Hospitals must comply with various tax requirements, such as deducting and remitting income tax and charging HST. They are also subject to various social security related obligations, such as deducting and remitting Canada Pension Plan contributions and employment insurance premiums.
Employment status directly affects a hospital’s obligations under several of the Acts discussed below. As such, for many of the statutes in this section, it is important to decide whether a worker is an employee or self-employed individual (i.e. independent contractor). Evolving case law and the facts of the working relationship as a whole decide the employment status.
The following Acts are covered in this section:
The CPP is a social insurance plan that provides contributors and their families with partial replacement of earnings in the case of retirement, disability or death. The CPP is funded by contributions from employers, employees, and the self-employed. The CPP sets out rules with respect to making contributions and claiming benefits, as well as the administration and enforcement of the enabling legislation.
Who does the CPP apply to?
The CPP applies to all hospitals with respect to staff who are employees of the hospital between the ages of 18 and 70.
What are the key requirements for hospitals under the CPP?
- Hospitals must deduct CPP contributions from employees' remuneration and remit them, along with the hospital’s share of the CPP contribution, to the Receiver General. CPP contributions must be calculated in accordance with the CPP and its regulations (CRC, c 385). Remittances of hospital and employee contributions must be accompanied by a return in prescribed form. (ss 9, 21; CRC, c 385, s 8(3))
- Hospitals must maintain records and books of account containing such information that will enable any contributions payable under the CPP to be determined. (s 24)
- Hospitals must require employees to provide their Social Insurance Number (SIN) and the hospital must maintain a record of each employee’s SIN. (s 98(5))
- Hospitals must file annual information returns with the Minister of National Revenue (Minister). Copies of relevant portions of the return must also be supplied to each employee. (CRC, c 385, ss 10(1), 13)
- Hospitals must remit CPP contributions to the Receiver General on or before the 15th day of the month following the month in which the hospital paid its employees the remuneration for which the contributions were calculated. Hospitals that have an average monthly withholding amount (the total amount of payroll remittances required in a month) that is equal to or greater than $25,000 will be subject to an accelerated remittance schedule. (CRC, c 385, s 8)
- Hospitals must require employees to provide their SIN within 30 days of becoming employed. (s 98(5))
- Annual information returns must be filed with the Minister on or before the last day of February of the following year. Copies of portions of the return provided to employees must be sent on or before the day the return must be filed with the Minister. (CRC, c 385, ss 10(1), 13)
Every employer that fails to remit CPP contributions at the time when it is required to do so is liable to pay the whole amount that should have been deducted and remitted from the time that it should have been deducted, as well as an additional penalty of up to 20 percent, depending on the circumstances. (s 21(7))
If an employer that fails to deduct or remit contributions as and when required is a corporation, the directors at the time the failure occurred are jointly and severally liable, together with the corporation, to pay that amount and any interest or penalties relating to it. (s 21.1(1)) However, a director is not liable if they exercised a reasonable degree of care, diligence and skill to prevent the failure. (s 21.1(2))
Additionally, the CPP sets out various acts as offences, including failing to deduct and remit CPP contributions or maintain records and books as required by the CPP. The penalty for committing an offence is a maximum fine of $5,000 and may also include imprisonment for a maximum term of six months. (s 41(1)) If a director directed, authorized, assented to, acquiesced, or participated in the commission of an offence, they are guilty of the offence and liable on conviction, whether or not the corporation has been prosecuted or convicted. (s 103(2))
For more information about the CPP, please refer to the following resources:
The EHTA imposes a payroll tax that provides partial funding by Ontario employers for the Ontario Health Insurance Plan (OHIP).
Who does the EHTA apply to?
The EHTA applies to hospitals and other employers in Ontario who pay total Ontario remuneration to employees. Hospitals fall under the scope of the EHTA because they employ staff and provide wages that are subject to payroll taxation. Special rules under the EHTA and its regulations apply to hospitals that are registered charities under the Income Tax Act.
What are the key requirements for hospitals under the EHTA?
- Employers must register for an EHT account if their payroll exceeds the exemption threshold. The tax rate varies based on payroll size. (ss 2 - 2.1) Hospitals that are registered charities may qualify for special exemption rules when calculating their taxable payroll. (O Reg 423/16)
- Records and books of account must be maintained to substantiate payroll and tax calculations. (s 12)
- Hospitals must pay monthly installments in accordance with the regulations. (s 3)
- Hospitals must file an annual return by March 15 of the following year, reporting their total Ontario remuneration, and remit the unpaid balance of tax, if any, to which the return relates. The return must be submitted in a form approved by the Minister of Finance (Minister), detailing the amount of tax payable for the year, the amounts on which the tax was calculated, and any additional information required by the Minister for compliance with the EHTA. (s 5)
The EHTA sets out various acts as offences, including failing to remit taxes or to report or retain records. (ss 31-35) Depending on the nature of the offence, the penalty may be a fine of not more than $5,000 per day, imprisonment for up to two years and/or a percentage of the tax that should have been paid. (ss 31-35) If a director directed, authorized, assented to, acquiesced, or participated in the commission of an offence, they are guilty of the offence and liable on conviction, whether or not the corporation has been prosecuted or convicted. (s 36)
For more information about the EHTA, please refer to the following resources:
The EI Act establishes the legal framework for Canada’s employment insurance (EI) program. The EI program provides temporary income support to eligible unemployed individuals while they look for new employment or upgrade their skills, as well as to those who are absent from work due to specific life circumstances, such as sickness, pregnancy, or providing care to family. The EI Act sets rules for paying premiums into the EI program and making claims for benefits. It also sets out the powers of the Canada Employment Insurance Commission (Commission) to oversee the administration and enforcement of the EI Act.
Who does the EI Act apply to?
The EI Act applies to all hospitals with respect to all staff who are employees of the hospital.
What are the key requirements for hospitals under the EI Act?
- Hospitals must deduct EI premiums from employees' insurable earnings and remit them, along with the hospital’s share of EI premiums, to the Receiver General. EI premiums must be calculated in accordance with the EI Act and its regulations. Remittances must be accompanied by a duly completed information return. (s 67-68, 82; SOR/97-33, s 4(6))
- Hospitals must maintain records and books of account with respect to insured employees, including Social Insurance Numbers (SIN) and information that will enable the determination of premiums payable under the EI Act. (s 87)
- Hospitals must complete a Record of Employment (ROE) if an insured employee has an interruption of earnings. (SOR/96-332, s 19)
- Hospitals must ask insured employees to provide their SIN. If the hospital is unable to ascertain an insured employee’s SIN, the hospital must report it to the Commission. (SOR/96-332, s 89)
- Hospitals must file annual information returns with the Minister of National Revenue (Minister). Copies of relevant portions of the return must also be supplied to each insured employee. (SOR/97-33, ss 11, 14)
- Hospitals must remit EI premiums to the Receiver General on or before the 15th day of the month following the month in which the hospital paid its employees the insurable earnings in respect of which the premiums were calculated. Hospitals that have an average monthly withholding amount (the total amount of payroll remittances required in a month) that is equal to or greater than $25,000 will be subject to an accelerated remittance schedule. (SOR/97-33, s 4)
- ROEs completed in paper form must be delivered to both the insured employee and the Commission no later than five days after the later of (a) the first day of the interruption of earnings and (b) the day the hospital becomes aware of the interruption of earnings. Unless a hospital has 13 or fewer pay periods in a year, ROEs completed in electronic form must be sent to the Commission no later than five days after the end of the pay period during which the employee’s interruption of earnings occurred. (SOR/96-332, s 19)
- Hospitals must request an insurable employee’s SIN within three days after the day their employment begins. If a SIN cannot be ascertained, the hospital must report it to the Commission within six days after the day their employment begins. (SOR/96-332, s 89)
- Annual information returns must be filed with the Minister on or before the last day of February of the following year. Copies of portions of the return provided to insured employees must be sent on or before the day the return must be filed with the Minister. (SOR/97-33, ss 11, 14)
Every employer that fails to remit EI premiums at the time when it is required to do so is liable to pay the whole amount that should have been deducted and remitted from the time that it should have been deducted, as well as an additional penalty of up to 20 percent, depending on the circumstances. (s 82)
If an employer that fails to deduct or remit premiums as and when required is a corporation, the directors at the time when the failure occurred are jointly and severally liable, together with the corporation, to pay that amount and any interest or penalties relating to it. (s 83(1)) However, a director is not liable if they exercised a reasonable degree of care, diligence and skill to prevent the failure. (s 83(2))
Additionally, the Commission may impose a penalty on an employer in circumstances where the employer makes a representation, provides information, or makes a declaration that the employer knew to be false or misleading. (s 39(1)) The maximum penalty is nine times the maximum rate of weekly benefits in effect when the penalty is imposed. (s 39(2)) If a director directed, authorized, assented to, acquiesced, or participated in the act, the Commission may impose a penalty on the director whether or not a penalty has been imposed on the corporation. (s 39(3))
Finally, the EI Act sets out various acts as offences, including failing to deduct and remit EI premiums or maintain records and books as required by the EI Act. The penalty for committing an offence is a maximum fine of $5,000 and may also include imprisonment for a maximum term of six months. (s 106) If a director directed, authorized, assented to, acquiesced, or participated in the commission of an offence, they are guilty of the offence and liable on conviction, whether or not the corporation has been prosecuted or convicted. (s 107) Unlike the penalty provisions, the offence provisions do not expressly include a due diligence defence for directors.
For more information about the EI Act, please refer to the following resources:
The ETA mandates that most goods and services sold in Canada are subject to the Goods and Services Tax/Harmonized Sales Tax (HST), unless exempt.
Who does the ETA apply to?
The ETA applies to individuals, businesses, and organizations that supply taxable goods or services in Canada. An organization that operates a public hospital can be designated by the Minister of National Revenue as a “hospital authority” for purposes of the HST. The Canada Revenue Agency (CRA) has the delegated authority to make this designation. Hospitals that have been designated as hospital authorities and are registered charities under the Income Tax Act will be governed by the rules applicable to “public institutions”.
Hospitals are often engaged in making both exempt and taxable supplies. Most health, medical, and dental services performed by licensed physicians, dentists, nurses, and certain other healthcare practitioners (such as optometrists, midwives, physiotherapists, occupational therapists, psychologists) for medical reasons are exempt supplies. Taxable supplies made by hospitals may include (but are not limited to) the operation of a retail pharmacy, and certain supplies of real property or parking.
What are the key requirements for hospitals under the ETA?
- A hospital is required to register for HST purposes if it makes taxable supplies and is not a small supplier. A hospital may voluntarily register for HST purposes if it makes taxable supplies and is a small supplier. (s 240)
A public institution (including a hospital authority that is a registered charity) is a small supplier if the total of all taxable supplies in the four previous calendar quarters (made by the person and all associated persons) does not exceed $50,000. In addition to being a small supplier by having no more than $50,000 of annual taxable supplies, a public institution will be a small supplier if its total revenues including grants and donations do not exceed $250,000. (ss 148-148.1)
A public institution cannot register for HST purposes if it only makes exempt supplies.
- A hospital that is a registrant must collect and account for the HST on its taxable supplies. Special rules apply to taxable sales of real property. The purchaser, if an HST-registrant, will self-assess and pay the HST directly to the CRA as opposed to paying it to the vendor. (ss 221(2), 228(4))
- Hospitals that are registrants may claim input tax credits (ITCs) to recover the HST paid or payable on their purchases and expenses to the extent that those purchases and expenses are for consumption, use, or supply in their commercial activities (that is, to provide taxable property and services). They can only claim ITCs for the HST paid or payable on purchases and expenses related to their commercial activities. Generally, no ITCs can be claimed to recover the HST paid or payable on inputs used to make exempt supplies. (s 169)
- A hospital authority that is a registrant is entitled to claim a public service body (PSB) rebate for the HST paid or payable on eligible purchases and expenses for which it cannot claim ITCs. The PSB rebate applies to property or services consumed, used, or supplied in activities engaged in by the hospital authority in the course of operating a public hospital. The rebate factor for hospital authorities in Ontario is 83% of the federal part of the HST and 87% of the provincial part of the HST. (s 259)
- Taxpayers must keep records and supporting documents in accordance with the ETA. (s 286)
- The filing and payment deadline will be different depending on a hospital’s reporting period. The reporting period is determined based on the total revenue from taxable supplies of property and services made in Canada in the previous fiscal year or in each fiscal quarter leading up to it. The revenue includes those of associates. (ss 238, 245)
| Filing and Payment Deadline |
| One month after
the end of the reporting period |
| One month after
the end of the reporting period |
| 3-months after
fiscal year-end |
- Hospitals that are registrants file their PSB rebate applications with the same frequency as they file their HST returns (monthly, quarterly or annually). An HST registrant has up to four years from the due date of its HST return for the claim period to file a PSB rebate application. (s 259(5))
The ETA imposes liability on the directors of a corporation for the corporation’s unremitted net tax as well as for net tax refunds that the corporation received and to which it was not entitled. (s 323(1)) However, the ETA requires the CRA to take certain steps (i.e., registration of a certificate for the company debt in Federal Court, and execution for that amount has been returned unsatisfied in whole or in part) before issuing a director's liability assessment; otherwise, the director is not liable. (s 323(2)) Additionally, a director is not liable if they exercised a reasonable degree of care, diligence and skill to prevent the failure to remit. (s 323(3))
For more information about the ETA, please refer to the following resource:
The ITA and its regulations guide the application and collection of income tax, including both personal and corporate tax. The ITA outlines the rules for calculating taxable income, claiming deductions and filing returns.
Who does the ITA apply to?
The ITA applies to every person resident in Canada and non-resident persons who were either employed in Canada, carried out business in Canada, or disposed of a taxable Canadian property at any time in the year or a previous year. A person includes a corporation and an individual.
Hospitals and their related entities that are registered as charities under the ITA or that qualify as non-profit organizations under the ITA are exempt from income tax under Part I of the ITA. However, as employers, they are subject to withholding, remittance, and filing requirements under the ITA.
What are the key requirements for hospitals under the ITA?
- Hospitals must deduct and withhold income tax from payments made to their employees (including salary, wages, bonuses, or other remuneration), and must remit those amounts to the Receiver General on account of the employee’s income tax liability. (s 153(1))
- Hospitals must file annual information returns with the Minister of National Revenue (Minister) identifying all of the remuneration paid by it to an employee (T4) and pension and other income paid to employees (T4A). Copies of the return must also be supplied to each employee. (CRC c 945, ss 200, 209)
- Hospitals that provide benefits to their employees must determine whether those benefits are taxable or not. If taxable, hospitals must withhold the appropriate payroll deduction and ensure that the taxable benefit is included in the employee’s income as reported in the T4 information return. (s 153(1); CRC 945, ss 200, 209)
- Hospitals must file annual information returns with the Minister identifying payment of fees, commissions or other amounts for services (over $500) to self-employed persons (T4A). Copies of the return must also be supplied to each self-employed person. (CRC c 945 ss 200, 209)
- Hospitals are required to register for a payroll account as employers and payers of amounts related to employment.
- Records and books of account must be maintained. (s 230)
- Hospitals must remit deducted or withheld amounts of income on or before the 15th of the following month. (s 153; CRC c 945, s 108) Hospitals that have an average monthly withholding amount (the total amount of payroll remittances required in a month) that is equal to or greater than $25,000 will be subject to an accelerated remittance schedule. (CRC c 945 s 108)
- Annual information returns must be filed with the Minister on or before the last day of February of the following year. (CRC c 945 s 205) Registered charities are not subject to late-filing penalties on annual information returns. (s 162(7.01)-(7.02))
- Hospitals that are registered charities must file a Form T3010 Registered Charity Information Return within six months of their year-end. (s 149.1(14)) Failure to file the information return can lead to revocation of charitable status. (168(1))
Every employer that fails to deduct or withhold income taxes from an employee is liable for a penalty of up to 20 percent. (s 227(8)) An employer is also liable to pay interest at the prescribed rate on the amount of taxes not properly withheld from the day the amount was due. (s 227(8.3)) Where the employee is not a resident of Canada, the non-resident employee is jointly and severally liable with the employer to pay the interest. Where the employee is not a resident of Canada, the employer is also liable for the amount of tax not withheld. (s 227(8.4)) There is no limitation period under the ITA with respect to an assessment relating to the above. (s 227(10))
Directors can be held jointly and severally liable, together with the corporation, for all taxes, penalties and interest noted above. (s 227.1(1)) However, a director is not liable if they exercised a reasonable degree of care, diligence and skill to prevent the failure. (s 227.1(3))
For more information about the ITA, please refer to the following resources:
The Insurance Act governs all matters relating to contracts of insurance and insurable interests in the province. The Insurance Act sets out, among other things, licensing and operational requirements for insurers, rules for both insurers and insured persons with respect to contracts of insurance, and the powers of the Financial Services Regulatory Authority of Ontario (FSRAO) to oversee the administration and enforcement of the Insurance Act.
Who does the Insurance Act apply to?
Hospitals that have entered into a contract of insurance are subject to the Insurance Act.
What are the key requirements for hospitals under the Insurance Act?
Hospitals must inform an insurer if there is a material change in the circumstances in connection with the hospital’s entitlement to a benefit under a contract of insurance. (s 447(2))
Hospitals must inform an insurer of a material change within 14 days of the material change. (s 447(2))
The Insurance Act sets out a list of offences, which includes contravening the Act, the regulations, or the FSRAO’s rules; knowingly making a false or misleading statement or representation to an insurer in connection with the corporation’s entitlement to a benefit under a contract of insurance; willfully failing to inform the insurer of a material change in connection with such an entitlement; and knowingly making a false or misleading statement or representation to an insurer to obtain payment. (s 447(2))
Directors are guilty of an offence under the Insurance Act if they cause, authorize, permit or participate in the corporation committing an offence, or fail to take reasonable care to prevent the corporation from committing an offence. The fine for a first conviction is not more than $100,000, and on each subsequent conviction, not more than $200,000, whether or not the corporation has been prosecuted for or convicted of the offence. (s 447(4)) In addition, the court may order a person convicted under the Insurance Act to compensate or make restitution in connection with the offence. (s 447(5))
For more information about the Insurance Act, please refer to the following resource:
The PBA establishes the legal framework for pension plans in Ontario. The PBA sets out rules for the registration and administration of pension plans, making pension contributions, and claiming benefits. The PBA also sets out the powers of the Financial Services Regulatory Authority of Ontario (FSRAO) to oversee the administration and enforcement of the PBA.
Who does the PBA apply to?
The PBA applies to hospitals that offer pension plans to hospital employees.
What are the key requirements for hospitals under the PBA?
- Hospitals must provide any information to the administrator of a pension plan (Administrator) that is required by the Administrator to comply with the terms of the pension plan and the PBA. This includes providing information to the Administrator with respect to employees who become eligible to become members of the pension plan. (ss 23, 25(3))
- Hospitals must make contributions to a pension fund in accordance with the terms of the pension plan and the PBA. If a hospital withholds money payable to an employee for the purpose of making an employee’s contribution under the pension plan, the hospital shall be deemed to hold the money in trust for the employee until it is paid into the pension fund. (ss 55, 57)
- The timing for hospital and employee contributions to a pension fund will be set out in the terms of the pension plan.
- If a hospital withholds money payable to an employee for the purpose of making an employee’s contribution under the pension plan, the money must be paid to the pension fund within 30 days after the month during which the money was withheld. (O Reg 386/24, s 10(2); Reg 909, s 6)
Every person who contravenes the PBA or its regulations is guilty of an offence. (s 109) Additionally, every director, officer, official or agent of a corporation is guilty of an offence if the person causes, authorizes, permits, acquiesces or participates in the commission of an offence by the corporation, or fails to take all reasonable care in the circumstances to prevent the corporation from committing an offence. (s 110(2))
A director who is guilty of an offence described above is liable to a fine of not more than $100,000 on a first conviction and on each subsequent conviction to a fine of not more than $200,000 whether or not the corporation has been prosecuted for, or convicted of, an offence arising from the same facts or circumstances. (s 110(3)) Further, where a person is convicted of an offence related to the failure to submit or make payment to a pension fund or to an insurance company, the court that convicts the person may, in addition to any fine imposed, assess the amount not submitted or not paid and order the person to pay the amount to the pension fund or to the insurance company. (s 110(4))
For more information about the PBA, please refer to the following resources:
The TA is the provincial counterpart to the federal Income Tax Act. The provisions of the TA with respect to the key requirements for hospitals, compliance deadlines, and director liability explicitly refer to or incorporate the applicable sections of the Income Tax Act described above.
