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Canada Announces Cannabis Tax Plans

Monday, November 13, 2017

The Canadian Government has launched a consultation on a proposed excise duty framework for cannabis products.

In April, the Government introduced legislation to legalize, regulate, and restrict access to cannabis. The accompanying federal excise duty framework is intended to be in place once legal cannabis for non-medical purposes becomes accessible for retail sale, no later than July 2018.

According to the Finance Department, "The proposed level of taxation is intended to keep prices low to eliminate the black market."

The proposed framework will impose an excise duty that is the higher of a flat rate – for example, an amount per gram – applied on the quantity of cannabis contained in a final product for sale, or a percentage – i.e., an ad valorem rate – of the federal licensee's sale price of the product it has packaged.

The Government intends that the combined rate of federal and provincial-territorial taxes for cannabis flowering material contained in a final packaged product should not exceed CAD1 per gram, or 10 percent of the producer's sale price of that product, whichever is higher. The proposed federal excise duty rate would therefore be 50 cents per gram of cannabis, or five percent of the producer's sale price.

The duty would apply to all cannabis products available for legal sale. This would include fresh and dried cannabis, cannabis oils, and seeds and seedlings for home cultivation.

Products would also be taxable under the goods and services tax/harmonized sales tax, as is currently the case for medical cannabis.

The consultation will close on December 7.