Canada Government Releases Draft Regulations on Coordinated Vaping Taxation Framework

June 17, 2024 – Ottawa, Ontario – Department of Finance Canada

Vaping rates among young people in Canada remain high, and the federal government recognizes the potential risks these products pose to them.

Today, the Department of Finance released draft regulations to include Alberta, Manitoba, New Brunswick, Yukon, and Prince Edward Island in Canada’s coordinated vaping taxation framework. Ontario, Quebec, the Northwest Territories, and Nunavut are already part of this framework.

Key Announcements:

Excise Duty Increase: In Budget 2024, the government announced a 12% increase in vaping excise duty rates. This equates to 12 cents per typical vape pod in non-participating jurisdictions and 24 cents per pod in participating jurisdictions. This increase will take effect on July 1, 2024, along with the implementation of the coordinated taxation regime in Ontario, Quebec, the Northwest Territories, and Nunavut.
Previous Measures: Budget 2024 builds on the government’s efforts to combat youth vaping. In Budget 2021, the government introduced a new taxation framework for vaping products in 2022 and aimed to collaborate with provinces and territories interested in a coordinated federal approach. Under this framework, total revenues are split equally between federal and provincial/territorial governments.

Draft Regulations Amending the Excise Duties on Vaping Products Regulations
1 Paragraphs 2(c) and (d) of the Excise Duties on Vaping Products Regulations
are replaced by the following:
(c) New Brunswick;
(d) Manitoba;
(e) Prince Edward Island;
(f) Alberta;
(g) Yukon;
(h) the Northwest Territories; and
(i) Nunavut.
2 The Regulations are amended by adding the following after section 7:
Definition of qualifying vaping product
8 (1) For the purposes of subsection (2), qualifying vaping product means a vaping product that is not stamped to indicate that additional vaping duty in respect of a specified vaping province has been paid and that
(a) is manufactured in Canada and is stamped before January 2025;
(b) is imported by a vaping product licensee for stamping by the vaping product licensee and is stamped before January 2025; or
(c) is imported otherwise than by a vaping product licensee for stamping by the vaping product licensee and is imported or released (as defined in subsection 2(1) of the Customs Act) before January 2025.
Marginal note:January 1 to March 31, 2025
(2) For the purposes of facilitating the joining of New Brunswick, Manitoba, Prince Edward Island, Alberta and Yukon to the coordinated vaping duty system (as defined in subsection 304.3(1) of the Act), the following rules apply:
(a) subsection 158.44(2) of the Act does not apply before April 2025 in respect of qualifying vaping products that are disposed of, sold, offered for sale, purchased or possessed, as the case may be, in any of those provinces;
(b) paragraph 158.46(d) of the Act does not apply before April 2025 in respect of qualifying vaping products that are to be entered in the duty-paid market of any of those provinces;
(c) section 158.58 of the Act does not apply in respect of vaping products if
(i) in the case of vaping products that are imported by an individual for their personal use, the vaping products are imported before January 2025 and the individual is resident in any of those provinces, and
(ii) in any other case, the vaping products are qualifying vaping products that are for consumption, use or sale to consumers in any of those provinces;
(d) subsection 158.6(2) of the Act does not apply in respect of vaping products if the particular time referred to in that subsection is before January 2025 and the vaping products are located in any of those provinces at the particular time; and
(e) subsection 158.61(2) of the Act does not apply in respect of vaping products if the particular time referred to in that subsection is before January 2025 and the last known location of the vaping products before the particular time is in any of those provinces.
Coming into Force
3 These Regulations come into force on the day on which they are published in the Canada Gazette, Part II.

Invitation for Feedback:

All Canadians and stakeholders, including Indigenous governments and organizations, are invited to share their feedback on these proposals by emailing Consultation-Legislation@fin.gc.ca by July 22, 2024.

Quick Facts:

Implementation Date: The draft regulations would allow for the January 1, 2025, implementation of the Coordinated Vaping Products Taxation Agreement in Alberta, Manitoba, New Brunswick, Yukon, and Prince Edward Island.
Vaping Statistics: According to the 2022 Canadian Tobacco and Nicotine Survey, 30% of youth aged 15 to 19 (631,000 youth) and 47.5% of those aged 20 to 24 (1.1 million young adults) reported having ever vaped. This is significantly higher than the 14.7% (4 million adults) reported among Canadians aged 25 and older.
Excise Stamps: From July 1, 2024, any vaping product manufactured in or imported into Canada and destined for the duty-paid market of a participating jurisdiction (Ontario, Quebec, the Northwest Territories, and Nunavut) must bear an excise stamp specific to that province or territory. Starting January 1, 2025, jurisdiction-specific stamps will also be required for dutiable vaping products intended for sale in Alberta, Manitoba, New Brunswick, Yukon, and Prince Edward Island.

Administration and Collection:

The Canada Revenue Agency (CRA) is responsible for the collection and administration of vaping product excise duties within Canada. The Canada Border Services Agency (CBSA) handles the collection of excise duties and other applicable taxes on imported vaping products.

Join the conversation and help shape the future of vaping regulations in Canada! Share your thoughts and feedback by July 22, 2024.