May 2006

On Tuesday, May 2, 2006, the Minister of Finance tabled a Notice of Ways and Means Motion to provide an exemption of the excise duty imposed on wine that is made from 100% Canadian-grown agricultural products.

Excise duty is imposed on wine that is produced in Canada and is payable at the time of packaging by the responsible wine licensee unless it is entered into an excise warehouse immediately after packaging or is relieved of the excise duty. Effective July 1, 2006, wine that qualifies for this exemption should not be entered into an excise warehouse.

The exemption will apply to wine, as defined in section 2 of the Excise Act, 2001 (including cider, wine coolers, fruit wines and sake), packaged on or after July 1, 2006. Specifically, it applies to the first 500,000 litres of wine that are made from 100% Canadian-grown agricultural products (e.g., grapes, berries and other fruits) in each fiscal year. The exemption threshold limit will be calculated based on the fiscal year of the wine licensee and will be pro-rated for the current fiscal year.

Wine licensees claiming this exemption must maintain adequate books and records to substantiate their calculations. These records may include, but are not limited to, maintaining production records sufficient to trace the raw materials and resultant wine to the package (e.g., blend sheets), maintaining inventory records of exempt and dutiable products, and maintaining records of transactions between the licensee and its raw material source(s) and other licensees (e.g., shipping documents, invoices).

Form B265, Excise Duty Return – Wine Licensee, and Excise Duty Memorandum EDM10-1-6, Completing an Excise Duty Return – Wine Licensee, will be amended to reflect this change. These will be made available to licensees prior to the first reporting period after July 1, 2006.

For more information on this subject, contact any Canada Revenue Agency (CRA) regional excise office. These offices are listed at Contact Information – Excise Duties, Excise Taxes, Fuel Charge and Air Travellers Security Charge.