As we wrote in a previous blog post, the Canada Revenue Agency (the “CRA”) has announced a “Coordinated Vaping Duty System” framework to manage the payment, collection, remittance and refund in respect of the additional vaping duty imposed under section 158.58 of the Excise Act.
Since the additional duty came into force on July 1, 2024, the CRA has released further guidance on the framework, including the use of vaping excise stamps and registration obligations within the vaping stamping regime.
Overview of the Coordinated Vaping Duty System
As outlined in Excise Duty Notice EDN95, the new “Coordinated Vaping Duty System” results in an increase in the total duty collected on vaping products as an additional vaping duty is imposed on vaping products entering the duty-paid market in “specified vaping provinces”. To date, the following provinces are “specified vaping provinces”: Ontario, Quebec, Northwest Territories, and Nunavut.
To show that the additional vaping duty for a specified vaping province has been paid, vaping products must bear a vaping excise stamp when entering the duty-paid market.
Registration for the Vaping Stamping Regime
According to Excise Duty Notice EDN80, a person must register for the vaping stamping regime if falling under one of the following categories:
- a vaping product licensee that packages vaping products manufactured in Canada and intended for sale into the duty-paid market;
- a vaping product licensee that imports packaged vaping products for stamping in Canada and intended for sale into the duty-paid market;
- a vaping product licensee that imports stamped packaged vaping products intended for sale into the duty-paid market; and
- a vaping prescribed person that imports stamped packaged vaping products intended for sale into the duty-paid market.
Considerations
While registering as a “vaping product licensee” may seem initially advantageous due to the broader scope of activities permitted, it entails more rigorous initial requirements and ongoing obligations compared to registering as a “vaping prescribed person”. For example, licensees may face higher financial security requirements and must renew their licenses periodically. Conversely, registration as a “vaping prescribed person” typically remains valid until the person either requests to cancel the registration or no longer meets the eligibility requirements.
Takeaways
With the new additional vaping duty came into force on July 1, 2024, participants in the vaping sector must consider whether they need to register for the Vaping Stamping Regime. Choosing between licensee and prescribed person categories requires careful consideration of regulatory requirements and operational implications.
Navigating through these complex requirements may require legal advice, and compliance is required in order to avoid assessment.