News and Insights

Federal Government Withdrawing the Penny from Circulation

Tax Development Aug 24, 2012



Due to the rising costs of keeping the penny in circulation, the Government of Canada announced in its 2012 budget last spring that it will discontinue distribution of the penny to financial institutions, effective the fall of 2012. The Royal Mint will officially no longer circulate pennies as of February 4, 2013. This will save Canadians approximately $11 million annually. 

Purchases may still be calculated in one-cent increments; therefore, there is no need for businesses to reprogram their cash registers.  However, where pennies are not available when settling cash transactions, businesses are expected to round prices to the nearest five-cent increment in a fair and transparent manner.  Non-cash payments such as cheques, credit cards and debit cards will continue to be settled to the cent.  

The calculation of GST or HST on purchases, whether cash or non-cash, will continue to be calculated to the penny and added to the pre-tax price.  It is only the total cash payment for the transaction that will be rounded.  Businesses cannot round the prices of individual items, nor round to the five-cent increment when the consumer can pay to the nearest cent.  However, businesses are not legally required to accept any particular Canadian coins or bank notes in a retail transaction, even though they are encouraged to do so.  

Businesses will be asked to return pennies through their financial institutions to the Mint for melting and recycling of the metal content.  Despite the fact that it will no longer be circulated, the penny can be used by consumers indefinitely for cash transactions.     

Transition for the Elimination of the Penny