Financial Security Requirement for Manufacturers of Beer or Malt Liquor, Wort, Yeast or Malt Products

Excise Duty Circular ED200-3

May 2024

This version replaces the one dated December 2000, which was entitled Guidelines for Excise Duty Licensing and Bonding – Guarantee Bonds. This circular has been revised to include updated information on financial security.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Act. The information in this publication does not replace the law found in the Act and its regulations.

If this information does not completely address your particular situation, you may refer to the Act or relevant regulation, or contact your CRA regional excise office for additional information. The offices are listed at Contact Information – Excise and Specialty Tax Directorate.

Table of Contents

• Providing financial security
• Calculating financial security
• • Licensed brewer
  • Manufacturer of wort, yeast or malt products
• Maintaining financial security
• Releasing financial security
• Explanation of terms used in this circular

Providing financial security

1. A person that manufactures beer or malt liquor, wort, yeast or malt products must provide adequate financial security for each physical business location.

2. The purpose of providing financial security is to guarantee that obligations related to the activities undertaken by the person will be met, including the payment of duty.

3. The person must provide financial security in Canadian funds in the form of an original surety bond issued by a company that is authorized by a Canadian federal, provincial or territorial regulator to provide surety bonds within Canada. Refer to the Office of the Superintendent of Financial Institutions to identify a federally regulated property and casualty insurance company that lists surety as an authorized class of insurance, or to the relevant regulator for a province or territory.

4. Examples of an acceptable surety bond are provided on Form L902, Surety Bond for a Licensed Brewer, and Form L904, Surety Bond for a Manufacturer of Wort, Yeast or Malt Products.

Calculating financial security

5. The amount of financial security required depends on the activity that is undertaken.

Licensed brewer

6. The minimum amount of financial security required for a licensed brewer is $5,000 and the maximum amount is $1 million.

7. The amount of financial security must be sufficient to ensure payment of gross duty payable on the licensed brewer’s Form K50B, Excise Duty Return – Brewer for any calendar month. For a new applicant, the amount of financial security required is determined using projections contained within their business plan. Calculations are based on current excise duty rates in effect. For a listing of rates of excise duty, go to Excise Duty Rates.

Manufacturer of wort, yeast or malt products

8. The amount of financial security required for a manufacturer of wort, yeast or malt products is $5,000.

Maintaining financial security

9. Licensed brewers and manufacturers of wort, yeast or malt products must ensure that the financial security provided remains valid.

10. Licensed brewers must also ensure that the amount of financial security provided remains adequate for the term of their licence. If the amount of financial security required increases, the licensed brewer must provide the additional amount. If the amount of financial security required decreases, the licensed brewer may request that the Canada Revenue Agency (CRA) return the excess amount.

11. A new surety bond is required when there is a change in the person’s legal entity (for example, where a proprietorship incorporates) or when the surety bond is voided (for example, the surety that issued the surety bond no longer operates in Canada).

12. An original rider or endorsement to an existing surety bond is acceptable where there is a change in the person’s legal name, the physical business location of the brewery, the amount of the surety bond, or the name of the surety.

13. Failure to maintain adequate financial security may result in the suspension, cancellation or revocation of the licence.

Releasing financial security

14. The CRA releases the financial security to the person once they are no longer conducting the activity for which they provided the financial security and all obligations have been met. If the person has an unpaid balance, the CRA withholds an amount of financial security sufficient to cover this liability.

Explanation of terms used in this circular

Beer or malt liquor is any product (other than wine, as defined in section 2 of the Excise Act, 2001) containing more than 0.5% absolute ethyl alcohol by volume that is a fermented liquor that is brewed in whole or in part from malt, grain or any saccharine matter without any process of distillation and that has an alcoholic strength not in excess of 11.9% absolute ethyl alcohol by volume.

Brewer means a person that carries on a brewery, either personally or by an agent.

Brewery means any physical business location where beer is manufactured.

Person means an individual, a partnership, a corporation, a trust, the estate of a deceased individual, a government or a body that is a society, a union, a club, an association, a commission or another organization of any kind.

A surety bond is a legally binding contract entered into by three parties – a principal (that is, the brewer or manufacturer of wort, yeast or malt products), an obligee (that is, the CRA) and a surety (that is, the bonding company that issues the surety bond).

Further information