than the Instalment Amount

If the payment amount is less than the Instalment Amount, the total amount paid will be displayed in the Credit/Payment Applied column (A) and the debit balance reflected in the Balance column of the Year - to - Date Summary (B). This debit will also be displayed in the Balance column of the Year - to - Date Totals (C) and the total payment reflected at the top of the Account Summary/Notice Assessment (D). The debit will also be noted on line 3 of the Employer Health Tax Instalment Statement (E).

Example 2

September 2011 Instalment Amount is $1,365.00 with a payment of $1,165.00 and there is not enough credit on account to cover. The October Account Summary/Notice of Assessment will reflect this as follows:

If your payment is less than the Instalment Amount but there is a credit on your account

If the payment amount is less than the Installment Amount and there is a credit on the account as shown in the previous months statement (see Example 1), this credit will be added to the payment and displayed as one total in the Credit/Payment Applied column (A). The total payment amount will be displayed at the top of the Account Summary/Notice of Assessment (B).

Example 3

October 2011 Instalment Amount is $1,560.00 with a payment of $1,360.00 and there is enough credit on the account to cover the $200.00 difference. The November Account Summary/Notice of Assessment will reflect this as follows:

Dispute an EHT assessment

If you receive an EHT assessment and you need an explanation or would like to discuss your assessment, call us at 1-866-ONT-TAXS.

Once you've spoken with Ministry of Finance staff, if you are still dissatisfied with the assessment, you can file a notice of objection.

File a Notice of Objection

1. Complete a Notice of Objection form
2. Mail the form – within 180 calendar days of receiving the Notice of Assessment – to:
   Advisory, Objections, Appeals and Services Branch
   PO Box 699, Station A
   Oshawa ON L1H 8S6
3. We will review the objection and notify you of a decision in writing

Please note, even if you file an objection, you still have to pay the amount on your Notice of Assessment, plus any interest.

For more information, refer to the Objection and Appeal Procedures for Ontario Taxes and Programs.

File a Notice of Appeal

If you disagree with the decision from your Notice of Objection, a Notice of Appeal may be submitted to the Ministry of Finance and to the Ontario Superior Court of Justice within 90 days of the mailing date on the Notice of Objection decision. For more information, refer to the Objection and Appeal Procedures for Ontario Taxes and Programs.

Confidential information

The Ministry of Finance is responsible for collecting and maintaining confidential employer information.

The Freedom of Information and Protection of Privacy Act prevents the Ministry of Finance from providing taxpayer information to third parties unless the ministry has the taxpayer's written consent or is authorized by the taxpayer in ONT-TAXS online. Therefore, when accountants, lawyers or other third parties make enquiries for clients, they must include the client's authorization in the request or ensure that they have been granted access by the taxpayer in ONT-TAXS online. Visit ontario.ca/taxrep for a copy of the Authorizing or Cancelling a Representative form. An employer can provide authorization and access to a representative to use ONT-TAXS online on their behalf.

For more information

Contact the Ministry of Finance at 1-866-ONT-TAXS (1-866-668-8297) or 1-800-263-7776 for teletypewriter (TTY).

Request written interpretations

Some written interpretations are included in this guide to illustrate how the Ministry has made past determinations on complex tax situations.

To request a written interpretation on a specific situation you don't see in this guide, send your request in writing to:

Ministry of Finance
Advisory, Objections, Appeals and Services Branch
Advisory Section, Employer Health Tax
33 King Street West, 3rd Floor
Oshawa ON L1H 8H5