What Is the Ontario Employer Health Tax (EHT)?
The Ontario Employer Health Tax (EHT) is a payroll tax levied on employers with employees who work in Ontario. Unlike CPP and EI premiums — which are shared between employer and employee — EHT is paid entirely by the employer. Employees do not contribute to it, and it does not appear on employee T4 slips.
EHT was introduced in 1990 to fund the Ontario Health Insurance Plan (OHIP). It is administered by the Ontario Ministry of Finance under the Employer Health Tax Act — making it a provincial tax, entirely separate from federal CRA remittances. For Mississauga and GTA employers, understanding EHT is critical: errors in calculation or late filings result in provincial penalties and interest.
At Pathak Professional Corporation, our Mississauga CPA team assists Ontario employers with EHT registration, annual filings, and payroll compliance — from sole proprietors to multi-company associated groups.
Ontario EHT Rates 2025
EHT uses a sliding rate scale based on total Ontario payroll (remuneration). The rate increases progressively:
| Annual Ontario Payroll | EHT Rate |
|---|---|
| Up to $200,000 | 0.98% |
| $200,001 – $230,000 | 1.101% |
| $230,001 – $260,000 | 1.223% |
| $260,001 – $290,000 | 1.344% |
| $290,001 – $320,000 | 1.465% |
| $320,001 – $350,000 | 1.586% |
| $350,001 – $380,000 | 1.708% |
| $380,001 – $400,000 | 1.829% |
| Over $400,000 | 1.95% |
The vast majority of Ontario businesses with payroll exceeding $1,400,000 (i.e., payroll above the $1,000,000 exemption that creates taxable payroll over $400,000) simply apply 1.95% to their total Ontario remuneration above the exemption.
The $1,000,000 Ontario EHT Exemption (2025)
Ontario provides an annual payroll exemption of $1,000,000. This means:
- If your total Ontario payroll is $1,000,000 or less, you owe zero EHT
- If your payroll exceeds $1,000,000, EHT applies only to the amount above $1,000,000
EHT Calculation Example
Business payroll: $1,400,000
EHT exemption: ($1,000,000)
Taxable payroll: $400,000
EHT rate: 1.95%
EHT owing: $400,000 × 1.95% = $7,800
Note: The $1,000,000 exemption is indexed to inflation starting in 2025, meaning it may increase annually based on the Ontario CPI — check the Ontario Ministry of Finance website for updated figures each year.
Associated Employer Rules — Critical for Multi-Company Owners
The EHT exemption is shared among associated employers. If you own or control multiple corporations in Ontario, all their Ontario payrolls are combined, and the group shares a single $1,000,000 exemption.
Associated Employer Example
| Entity | Ontario Payroll | EHT Without Association Rule |
|---|---|---|
| Corporation A (owner has 100% interest) | $700,000 | $0 (under $1M — exempt) |
| Corporation B (same owner) | $600,000 | $0 (under $1M — exempt) |
| Combined (associated) | $1,300,000 | EHT on $300,000 = $5,850 |
Failing to account for the associated employer rules is one of the most common EHT audit triggers in Ontario. The Ministry of Finance looks for common ownership — two corporations owned by the same individual or family group must combine their payrolls.
Pathak Professional Corporation regularly assists Mississauga and GTA business owners with associated employer analysis and EHT group allocation strategies.
What Counts as “Remuneration” for Ontario EHT?
EHT applies to employment remuneration — a broad term defined in the EHT Act:
Included in EHT Remuneration
- Regular wages, salary, and overtime
- Bonuses, commissions, and tips paid through payroll
- Vacation pay
- Taxable benefits (company car personal-use component, group insurance premiums above the threshold)
- Stock option benefits exercised (subject to specific rules for CCPCs)
- Retroactive pay and settlements for employment income
Excluded from EHT Remuneration
- Payments to genuine independent contractors (T4A income, not T4)
- Dividends paid to shareholder-employees
- Employees who work entirely outside Ontario (pro-rate for partial Ontario time)
- Retiring allowances and severance (generally excluded — confirm with your CPA)
Key point for incorporated professionals: If you operate through a professional corporation and pay yourself salary (T4), that salary is subject to EHT. Dividends paid to yourself are not. This is one reason why the optimal salary/dividend mix in Ontario involves EHT planning — not just personal and corporate income tax.
Ontario EHT Filing Requirements and Deadlines
Who Must Register for EHT?
You must register with the Ontario Ministry of Finance for EHT if:
- Your total Ontario payroll exceeds the $1,000,000 annual exemption, OR
- You are an associated employer group whose combined Ontario payroll exceeds $1,000,000
Registration is done through the Ontario Ministry of Finance (not the CRA). You can register online at ontario.ca or by calling 1-866-ONT-TAXS (1-866-668-8297).
Monthly vs. Annual EHT Filing
| Annual Ontario Payroll | Filing Requirement | Key Deadline |
|---|---|---|
| $600,000 or less | Annual EHT Return only | March 15 of following year |
| Over $600,000 | Monthly installments + Annual Return | Installments: 15th of each month; Annual: March 15 |
Monthly Instalment Calculation
Monthly instalment = (Prior year EHT owing × applicable rate factor) ÷ 12
Or more practically: estimate current year Ontario remuneration → calculate annual EHT → divide by 12.
Annual EHT Return Deadline
The annual EHT return is due March 15 of the year following the tax year. For example, the 2024 EHT return is due March 15, 2025.
EHT for Registered Charities
Registered charities receive a separate $1,000,000 EHT exemption, which is not shared with associated employers. Key rules for charities:
- Each qualifying registered charity claims its own full $1,000,000 exemption independently
- Charitable organizations with total Ontario payroll under $1,000,000 pay zero EHT
- Charities must still file an annual EHT return if they employ staff in Ontario and meet the registration threshold
EHT Penalties and Interest
Failure to comply with Ontario EHT requirements results in:
| Violation | Penalty |
|---|---|
| Late filing of annual EHT return | 5% of unpaid EHT + 1% per month late (maximum 17%) |
| Failure to register when required | Penalties plus back-interest on all installments from their original due dates |
| Falsifying or failing to file | Up to $25,000 or imprisonment under the EHT Act |
| Late payment of instalments | Interest at the province’s prescribed rate on the shortfall |
EHT for New Ontario Businesses
When you register a new Ontario business and hire employees, here are your EHT steps:
- Determine your expected annual Ontario payroll
- If it will exceed $1,000,000 (after considering associated employers), register with the Ontario Ministry of Finance
- Set up monthly installment schedule or annual-only if payroll is under $600,000
- Coordinate EHT filings with your CRA payroll account (CPP, EI, income tax withholdings) — these are separate
Pathak Professional Corporation assists new Mississauga businesses with complete payroll setup — both CRA federal remittances and Ontario EHT provincial compliance — from day one.
Ontario EHT vs. Other Provincial Employer Payroll Taxes
| Province | Employer Payroll Tax | Exemption Threshold | Maximum Rate |
|---|---|---|---|
| Ontario | Employer Health Tax (EHT) | $1,000,000 | 1.95% |
| Quebec | Health Services Fund (HSF) | Varies by industry/payroll | 4.26% (service sector) |
| Manitoba | Health and PSE Tax Levy | $2,250,000 | 2.15% |
| Newfoundland | Payroll Tax | $1,300,000 | 2.0% |
| Northwest Territories / Nunavut | Payroll Tax | None (employee-paid) | 2.0% |
| BC, AB, SK, NS, PEI, NB | None | N/A | N/A |
Can You Deduct Ontario EHT as a Business Expense?
Yes. Ontario EHT paid is deductible as a business expense for both federal and Ontario corporate income tax purposes. This reduces the net after-tax cost of EHT:
Example:
EHT paid: $7,800
Combined federal + Ontario corporate tax rate: ~26.5% (small business rate)
Tax savings from deduction: $7,800 × 26.5% = $2,067
Net after-tax EHT cost: $5,733
Frequently Asked Questions: Ontario Employer Health Tax
Q: Does EHT apply if I only have one part-time employee?
A: If your total Ontario payroll (all employees combined) is under $1,000,000, you owe zero EHT. A single part-time employee earning $25,000/year results in zero EHT. You only need to register and pay EHT if your combined Ontario payroll exceeds $1,000,000 — considering all associated employers.
Q: Is EHT the same as payroll tax?
A: EHT is one type of employer payroll tax — a provincial levy specific to Ontario. Other payroll taxes include CPP employer contributions and EI premiums (federal). EHT is paid exclusively to the Ontario government and funds OHIP. Your federal CRA payroll account and your Ontario EHT account are completely separate.
Q: Do I pay EHT on dividends I pay myself from my corporation?
A: No. EHT only applies to employment remuneration (T4 income). Dividends paid to yourself as a shareholder are not subject to EHT. This is why some incorporated business owners in Ontario prefer a higher dividend ratio — it reduces EHT exposure, in addition to other tax planning benefits. Consult Pathak Professional Corporation for a personalized salary/dividend analysis.
Q: I run three Ontario corporations with different employees. Do I get three EHT exemptions?
A: No — if the corporations are associated (common ownership or control), they share a single $1,000,000 EHT exemption. The group must designate one employer to claim the exemption and file a Notice of Exempt Status accordingly. Failure to follow the associated employer rules can result in audits and back-assessments.
Q: What is the EHT exemption amount for 2025?
A: The Ontario EHT annual exemption is $1,000,000 for 2025. Starting in 2025, this exemption is indexed to Ontario’s Consumer Price Index (CPI), meaning it may increase slightly each year to reflect inflation.
Contact Pathak Professional Corporation — Mississauga Payroll and Business Tax Experts
Ontario EHT compliance is just one piece of the employer tax puzzle. From payroll setup and CRA remittances to EHT filing and corporate tax planning, Pathak Professional Corporation provides comprehensive employer tax services for businesses across Mississauga, Brampton, Oakville, and the Greater Toronto Area.
📍 48 Village Centre Place, Mississauga ON L4Z 1V9
📞 437-872-7399
📧 info@pathakcpa.ca
