February 2013

NOTE: This version replaces the one dated July 2003.

Disclaimer:

The information in this document does not replace the law found in the Act and its regulations. It is provided for your reference. As it may not completely address your situation, you may wish to refer to the Act or its regulations, or contact any Canada Revenue Agency regional excise office for additional information. These offices are listed at Contact Information – Excise Duties, Excise Taxes, Fuel Charge and Air Travellers Security Charge.

Table of Contents

• Requirement for a duty free shop licence
• Refund of special duty
• Maintaining records and filing returns
• Offences and penalties

Requirement for a duty free shop licence

1. Under section 22 of the Excise Act, 2001, a person who is licensed under the Customs Act to operate a duty free shop and who intends to possess and sell, in that duty free shop, imported manufactured tobacco that is subject to special duty under the Excise Act, 2001 must apply for a separate excise duty licence.

2. If a duty free shop operator does not intend to possess and sell imported manufactured tobacco, that operator is not required to obtain a separate excise duty licence under the Excise Act, 2001.

3. A "duty free shop licensee" is a person who is licensed under the Customs Act to operate a duty free shop.

4. "Manufactured tobacco" means every article, other than a cigar or packaged raw leaf tobacco, that is manufactured in whole or in part from raw leaf tobacco by any process.

Imposition of special duty
ss 53(1) and 53(2)

5. A special duty is imposed on imported unstamped manufactured tobacco delivered to a duty free shop. It is payable by the duty free shop licensee at the time of delivery to the duty free shop.

Rates
Sch. 3, s 1

6. The rates of special duty imposed on imported unstamped manufactured tobacco are found in section 1 of Schedule 3 to the Excise Act, 2001. They are also available at Excise Duty Rates.

7. Additional information relating to the requirements and procedures for obtaining a duty free shop licence under the Excise Act, 2001 is provided in Excise Duty Memorandum EDM2.2.1, Obtaining and Renewing a Licence.

Refund of special duty

ss 183(1)

8. The special duty imposed on certain imported manufactured tobacco may be refunded to a duty free shop licensee who is licensed under the Excise Act, 2001. This refund applies to a maximum of the first 200 cigarettes, 200 tobacco sticks or 200 grams of other manufactured tobacco that are sold by the licensee to an individual who is a non-resident of Canada, and who is about to leave Canada.

Application and time limit
ss 183(2)

9. An application for a refund of the special duty must be made within two years after the sale is made. To claim the refund, licensed operators must file Form B256, Application for Refund/Deduction.

10. Additional information relating to the refund of special duty is available in Excise Duty Memorandum EDM10.3.1, Refunds.

Maintaining records and filing returns

Keeping records
ss 206(1)

11. Every person who possesses a licence under the Excise Act, 2001 is required to maintain all records that are necessary to determine whether they are in compliance with that act.

12. Additional information on the requirement to maintain books and records is available in Excise Duty Memorandum EDM9.1.1, General Requirements for Books and Records.

Filing returns
ss 160

13. Every duty free shop operator licensed under the Excise Act, 2001 is required to file Form B261, Excise Duty Return – Duty Free Shop, in respect of each fiscal month, and to calculate and remit any special duty payable on that return.

Fiscal month
ss 159(1)

14. Where a licensed operator has determined a fiscal month for GST/HST purposes, the same fiscal month applies for purposes of excise duty. Where such a fiscal month has not yet been determined, a person may choose a fiscal month using established GST/HST rules, or use a calendar month.

Branches or divisions filing separate returns
ss 164(1)

15. Where a licensed operator has branches or divisions with distinct operations under a duty free shop licence, the operator may apply to the CRA for authority to file separate returns for each branch or division.

16. Additional information on the filing of monthly returns, remitting special duty and paying the correct amounts of special duty is available in Excise Duty Memorandum EDM10.1.1, Returns and Payments. Information relating to the amounts to be included on the excise duty return is available in Excise Duty Memorandum EDM10.1.2, Completing an Excise Duty Return – Duty Free Shop.

Offences and penalties

Unlicensed duty free shop operator
s 216

17. A duty free shop operator who is not licensed under the Excise Act, 2001 and who possesses or sells imported unstamped manufactured tobacco is guilty of an offence. Such a person may be liable on conviction to a fine or prison term, or both.