Ontario Employer Health Tax for restaurants: does it apply to you, and what to file

Employer Health Tax (EHT) is a payroll tax that helps fund Ontario's health care. Many restaurant owners hear about it and wonder if it applies to them. For most small and mid-sized independent restaurants, the answer is that the exemption covers the whole amount, so no tax is payable. But exemption does not always mean no paperwork. This guide explains how it works in general terms. It is not tax advice, and your accountant or the Ontario Ministry of Finance is the authority on your own situation.

What is the Employer Health Tax?

EHT is a tax paid by employers on the total remuneration they pay to employees in Ontario. Remuneration means wages, salaries, bonuses, taxable benefits and similar payments. The tax is calculated on your annual payroll, and eligible private-sector employers can exclude an amount through an exemption.

How big is the exemption?

Eligible private-sector employers can exclude an amount of annual Ontario payroll from the tax. The size of the exemption, and the payroll level above which it is reduced or lost, have changed over time, including through recent legislation, so check the Ministry of Finance's current EHT guide on ontario.ca before you rely on any figure.

For a restaurant, that means a business with a payroll under the exemption pays no EHT. A restaurant with 20 employees will often be under the line, but a business with many locations or high payroll might not be.

Do you have to register or file if you are exempt?

Employers whose payroll is below the exemption may still have obligations. There is generally an annual return for the previous year, with a filing date set by the Ministry, and there are requirements to register once your payroll reaches certain levels. Ask your accountant or the Ministry whether you need to file an annual return even if you owe nothing. Missing a required filing can lead to penalties.

What counts as payroll?

Wages, salaries, bonuses and vacation pay paid to employees who work in Ontario or who report to an Ontario base. Taxable benefits count too. Tips are an area where you should ask for advice, because the treatment depends on how tips are paid and recorded. Do not assume. Ask the Ministry or your accountant how tips and service charges are treated in your case.

What if you have more than one business?

Associated employers share one exemption. If you own several corporations that are linked, for example one for each restaurant, you generally cannot claim the full exemption for each. The guides describe a written allocation of the exemption among the group, filed by a set date. This is a common trap for owners with multiple locations. Ask your accountant before you open a second location or restructure.

What if you only operate part of the year?

The guides say that the exemption is prorated if you are an employer for only part of a year. A seasonal restaurant that opens in the spring, for example, should check how the proration works, and whether its payroll in the open months crosses a threshold.

When do instalments apply?

The guides say employers whose EHT payable is above a certain size must pay in instalments through the year rather than once annually. This does not apply to a business below the exemption, but it could apply as you grow. Put a payroll review on your calendar whenever you add locations or staff.

What records should you keep?

Payroll registers, T4 summaries, benefit records and any allocation agreements. Your accountant will use these to prepare the return. Keep them for the number of years the law requires.

How is Ontario different from British Columbia?

British Columbia has its own Employer Health Tax with a different structure. If you operate in both provinces, treat them separately. See the guide to the BC Employer Health Tax.

What should you do now?

1. Add up your expected annual Ontario payroll.
2. Compare it with the exemption on the Ministry of Finance website.
3. Ask your accountant if you need to register or file.
4. Put the 15 March filing date in your calendar.
5. Review again whenever you add a location or change the legal structure.

Where can you get help?

The Ontario Ministry of Finance publishes an Employer Health Tax guide and has a telephone line for questions. Your accountant can check your payroll against the exemption and your filing dates. An industry association such as Restaurants Canada can also point you to current information. Ask in writing when the answer matters, and keep the reply with your tax records.

More guides for your business:

• AODA website rules for Ontario restaurants: who must meet WCAG 2.0 AA and what to fix first
• How to get an Ontario liquor sales licence for a restaurant or bar (AGCO guide, 2026)
• Public holiday pay for Ontario restaurant staff: the nine holidays and how to work out the pay

More in the Canadian guides for food businesses.