About Health Spending Accounts in Canada

Tax saving extended health benefits designed for small business owners.

What is a Health Spending Account in Canada?

A Health Spending Account (HSA) is pay-as-you-go extended health benefits plan designed for small businesses. 

It is fully tax deductible, cost controllable and digitally accessible.  

Benefits of a Health Spending Account in BC

  • Canada Revenue Agency approved to provide medical, dental and vision benefits in a tax efficient manner

  • A corporation can write off 100% of the costs related to its HSA

  • All expenses reimbursed are tax-free to the employees

  • Your employees with an annual credit limit can freely choose how, when, and where to spend their 100% tax free allowance through the plan

Why get a Health Savings Account in BC?

Health Spending Accounts in Canada are considered to be the most cost-efficient way for small business owners to cover health related expenses for their employees. To see a more in depth comparison of cost savings case studies refer to the article here.

 

British Columbia has one of the lowest sales taxes in Canada for HSA. The tax rate in BC is only 5% compared to 25% in Ontario. 

Who Qualifies for a Health Savings Account in BC?

For incorporated business owners, both the employer and employee can take part in the plan. Businesses with as a few as one employee can be eligible.

 

This means a business with only the owner can be eligible. The only requirements are that the owner must be considered an employee earning a bona fide salary and the business must be earning active business income.

 

As for unincorporated business, usually sole proprietors, HSA are only eligible when they have at least one arm's-length employee. Sole-proprietors with no arm’s-length employee cannot use a HSA and must buy an insured plan through an insurance company.

 

Some HSA administrators do not allow unincorporated businesses due to the CRA challenges of their tax-act qualifications in the past. The risk is to be acknowledged by business owners if they wish to pursue further.

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