The Cannabis Act received Royal Assent on June 21, 2018, legalizing and strictly regulating cannabis in Canada. Both the Cannabis Act and the regulations will come into force on October 17, 2018. Cannabis is also subject to Excise Duties and customs duty on the importation.
Review the Regulatory and Legislative Proposals relating to the Taxation of Cannabis for details of the excise duties applicable by each province in Canada.
What is Cannabis?
Cannabis contains hundreds of chemical substances. Over 100 of these are known as cannabinoids. Cannabinoids are made and stored in the plant’s trichomes. The most researched cannabinoid is delta-9-tetrahydrocannabinol (THC). Cannabis that contains very low amounts of THC in its flowers and leaves (less than 0.3%) is classified as hemp. Cannabidiol (CBD) is another cannabinoid. Terpenes are chemicals made and stored in the trichomes of the cannabis plant, with the cannabinoids. Terpenes give cannabis its distinctive smell. Marijuana is a slang term for the dried flowers, leaves, stems and seeds of the cannabis plant.
CFIA’s role in cannabis regulation
The Canada Food Inspection Agency (CFIA) regulates the import, export, certification and grading of cannabis seed. The CFIA already administers several acts and regulations that relate to the cultivation of cannabis and industrial hemp, and to cannabis products and by-products, such as regulations for livestock feed and the disposal of unused plant parts. The Cannabis Act does not affect these acts and regulations; they remain in effect.
Directive D-96-03 Plant protection import requirements for Cannabis sativa provides the import requirements for cannabis plants and seed.
In addition to phytosanitary import requirements importers of Cannabis sativa plants and seed from all countries must obtain appropriate licenses and permits from Health Canada’s Office of Controlled Substances. Health Canada requirements must be met before Permits to Import can be issued.
Health Canada’s role?
Under the Access to Cannabis for Medical Purposes Regulations, a licensed producer may import cannabis, marihuana or cannabis oil with an import permit issued by Health Canada. To export marijuana or cannabis, a licensed business will require an export permit from Health Canada.
During the transition period the Government of Canada will continue to work with the provinces and territories, Indigenous communities, the regulated cannabis industry and law enforcement, among others, to prepare for legalization. Until that time, it remains illegal to buy, possess or use cannabis for anything other than authorized medical or research purposes.
Cannabis for non-medical purposes will become available for legal retail sale in Canada on October 17, 2018. In anticipation of this milestone, the Government of Canada is taking additional steps to implement the coordinated cannabis taxation framework that was agreed upon in principle by federal, provincial and territorial Finance Ministers in December 2017, and formalized through the signing of Coordinated Cannabis Taxation Agreements (CCTAs) with most provincial and territorial governments to date.
The Government released for consultation a set of technical draft regulatory and legislative proposals under the Excise Act, 2001 that would provide for the additional excise duty rates for each province or territory that has signed a CCTA with the Government of Canada. These rates would come into effect when cannabis for non-medical purposes becomes available for legal retail sale.
In keeping with the agreement reached by Finance Ministers, under the CCTAs, revenues from the excise duties on cannabis products will be shared on the following basis: 75 per cent to provincial and territorial governments, and 25 per cent to the federal government. Provinces and territories will work with municipalities according to shared responsibilities towards legalization. In addition, federal revenues from the excise duty on cannabis will be capped at $100 million per year for the 24 months that follow the legalization of non-medical cannabis. Excess federal revenues over the $100 million cap will be provided to provinces and territories that have concluded a CCTA with the federal government.
This consultation also seeks comments on additional regulatory proposals that would provide:
- exemptions for certain entities to allow the possession of cannabis products stamped for multiple jurisdictions, under certain conditions;
- the ability for third parties to possess cannabis excise stamps for specific purposes; and
- exemptions from the proposed excise duty for certain cannabis-based products that are not intended for human consumption.
Canadians are invited to provide comments on the draft regulatory and legislative proposals detailed below by October 17, 2018.
Please send your comments to fin.cannabis-duty.2018.droit-cannabis.fin@canada.ca. Written correspondence related to these consultations can also be mailed to:
Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
The following new documents are now available on the Government of Canada website:
EDN52 Obtaining and Renewing a Cannabis Licence
EDN53 General Information for Cultivators, Producers and Packagers of Cannabis Products
EDN54 General Overview of the Cannabis Excise Stamps
Other Related Documents
- Regulatory and Legislative Proposals Relating to the Taxation of Cannabis and Explanatory Notes
- Backgrounder – Modifications to the Excise Duty Framework on Cannabis Products
- Backgrounder – Cannabis Excise Duty Rates in Provinces and Territories
- EDN55 – Calculation of Cannabis Duty and Additional Cannabis Duty on Cannabis Products