Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 230364
Dear [Client]:
Subject: EXCISE INTERPRETATION
Excise duty on beer - Regular and reduced rates
Thank you for your letter of [mm/dd/yyyy], received on [mm/dd/yyyy], concerning the application of the Excise Act, in particular the regular and reduced rates of excise duty on beer.
All legislative references are to the Excise Act and its regulations unless otherwise specified.
We understand from your letter, as well as our telephone call of [mm/dd/yyyy], the following facts of the situation:
1. […][X], […], holds a licence issued under the Act to carry on the trade or business of a brewer.
2. [X] presently brews less than 75,000 hectolitres of beer, containing more than 2.5% absolute ethyl alcohol by volume, per year in Canada.
3. This domestic beer meets the requirement of ‘beer brewed in Canada’ in subsection 170.1(1) of the Act and, as such, reduced rates of excise duty are imposed on it.
4. [X] is considering a business opportunity whereby they would import bulk beer, anticipated to be produced in […][a foreign country of origin], for subsequent packaging in Canada. The packaged imported beer would then be sold domestically or exported.
INTERPRETATION REQUESTED
You would like to know the CRA’s interpretation of the Act towards […][the following]:
i. Do regular rates of excise duty apply to beer packaged in Canada that is:
a. imported beer; or
b. produced from imported wort?
ii. Notwithstanding […][the business opportunity], would […][X] still be entitled to the reduced excise duty for beer brewed and packaged up to the 75,000 hectolitre threshold, pursuant to subsection 170.1(1) and Part II.1 of the Act? In other words, is there any reason why [X] would lose its entitlement to the reduced excise duty for domestically brewed and packaged beer, were it to proceed with […][the business opportunity]?
iii. Would [X] be responsible for any immediate excise duty to be paid for the Foreign Beer packaged in Canada and exported for sale in […][the foreign country of export], in which case [X] would be required to claim a drawback pursuant to sections 173 and 187 of the Act, and section 6 of the Brewery Departmental Regulations?
INTERPRETATION GIVEN
In general, reduced rates of excise duty apply to the first 75,000 hectolitres of beer brewed in Canada each calendar year by a brewer and any person related to or associated with that brewer.
With respect to your first interpretive question, the regular rates of excise duty apply to beer packaged in Canada that is either imported beer, or beer produced from imported wort.
Excise duty circular ED212-11 – Application of Rates of Excise Duty on the First 75,000 Hectolitres of Beer Brewed in Canada describes the CRA’s administration of section 170.1 of the Act. As part of that guidance, the publication describes beer brewed in Canada, for the purposes of reduced rates of excise duty, to mean that the wort must be made by steeping and boiling raw materials in Canada. Also, the CRA does not consider beer to have been brewed in Canada if any of the production steps have been conducted outside Canada.
Section 3 of excise duty circular ED212-11 lists beer for which the reduced rates do not apply. Specifically, beer packaged in Canada that is imported beer and beer packaged in Canada that is produced from imported wort are subject to the regular rates of excise duty under section 170 and set out in Part II of the schedule to the Act.
With regards to the second interpretive question, there are no qualifying restrictions on a brewer’s operations to access reduced rates, only qualifying restrictions on the beer product itself. Packaging imported beer has no implications towards the eligibility for, and amount of, reduced rates of excise duty for beer brewed in Canada.
Imported beer is subject to regular rates of excise duty upon packaging and beer brewed in Canada may still be eligible for reduced rates of excise duty.
With regards to your third interpretive question, excise duty is imposed on beer produced in Canada and the brewer may be entitled to a drawback.
Section 5 of the Brewery Departmental Regulations describes how duty is computed based on the quantity of beer produced during each production day. For beer, produced is interpreted to mean beer that is put into packages, as stated under paragraph 1(a) of excise duty circular ED212-4 – Guidelines for Brewery Operations Beer Produced.
However, subsection 173(1) of the Act authorizes a drawback for excise duty paid on beer shipped for export, provided that notice of the export was provided as required under subsection 173(2) of the Act.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4 - Excise and GST/HST Rulings and Interpretations Service, the interpretations given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the Act, its regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-552-0974.
Yours truly,
M. Alexander Klein
Excise Duty Operations - Alcohol Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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