News Article

2018 Budget Overview: Additional Tax Provisions

Posted: February 27, 2018 By : Knowledge Bureau Reporters
Posted in: Strategic Thinking, federal budget, 2018 Federal Budget, Federal Budget Canada, Additional Tax Provisions

Review additional tax provisions announced by the Government in the 2018 Federal Budget.

SALES AND EXCISE TAX MEASURES

GST/HST and Investment Limited Partnerships

The draft legislation that was presented on September 8, 2017 relating to the application of GST/HST to investment limited partnerships is confirmed to proceed with changes.  The GST/HST will now apply to management and administrative services rendered by the partner only after September 8, 2017 and not before that date. The GST/HST will be payable on the fair market value of management and administrative services in the period they were rendered.

An investment limited partnership will also be allowed to make an election to advance the application of the special HST rules as of January 1, 2018.

Tobacco Taxation

Effective the day after Budget Day

Currently the rates of excise tax on tabacco products increase every five years. The next increase is scheduled for December 1, 2019.  The 2018 budget proposes to adjust the increases on an annual basis and will take effect on April 1 of every year starting in 2019. The excise duty rates are proposed to increase an additional $1 per carton of 200 cigarettes with this budget.

   

Cannabis Taxation

Proposed to be effective when available for sale for non-medical purposes

As part of the Excise Act, 2001 the 2018 Budget proposes a new framework for cannabis products. A cannabis license from the Canada Revnue Agency will be required for all cannabis manufacturers and cultivators.  They will be required to remit excise duty where applicable.

There will be a flat rate duty at the time of packaging and an ad valorem rate at the time of delivery.  Those licensed to sell cannabis will be required to pay duty at the higher of the flat rate or ad valorem rate. Any sales of cannabis that would be considered as basic groceries will be subject to the GST/HST of other cannabis products.

An agreement for the first two years after legalization with most provincial and territorial governments states that they will receive 75 percent of the taxation revenues from a combined $1 per gram/10 percent excise duty rate and the federal government will receive the remaining 25 percent.

 

Cannabis
Plant Product
Federal Rates
Higher of the Two Rates Apply
Additional Rates in Respect of a
Province/Territory
Higher of the Two Rates Apply
  Federal Flat Rate Federal Ad
Valorem Rate
PT Additional
Flat Rate
PT Ad Valorem
Additional Rate
Flower $0.25 / gram 2.5 per cent of the
dutiable amount
of a cannabis
product
packaged by a
cannabis licensee
to a purchaser.
$0.75 /gram 7.5 per cent of the
dutiable amount
of a cannabis
product
packaged by a
cannabis licensee
to a purchaser.
Trim $0.075 / gram $0.225 / gram
Seed $0.25 / seed $0.75 / seed
Seedling $0.25 / seeding $0.75 / seeding

Source: Budget Document

 

The Canada Revenue Agency will issue excise stamps and accept applications for cannabis licenses before the legalization date.

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