Employer Health Tax (EHT) is a payroll tax on remuneration paid to employees. Eligible employers are exempt from EHT on the first $490,000 of total Ontario remuneration each year. Employers normally cannot claim the exemption if their payroll for the year (including the payroll of any associated employers) is over $5 million.
Registered charities are also subject to the EHT regime, but may benefit from special rules in relation to the EHT exemption. For registered charities with significant payroll expenses and/or multiple locations, these special rules may result in significant cost savings.
$5 Million Payroll Exclusion
Firstly, registered charities are not subject to the abovementioned $5 million payroll exemption exclusion. Eligible employers who are registered charities can claim the exemption even if their payroll exceeds $5 million.
Multiplication of the Exemption
Second, registered charities with multiple locations may be able to multiply their EHT exemption. A registered charity that has two or more qualifying charity campuses may claim an exemption amount for each qualifying charity campus.
A charity campus is a qualifying charity campus for tax exemption purposes if it:
- is publicly advertised (not applicable to sensitive locations such as emergency shelters or group homes);
- has been appropriately registered with the Ministry of Finance;
- is a permanent establishment in Ontario;
- the charity has the exclusive right to occupy the place at all times;
- the place is used and occupied solely by the registered charity;
- the place is used and occupied by the registered charity for the purpose of carrying out its charitable activities.
A charity campus includes all of a registered charity’s locations that are in one building, or on one parcel of land or on contiguous properties. If a registered charity has branches, sections, parishes, congregations or other divisions (internal divisions), a charity campus includes all of the locations of the registered charity and all of the locations of any of its internal divisions that are in one building, or on one property or on contiguous properties.
Registered charities must complete and file an EHT Annual Return for each qualifying charity campus every year.
If you have already filed your annual return(s) claiming only one tax exemption, you can request a refund when you register your charity campus(es). Refund requests must be made in writing and must be received by the Ministry of Finance within 4 years of each return’s due date.
For more information, or if you need assistance with your charity’s assurance or compliance requirements, contact us. We are here to help.