Employer Health Tax (EHT) Clarification Related to Stock Option Benefits

On September 27, 2022, British Columbia (BC) EHT updated the “Determining remuneration for employer health tax” section of its website, clarifying that stock option benefits represent a benefit received by the employee due to their employment relationship. 

As a result, the EHT now applies in the calendar year on the stock option benefits that are required be reported in Box 14 (Employment Income) of an employee's T4 slip. Previously, the employer would exclude the stock option deduction reported in Code 39 - Security options deduction – 110(1)(d) and Code 41 - Security options deduction – 110(1)(d.1) of the T4 slip when determining the remuneration subject to the premium. 

Employers that may have included the deduction in their estimated payroll for the 2022 tax year by reducing their Box 14 earnings by the stock option deductions reported in Code 39 and Code 41 of the T4 slip must re-calculate and reconcile their BC EHT premium and remit the adjusted instalment by December 15, 2022. 

Employers will also need to adjust their previous years’ Annual Returns as the new requirement is being applied retroactively to 2019. The return(s) for 2019, 2020 and 2021 must be amended to retroactively adjust their filing and add back the deduction previously claimed. This will result in an increase in the amount payable, and employers must pay for the balance.

Employers can request a waiver if interest and penalties are assessed after amending the applicable EHT returns.

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