According to Canada’s 2019-20 federal budget, come May, cannabis edibles, oils, extracts, concentrates and topicals will be taxed depending on the quantity of tetrahydrocannabinol (THC) – the psychoactive chemical in cannabis – present in them, rather than by weight. Thus, the more the THC in the product, the heavier it will be taxed.
This has largely been done to ease the compliance issues the manufacturers were facing with regard to cannabis oils. The taxes, though, apply to both medicinal and recreational cannabis products.
At present, the excise tax for dried cannabis flower and cannabis oils – which were legalized for recreational use in October, 2018 – is set at 10% on each gram or gram-equivalent, or $1 per gram, whichever is higher.
In the budget, the government has proposed a THC-based excise duty rate of 1 cent/milligram of total THC.
Cannabis products containing Cannabidiol (CBD), the non-psychoactive chemical, and minute amounts of THC are exempt from excise tax. Therefore, many producers are focusing more on CBD based products for this fall.
Notably, the pharmaceutical cannabis medicines that come with a Drug Identification Number are also exempt from taxes.
Presently, the cannabis excise tax revenue is split between the federal and the provincial/territorial government in the ratio of 1:3, that is, the federal government gets 25% of the revenue while the latter takes the rest, 75%.
Licensed producers, however, have argued that any kind of marijuana products being sold in the medical market should not be subject to an excise tax. Aurora Cannabis Inc., based in Edmonton, has lost over $2 million in the form of excise tax that it has paid in the last three months on the behalf of its patients.
Thanks to the new budget, the patients with a medical cannabis card will now be eligible for a medical expense tax credit.
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