Based on the Excise Act, 2001 and its regulations including proposed amendments under Bill C-97, Budget Implementation Act, 2019, No. 1.
CRA Licence – ‘Cannabis Licence for Tax Purposes’
Before a licensed producer can legally take possession of cannabis, it must be licensed by both Health Canada and the Canada Revenue Agency (the “CRA”). The CRA cannabis licence under the Excise Act, 2001 requires that all commercial growers (cultivators, nurseries, etc..), producers and packagers (processors) must apply. Entities with a Health Canada licence for cannabis production must apply for a cannabis licence for both medical and recreational purposes. CRA licences are valid for a period of no more than two (2) years.
Certain exemptions due exist such as:
a) if you are an individual in Canada who, under the Cannabis Act:
1. Produces cannabis for personal use,
2. Produces cannabis for medical purposes,
3. Is authorized to produce cannabis (a designate) for another individual for medical purposes,
4. A cultivator of industrial hemp (note that industrial hemp growers must have their hemp flower processed at a site with a licence for cannabis processing, and that processor must have a CRA licence).
or b) if your business involves only storing unpackaged cannabis products.
Holder of a licence for:
-Cultivation (subclass: micro or standard)
-Processing (subclass: micro or standard)
MUST have a CRA Cannabis Licence before they can possess cannabis – this includes prior to taking possession of cannabis during the 10(2) Declaration of Starting Material to Health Canada.
Holders of a CRA Cannabis Licence
When you become a licensed cannabis producer, you must pay a federal excise duty when the cannabis products you package are delivered to a purchaser (for example, a provincially authorized distributor/retailer or final consumer)
Eligibility conditions for a cannabis licence
To apply for or renew a cannabis licence, you must meet all of the following conditions:
- You are not the subject of a receivership of your debts
- You have not failed to comply with any Act of Parliament (other than the Excise Act, 2001) or of a provincial or territorial legislature that deals with the taxation or control of alcohol or tobacco, or any regulations under it in the past 5 years
- You have not been convicted of fraud within the past 5 years
- Each individual involved must be at least 18 years of age
- You must have a valid business address in Canada
- Provide a list of all premises that will be cultivating, producing and/or packaging cannabis products
- Have sufficient financial resources to conduct your business in a responsible manner
- Hold a valid licence from Health Canada issued under the Cannabis Act
- Provide a business plan (including a business industry overview, operating plan, financial plan or source of funds, and a sales and marketing plan)
- Provide acceptable security to cover one month of cannabis duty liability (minimum of $5,000 and a maximum of $5 million)
Restrictions and conditions
The CRA will suspend or cancel licences if certain conditions are not upheld, these include (but are not limited to):
- The entity that holds the licence cannot become bankruptcy
- Cannabis activities are no longer conducted at the licensed site that includes, cultivating, producing, or packaging cannabis or cannabis products
- The entity of its stakeholders fail to comply with applicable federal alcohol or tobacco taxation laws
- The entity of its stakeholders are convicted of fraud
- The entity of its stakeholders fails to notify the CRA of important changes to your licence, as required.
The Cannabis Excise Stamp
Each cannabis product that is for sale in Canada that contains THC (low-THC or CBD only products are exempt from the excise program as well as prescription cannabis drugs), whether for medical or recreational purposes, must have a cannabis excise stamp applied to that cannabis product by a license holder with a cannabis processing licence. Both standard and micro processors are able to apply these stamps to products under the condition that one of the processors in the supply chain (the last in the chain of custody) holds an amendment to their Health Canada licence that allows for the sale of products.
Cannabis excise stamps would have specified colours indicating the province or territory in which the product is intended to be sold. The cannabis licensee who packaged the product would be responsible for determining and applying the appropriate cannabis excise stamp before the product enters into the duty-paid market.
The excise stamp demonstrates to consumers, retailers, or industry stakeholders that cannabis duty has been paid on the cannabis product on which it is placed. Several identifying characteristics or visible features are considered.
Visible Features of the Excise Stamp
- The dimensions of the cannabis excise stamp are exactly 20 × 40 mm.
- The jurisdiction (each province and territory) would include the jurisdiction’s name abbreviation as well as the jurisdiction’s distinctive colour band and background.
- The unique identifier would be an alphanumeric identifier specific to each cannabis excise stamp and would start with 3 capital letters followed by 6 numbers.
- The duty-paid status would distinctively indicate that the cannabis duty and, where applicable, additional cannabis duty in respect of the particular province or territory, were paid on the cannabis product.
The Cannabis Excise Stamping Regime
Responsibilities of a Licensee who is Packaging Cannabis Products i.e. a Cannabis Processor
Your responsibilities as a licensee who is packaging cannabis products
As a licensee who is packaging cannabis products, you must:
- Affix a cannabis excise stamp to the products at time of packaging for final sale
- Calculate the duty payable on cannabis
- Report (send) and remit (pay) the monthly duty payable on cannabis using Form B300, Cannabis Duty and Information Return
- Report on your inventory of stamps using Form B300
- Keep all your supporting documents for 6 years to support the use and destruction of stamps
Penalties may apply for unaccounted cannabis excise stamps.
Cannabis Duties Calculation
The greater of (1) or (2), whereas:
(1) a flat-rate tax based on a cannabis product’s weight/quantity at the time of packaging; and
(2) an ad valorem rate based on the cannabis product’s sale price.
Clones can be prepared by tissue culture or from cuttings. Seeds are made from males/females.
Applications for a CRA Licence for Cannabis
CannDelta will complete all aspects of the application to obtain a CRA licence for Cannabis on your behalf. CannDelta can register for the cannabis stamping regime at the same time as you apply for a cannabis licence under the Excise Act, 2001.
Contact Us Now to Speak with a Consultant about obtaining your Cannabis Licence from the CRA.