Ontario Employer Health Tax: Exemptions, Rates, and Filing for Small Business

The Ontario Employer Health Tax (EHT) is a payroll tax paid by Ontario employers on total annual remuneration paid to employees. While it is separate from federal payroll deductions and remitted to the Ontario Ministry of Finance, it is a significant cost for growing businesses. Understanding the exemption rules can save small businesses thousands of dollars annually.

What Is the EHT and Who Pays It?

The EHT is a provincial tax that Ontario employers pay based on the total remuneration they pay to employees who report to work at a permanent establishment in Ontario.

Remuneration for EHT purposes includes: salaries, wages, bonuses, commissions, taxable benefits, and most other employment income. It does NOT include dividends, contractor payments, or reimbursements of actual expenses.

• Applies to all employers with a permanent establishment in Ontario
• Based on total Ontario remuneration paid in the calendar year
• Paid by the employer — not deducted from employees
• Filed annually on the EHT Annual Return (due March 15)

The $1,000,000 Exemption for Small Businesses

Private sector employers with annual Ontario remuneration of $1,000,000 or less are fully exempt from EHT — they owe $0. This exemption was permanently increased from $490,000 to $1,000,000 in 2020.

Employers with remuneration between $1,000,000 and $5,000,000 get a partial exemption and pay at a reduced rate. Only employers with remuneration over $5,000,000 pay EHT on their full payroll.

• Total Ontario remuneration ≤ $1,000,000: EHT = $0 (fully exempt)
• Between $1,000,000 and $5,000,000: partial exemption applies
• Over $5,000,000: EHT on full remuneration, no exemption
• Associated employers share one $1,000,000 exemption between them

EHT Tax Rates

EHT is calculated using a progressive rate structure that depends on the employer's total Ontario remuneration. The rates range from 0.98% to 1.95%.

• Remuneration under $200,000: 0.98%
• Remuneration $200,000–$400,000: 1.101%
• Remuneration $400,000–$600,000: 1.223%
• Remuneration $600,000–$800,000: 1.344%
• Remuneration $800,000–$1,000,000: 1.465%
• Remuneration over $1,000,000: 1.95% (on the portion above the exempt amount)

EHT Instalments and Annual Return

Employers with annual EHT payable of more than $2,400 must make monthly EHT instalment payments. The annual EHT return is due by March 15 of the following year.

• Monthly instalments: due by the 15th of each month
• Annual EHT return: due March 15 (for prior calendar year)
• Balance owing: due with the annual return by March 15
• File online through Ontario's ONe-Source portal

Key Takeaways

The EHT exemption provides a significant benefit for Ontario small businesses under $1,000,000 in payroll. As your payroll grows toward and past this threshold, EHT becomes a meaningful cost to plan for. Understanding when you cross the threshold helps you budget accurately and structure associated corporations properly.