CRA Updates Canada’s Excise Duty Framework for Vaping Products

The updates, effective January 1, 2025, will introduce new provincial duties, licensing requirements, and compliance protocols that will affect importers, manufacturers, and distributors.

The Canada Revenue Agency (CRA) has announced detailed guidelines on the administration and enforcement of excise duty on vaping products, which will go into effect on January 1, 2025.

This update introduces significant changes for manufacturers, importers, and distributors in the vaping industry.

It will include new measures to standardize regulations across specific provinces and clarify compliance requirements, over and above the required compliance with the Tobacco and Vaping Products Act and the Canada Consumer Product Safety Act.

Under this updated framework, vaping products consumed, used, or sold to customers in Canada are subject to an additional vaping duty equal to the federal vaping duty rate.

To align with this update, the CRA and participating provincial governments have expanded coordinated vaping taxation agreements to include Alberta, Manitoba, New Brunswick, Yukon, and Prince Edward Island.

The initial list included Ontario, Quebec, the Northwest Territories, and Nunavut.

As of January 1, 2025, any vaping products destined for these jurisdictions must be stamped with a province-specific mark to confirm the payment of additional vaping duty. Products stamped before this date can remain in the market only until March 31, 2025.

In non-specified vaping provinces, only the standard vaping duty is applied. For specified provinces, both the standard and additional duties apply.

Scope of the excise duty framework for vaping products

The excise duty framework for vaping products in Canada applies to those imported from abroad or manufactured within the country and intended for the duty-paid market, regardless of whether they contain nicotine.

Vaping products that do not meet the definition provided by the Excise Act, 2001, are exempt from this duty.

Anyone who imports packaged vaping products for stamping must apply for a vaping product licencefrom the CRA and fulfill specific eligibility criteria set under the Excise Act, 2001.

Vaping product licensees can import packaged but unstamped products for stamping within Canada.

However, an importer who brings only stamped packaged vaping products into the duty-paid market must register with the CRA as a vaping prescribed person to obtain the necessary excise stamps for their products.

Both vaping product licensees and prescribed persons are also required to register for the CRA’s vaping stamping regime.

All products entering the Canadian duty-paid market must be appropriately packaged and stamped.

Any vaping products destined for non-specified provinces must have a peach-coloured Canada vaping excise stamp, whereas those for specified provinces require a province-specific stamp.

If vaping products are imported into a non-specified province but intended for sale in a specified province, they must carry a vaping excise stamp indicating the additional duty depending on where it is sold.

Appendix C of Memorandum D18-3-2 contains a detailed flow chart illustrating how the excise duty framework is applied to imported vaping products.

Duty rates and taxes for vaping products

New duty rates have been in place since July 1, 2024, and will continue to be in use as of January 1, 2025. These are:

For liquid vaping products:

• $1.12 per 2 millilitres (mL), or fraction thereof, for the first 10 mL of vaping substance in the vaping device or immediate container.
• $1.12 per 10 mL, or a fraction thereof, for amounts over the first 10 ml.

For solid vaping products:

• $1.12 per 2 grams (g), or fraction thereof, for the first 10 g of vaping substance in the device or immediate container.
• $1.12 per 10 g, or a fraction thereof, for amounts over the first 10 g.

You can learn more about calculating the vaping duty by referring to the Related Links section of the Excise Duty Notice EDN82.  

As for the value for tax of vaping products, it is calculated through the formula A plus B where:

• A is the value of the vaping product as it would be determined under sections 48 to 53 of the Customs Act (i.e., value for duty)
  
  
• B is any duties and taxes payable related to customs (e.g., under the Customs Tariff, the Excise Tax Act, the Excise Act, 2001 or the Special Import Measures Act, etc.).

The GST/HST applies to the value for tax of the vaping product. Moreover, when a provincial sales tax is applicable, it also applies to the value for tax of the vaping product and to the applicable GST.

Record-keeping and compliance

Under subsection 206(1) of the Excise Act, 2001, every vaping product licensee and vaping prescribed person is required to maintain all records necessary to determine whether they are in compliance with the Act.

This includes the amount of vaping products manufactured, received, used, packaged, sold and disposed of. Records must also support the information reported with respect to the possession and use of any vaping excise stamps issued.

Moreover, companies must maintain all relevant records for at least six years to demonstrate compliance.

For more details about this update and advice on duty calculations for vaping product imports, please reach out to one of our trade professionals.