The Canada Revenue Agency has released the following notices concerning the taxation and administration of recreational cannabis production and sales:
- Excise Duty Notice EDN52, “Obtaining and Renewing a Cannabis License”;
- Excise Duty Notice EDN53, “General Information for Cultivators, Producers and Packagers of Cannabis Products”; and
- Excise Duty Notice EDN54, “General Overview of the Cannabis Excise Stamps.”
These notices provide general information about the licensing requirements for persons who wish to obtain a cannabis licence, to persons who wish to undertake any regulated activity involving cannabis products, and the cannabis excise stamp for cannabis licensees.
Once legislated under the Excise Act, 2001, duty will be imposed on all cannabis products legally available for purchase, including fresh and dried cannabis, cannabis oils, and seeds, and seedlings for home cultivation. Cannabis cultivators and manufacturers will be required to obtain a license from the Canada Revenue Agency, remit applicable excise duty, and follow specific excise stamping rules.
In December 2017, the federal government and most provincial and territorial governments negotiated an agreement for the first two years after legalization, under which 75% of cannabis excise duty revenues will be shared with participating jurisdictions. The remaining federal portion (i.e., 25%) of cannabis excise duty revenues will be capped at $100 million annually, with any excess being distributed to the participating provinces and territories. The combined federal and provincial or territorial excise duty rates for cannabis are expected to be:
- $1.00 per gram of cannabis plant flower;
- $0.30 per gram of cannabis plant trim (which is plant material, other than the flower, used in a cannabis product); and
- $1.00 per seed or seedling for home cultivation.
The excise duties to be paid by licensed producers, however, will be equal to the greater of the flat duty rate applied to the quantity of cannabis included in a final product at the time of packaging for retail sale; and a 10% ad valorem rate applied to the dutiable amount (i.e., the selling price, excluding the excise duty) at the time of delivery.
The excise duty will generally apply to any cannabis product that contains Tetrahydrocannabinol (THC). However, a packaged product that contains a concentration of 0.3% or less THC will not be subject to excise duty. Similarly, prescription drugs derived from cannabis will not be subject to duty.