CRA Publishes Excise Duty Guidance and Licence Applications for Cannabis Producers

by Blake, Cassels & Graydon LLP
Contact

On May 14, 2018, the Canada Revenue Agency (CRA) published its first guidance for cultivators, producers and packagers of cannabis products, as well as the application forms for excise duty licences and the cannabis excise stamping regime. The CRA has also committed to publishing at least one additional excise duty notice to explain how the proposed additional cannabis duty, which is imposed on behalf of the provinces, would be administered.

Cannabis producers with Health Canada licences can now apply for excise duty licences with the CRA. This was a required step in advance of the legalization date for recreational cannabis, because the transitional rules for excise duty and stamping required the excise duty framework to be in place by that date (for more information on the excise duty framework, please see our March 2018 Blakes Bulletin: 2018 Federal Budget: Excise Tax on Cannabis).

TRANSITIONAL RULES

The proposed transitional rules require cannabis producers to stamp cannabis products delivered to a purchaser in advance for sale or distribution on or after the legalization date for recreational cannabis with the cannabis excise stamp to indicate the provincial or territorial market in which it is intended to be sold or distributed. For example, if a licensed producer sold recreational cannabis to a retailer for sale on or after legalization, the producer would have to stamp the cannabis with an excise duty stamp. This means that licensed producers who will be packaging cannabis products should take steps in preparation for legalization to purchase excise stamps and package their products as required.

The excise duty (including any additional duties imposed on behalf of the provinces) would be imposed on cannabis products produced in Canada and delivered to a purchaser in advance for sale or distribution after legalization. The cannabis duty and additional duties on cannabis products that are produced in Canada and delivered to a purchaser before legalization would be payable on the date of legalization, and should be remitted on the monthly return for the month that includes the legalization date.

EXCISE LICENCES AND STAMPS

The excise duty licence application forms (Form L-300E) require the cannabis producers to provide a business plan, including a business overview, sales and marketing plan and a financial plan that explains the business’s sources of funds. For licensed producers that already have a Health Canada licence and have undergone significant scrutiny by the federal government, the CRA should not require significant documentation. For new entities, this process may be more rigorous.

The application forms also require the applicant to have set up a federal business number before the CRA may issue an excise licence. While corporations, partnerships, individuals or unincorporated bodies (a “person”, as defined in the Excise Act, 2001) can all obtain an excise licence, the CRA will only activate the excise licence once the person’s Health Canada licence is also activated, and Health Canada may impose additional restrictions on the kind of entity that can become licensed.

The CRA also requires personal information about all directors, officers, partners and, in the case of corporations, shareholders holding more than 20 per cent shares.

For persons who will be packaging cannabis products, a separate application form (Form L-301E) is required to register for the cannabis stamping regime. Cannabis excise stamps will be delivered as dry (non-adhesive) individual stamps wrapped in bundles of 500. The unit price of cannabis excise stamps for the period of April 1, 2018 to September 30, 2019 is C$0.00714.

EFFECT AND DURATION OF EXCISE LICENCE

Once CRA decides to issue a licence, the CRA regional excise duty office will issue a cannabis licence approval letter, specifying the following: the legal name of the entity that holds the licence; complete mailing address; premises authorized under the licence; activities that may be carried on under the licence; and the effective and expiry dates of the licence.

The cannabis licence would be effective from the date indicated on the licence approval letter and would generally remain in effect until the expiry date indicated in that letter. A licence remains in effect for a maximum period of two years, provided that it is not suspended or cancelled prior to expiration.

A CRA excise license is connected to an entity’s federal business number and cannot be transferred to another person. In the case of a change of legal entity (e.g., a sole proprietorship incorporates, or a corporation amalgamates or merges with another corporation), the existing cannabis licence would be cancelled and the person would have to apply for a new licence.

FURTHER GUIDANCE

The CRA’s current guidance to the industry can be found in the following three publications:

  1. EDN52 Obtaining and Renewing a Cannabis Licence
  2. EDN53 General Information for Cultivators, Producers and Packagers of Cannabis Products
  3. EDN54 General Overview of the Cannabis Excise Stamps

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blake, Cassels & Graydon LLP | Attorney Advertising

Written by:

Blake, Cassels & Graydon LLP
Contact
more
less

Blake, Cassels & Graydon LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.