Does Corporation A qualify for the Employer Health Tax exemption?

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Interpretation Letter 09-0030, May 2009

We refer to your letter dated XXXXXX, requesting an interpretation on the definition of eligible employers who qualify for the Employer Health Tax (EHT) exemption, with respect to Corporation A.

Under the EHT Act, "eligible employer" includes an employer that is not,

  1. a person in the public sector, as described in clauses 1 (a) to (i) and section 2 of the Schedule to the Social Contract Act, 1993, and not subject to tax under Part I of the Income Tax Act (Canada)

The Schedule to the Social Contract Act, 1993 under Clause 1, defines a public sector employer to include:

  1. the corporation of every municipality in Ontario, every local board as defined by the Municipal Affairs Act, and every authority, board, commission, corporation, office or organization of persons some or all of whose members, directors or officers are appointed or chosen by or under the authority of the council of the corporation of a municipality in Ontario

From the information you provided, we understand that:

  • Corporation A is a separate entity under the Business Corporation Act
  • the City of XXXXXX is the sole shareholder of Corporation A
  • Corporation A operates under the direction and governance of seven people, who are appointed by the City of XXXXXX
  • three of the Board members are municipal councillors.

Based on the information provided, it is our opinion that the directors of Corporation A's Board are appointed under the authority of the corporation of a municipality (the City of XXXXXX) as described in clause 1(b) of the Social Contract Act, 1993. Corporation A is considered to be a member of the public sector. As a result, Corporation A is not an eligible employer for EHT purposes, and therefore is not eligible for the tax exemption.

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