BC Employer Health Tax — and the trap that catches Holdcos.
Most BC employers under $1 million of payroll pay nothing. But the exemption is shared across associated companies — and once the group crosses $1.5 million, every company in it loses the exemption entirely. Put your group in below and see what association actually costs you.
Add up the whole group first, not just one company.
The single most common EHT mistake we see is a business owner running their payroll through an operating company, checking it against the $1 million exemption on its own, and concluding they owe nothing. If that company is associated with any other employer — a Holdco, a sister company, a spouse’s corporation under common control — the test applies to the combined BC remuneration of the entire associated group.
Run your group through it
List every employer that is associated with you — Opco, Holdco, a sister company, a spouse’s corporation under common control. If nothing is associated, leave a single row.
Your associated group
Calendar-year BC remuneration| $ | ||
| $ |
BC remuneration is salary, bonuses, taxable benefits, commissions and most taxable allowances. Dividends are not remuneration and do not belong here.
—
Company by company
| Company | BC remuneration | Exemption allocated | EHT payable | On its own |
|---|
Scroll the table sideways to see every column.
How the allocation works. Inside the notch band the group shares one $1,000,000 exemption and files an allocation agreement deciding the split. This tool allocates it pro‑rata by remuneration, but the group total does not change whichever split you choose — the allocation only moves tax between the companies. Over $1,500,000 combined there is no exemption to allocate. Figures assume every employer had a BC permanent establishment for the full calendar year; a part‑year employer prorates the $1,000,000 and $1,500,000 thresholds by days ÷ 365. Registered charities and non‑profits use different thresholds applied per qualifying location and are outside this tool.
What you pay in 2026
“BC remuneration” means wages, salaries, bonuses, taxable benefits, commissions and most taxable allowances paid to employees who report to work in BC. It is a calendar-year figure, not a fiscal-year one.
| Total BC remuneration | What you owe | Tax at the top of the band |
|---|---|---|
| $1,000,000 or less | Exempt — nothing payable | $0 |
| $1,000,000.01 – $1,500,000 the “notch” band |
5.85% × (remuneration − $1,000,000) | $29,250 |
| Over $1,500,000 | 1.95% × total remuneration | no cap |
Why the notch rate is higher than the full rate. The 5.85% band exists to phase the exemption out smoothly. At exactly $1.5 million both formulas give the same answer — 5.85% × $500,000 = $29,250, and 1.95% × $1,500,000 = $29,250 — so there is no cliff at that point. Inside the notch, though, every extra dollar of payroll costs you 5.85 cents, three times the headline rate. Registered charities and non-profits use a different, higher set of thresholds applied per location.
Three worked examples
The associated-employer rules — where Holdcos get caught
BC applies the association rules from section 256 of the federal Income Tax Act. If two corporations are associated for income tax purposes, they are associated for EHT. In an owner-managed group that usually means a Holdco and its Opco, two Opcos under the same Holdco, or two companies controlled by the same person or related group.
Everyone is exempt. No allocation needed, no return required.
The group shares one $1,000,000 exemption. You file an allocation agreement deciding how it is split between the associated employers. The split cannot exceed $1,000,000 in total.
No exemption for anyone. Every associated employer pays 1.95% on its full BC remuneration — including the small ones.
The jump comes from association, not from crossing a threshold. A company with $900,000 of payroll pays nothing on its own. Associate it with a sister company that has $700,000 of payroll and the group total is $1.6 million — over the $1.5 million line. The exemption disappears for both. That $900,000 company now pays 1.95% × $900,000 = $17,550, and the sister company pays $13,650. The group went from $0 to $31,200 because of a structure decision, not a hiring decision.
What this means for how you structure and pay yourself
- Dividends are not remuneration. EHT applies to salary, bonuses and taxable benefits — not to dividends. For an owner sitting near the $1 million line, the salary-versus-dividend decision has an EHT dimension on top of the usual CPP, RRSP room and CCB considerations. Our salary vs dividend calculator covers those.
- Association is about control, not about how separate the businesses feel. Two genuinely unrelated businesses you happen to own are still associated. If you are mapping or changing a group, the corporate structure builder is the place to sketch it before you commit.
- EHT is a real cost per employee. Once you are past the exemption, 1.95% sits on top of CPP, EI, vacation pay and WorkSafeBC on every hire. Our true cost of hiring calculator already includes it in the fully loaded number.
- Instalments. Employers whose prior-year EHT exceeded the instalment threshold pay quarterly rather than annually. Our tax instalment calculator covers the CRA instalment regimes; BC EHT instalments are administered separately through eTaxBC.
Common questions
Who counts as an associated employer for BC EHT?
BC uses the association rules in section 256 of the federal Income Tax Act. In practice that captures a Holdco and its Opco, two corporations controlled by the same person, corporations controlled by related persons where there is cross-ownership, and most family-group structures. It is a control test, not a test of whether the businesses operate together.
Does my Holdco need to file if it has no payroll?
A corporation with no BC remuneration has no EHT to pay. But it still counts as an associated employer, so it forms part of the group total and it may need to be named in the allocation agreement if the group is inside the notch band. A Holdco that pays management salaries, though, has remuneration — and that is exactly the case people miss.
Are dividends subject to the Employer Health Tax?
No. EHT applies to BC remuneration — salary, wages, bonuses, commissions and taxable benefits. Dividends are a distribution of after-tax corporate profit, not remuneration, so they fall outside the EHT base entirely. That does not make dividends automatically better; it is one factor among CPP, RRSP contribution room, the Canada Child Benefit and mortgage qualification.
What happens if the group crosses $1.5 million partway through the year?
EHT is assessed on the calendar year as a whole, so it is the full-year combined total that determines which band the group lands in — not where you were mid-year. A large December bonus can retroactively push an entire associated group over the line, which is worth modelling before you declare it.
Can we allocate the exemption however we want between associated companies?
Within the group you can agree how to divide the $1,000,000 exemption, and you file that allocation with the Province. The total allocated cannot exceed $1,000,000. The sensible split puts the exemption where it shelters remuneration sitting in the 5.85% notch band, since that is where each exempted dollar is worth the most.
It is a cheap question to ask and an expensive one to get wrong.
Association is determined by control, and control is not always obvious once trusts, family shareholdings or a second corporation are involved. A 30-minute chat will tell you where your group actually sits.
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