- How do I register for employer health tax?
- What is considered payroll/remuneration?
- Who is an employee or an employer?
- Are retiring allowance and severance pay taxable?
- Can each member of an associated group claim the $1 million employer health tax exemption?
- What if my business becomes an associated employer partway through the year?
- For employer health tax purposes, what if I sell, close or amalgamate my business?
- I did not receive my employer health tax statement. How can I file my instalment?
- I did not receive an employer health tax annual return. How can I file my return?
- What tax rate do I use to calculate my employer health tax instalment?
- How do I correct my employer health tax account? I forgot to report directors' fees when I filed my annual return.
How do I register for employer health tax?
To register for an employer health tax account, please complete the Application for Employer Health Tax Registration form. The completed form may be electronically submitted or printed, and
- mailed to 33 King St W, Oshawa ON L1H 8H5
- faxed to 1-866-888-3850, or
you may call the Ministry of Finance toll-free at 1 866 ONT-TAXS (1 866 668-8297).
If you are registering by phone, you will need to provide the following information:
- legal name
- trade name
- business address
- mailing address
- telephone and fax numbers
- director(s) name and telephone number
- name of contact person or authorized representative
- payroll start date
- estimated annual payroll
- federal business number
- employer type (for example: associated, multiple account, public sector)
- legal entity type (for example: corporation, partnership, association)
- Ontario corporation number and incorporation date if incorporated.
What is considered payroll/remuneration?
In this Frequently Asked Questions, the word payroll may be used instead of the word remuneration.
In general, remuneration means employment income (box 14 of the T4 slip) that is taxable under sections 5, 6, and 7 of the federal Income Tax Act.
In addition to salary and wages, remuneration includes:
- tips and gratuities paid through an employer
- bonuses
- commissions and other similar payments
- vacation pay
- taxable allowances and benefits
- directors' fees
- payments for casual labour
- amounts paid by an employer to top up benefits
- advances of salaries and wages, and
- stock option benefits.
Who is an employee or an employer?
An employee is an individual:
- employed by an employer
- who holds office from an employer and receives payment for carrying on the duties of the office, or
- who was formerly an employee in the ways outlined above.
An employer is someone who pays an employee for work or services. An employer can be an individual, a corporation, a government, a university, a school board, a hospital, a non-profit organization, a charity, a trust, a partnership, a joint venture or an unincorporated association.
The Ministry of Finance considers many factors when determining employer-employee relationships, including common law principles and Canada Revenue Agency rulings, although Ontario is not necessarily bound by those rulings.
More about how to identify an employer-employee relationship
Are retiring allowance and severance pay taxable?
No, retiring allowances and severance pay are not considered to be income from office or employment and are not taxable for EHT purposes. When completing your T4s for the CRA, you should ensure retiring allowances and severance pay are reported in the correct box.
Employers often refer to the total amount paid to an employee upon termination as severance pay; however, this amount could include taxable items. For example, pay in lieu of notice is considered employment income and is subject to EHT.
More about salary continuance, termination pay, severance pay and retiring allowances
Can each member of an associated group claim the $1 million employer health tax exemption?
No, if you are associated with other employers at any time in the year, you must enter into an agreement with the members of the group to allocate the tax exemption. Only one member of the group needs to complete the Associated Employers Exemption Allocation form and submit it to the Ministry of Finance by March 15th of the following calendar year. If the agreement is not filed, no exemption is allowed. If members of the associated group are monthly filers, the allocation should be determined on January 1 for the current year and correctly accounted for on the instalment remittances.
If the combined total Ontario payrolls of the associated group exceeds $5 million, the exemption is eliminated for all members of the group.
What if my business becomes an associated employer partway through the year?
Your business becomes associated with the other business for the whole year if they became associated at any time during the year. For example, if your business was acquired and became associated with Company B on April 1, 2021, you business and Company B are considered associated for all of the 2021 tax year.
Eligible employers who are associated with each other at any time in a year must share one tax exemption amount. However, if the total combined payrolls of the associated group are above $5 million for the year, then none of the businesses may claim an exemption.
If the total combined payrolls are below $5 million, employers who are members of an associated group are required to enter into an agreement to allocate the tax exemption amount amongst themselves for the year. If members of the associated group are monthly filers, the allocation should be determined on January 1, for the current year and correctly accounted for on the instalment remittances.
If the employers had already claimed the EHT exemption on instalments before they became associated, an adjustment will need to be made in the month following the change in association status to re‑allocate the one exemption among the members of the associated group and “catch up” EHT payments made. One member of the associated group will need to file the Associated Employer Exemption Allocation form by the annual return due date.
Please see the Tax Exemption webpage – Associated Employers examples for more information.
For employer health tax purposes, what if I sell, close or amalgamate my business?
Employers who cease to have a permanent establishment, who have amalgamated, or who no longer have employees in Ontario need to advise the Ministry of Finance.
A final EHT return must be filed, within 40 days of the business closure date (or date of amalgamation), for the part of the calendar year that payroll was paid. Final payment of any outstanding liabilities must be remitted with the final return.
A change in the ownership of shares is not considered a change in legal entity, and does not trigger any change to the EHT account. No final return is necessary in such circumstances. A change in control may affect the legal entity’s associated status and, therefore, exemption claims. For additional information on the impacts of changes in control, please contact the Ministry of Finance at 1 866 ONT‑TAXS (1 866 668‑8297
I did not receive my employer health tax statement. How can I file my instalment?
If you are a monthly EHT filer and you do not receive your statement, you should call the Ministry of Finance at 1 866 ONT-TAXS (1 866 668-8297).
You may send your payment with a letter stating the following information:
- business number (BN), name and address
- the period covered
- the amount of taxable total Ontario remuneration, and
- the amount of tax due.
A replacement instalment remittance form may be mailed to you. The completed instalment remittance form can be faxed back to the ministry to avoid a late-filing penalty and the payment can be mailed in. However, interest charges will apply if the payment is not received by the due date. If the due date falls on a weekend or holiday, the due date for the instalment is the next business day.
I did not receive an employer health tax annual return. How can I file my return ?
An online generic Employer Health Tax Annual Return is available. Please access the form and follow the included instructions for completion and filing of the completed return. To ensure accurate processing, please file an original, preprinted form whenever possible. To request a copy of your personalized return, please contact the ministry at 1 866 ONT‑TAXS (1 866 668‑8297).
What tax rate do I use to calculate my employer health tax instalment?
The EHT rate may be different for instalments versus that used for the annual return. Instalment tax rates are based on the employer's payroll from the prior year.
New employers in their first and second year of operation should estimate their annual payroll for the current year and use that amount to determine their instalment tax rate.
The tax rate to be used on the EHT annual return is based on the actual Ontario payroll paid by the employer during the year. Since the tax payable on the return may differ from the tax paid on the instalments during the year, a debit or credit balance may arise at year-end.
How do I correct my employer health tax account? I forgot to report directors' fees when I filed my annual return.
To correct financial information reported on your EHT account, you can:
- call the Ministry of Finance at 1 866 ONT-TAXS (1 866 668-8297)
- file an amended return for the period in question, or
- send a letter to the ministry detailing the required adjustments.
Financial information must be corrected within four years from the return's due date.
