Canada Revenue Agency Issues Notice on Removal of Fuel Charge

The Canada Revenue Agency (CRA) recently released FCN16 Removal of the fuel charge to provide information on the impact of the Government of Canada’s announcement that the fuel charge will be removed on April 1, 2025. The removal of the fuel charge—also known as the carbon tax—will be accomplished by setting all fuel charge rates to zero percent. This change will impact both registered and non-registered persons.

A federal carbon pollution pricing system, comprised of two parts, was implemented on June 21, 2018, through the Greenhouse Gas Pollution Pricing Act. The first part, which is administered by the CRA, is a fuel charge that applies to 21 types of fuel and certain combustible waste. The fuel charge also serves as a backstop, applying in provinces and territories that do not have their own carbon pricing system meeting federal requirements. Currently, the fuel charge applies in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Saskatchewan, and the Yukon, but it will be removed effective April 1, 2025.

In addition, registration under the fuel charge will no longer be required after March 31, 2025, and all fuel charge accounts will be cancelled, effective November 1, 2025. Most filing and reporting requirements for the fuel charge will also be eliminated for reporting periods after March 31, 2025, except for any outstanding returns and payment obligations related to purchases made up to that date. Exemption certificates will no longer apply to purchases of fuel in the jurisdictions listed above on or after April 1, 2025, but must be retained for six years after the end of the year to which they relate.

Environment and Climate Change Canada administers the second part of the federal carbon pollution pricing system, which is an output-based pricing system applicable to industrial facilities. This system will continue to apply in provinces where it is currently in place.

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals.