EDN81 Becoming a vaping prescribed person

Excise Duty Notice

November 2024

This version replaces the one dated July 2024. This notice has been updated to add information regarding amendments to the Excise Duties on Vaping Products Regulations, including the addition of five additional specified vaping provinces and appliable transitional rules.  

Amendments to the Regulations were published in the Canada Gazette, Part II on November 6,  2024.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Act, 2001. In addition, all references to the Regulations are to the Stamping and Marking of Tobacco, Cannabis and Vaping Products Regulations. 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

• Overview
• Definitions
• Who is required to be a vaping prescribed person
• Who is not required to be a vaping prescribed person
• Eligibility requirements
• Application process
  • Mandatory documents
• Registration for vaping stamping regime
• Financial security requirements
  • Calculating financial security
  • Maintaining financial security
  • Increase in financial security required
• Certification
• Authorized representative
• Email notification
• Effect and duration
• Responsibilities of a vaping prescribed person
• Notification of changes
  • Name change
  • Change of legal entity
• When an application is not approved

Overview

The Canada Revenue Agency (CRA) is responsible for administering and enforcing the excise duty framework for vaping products included in the Excise Act, 2001, including the coordinated vaping duty system with specified vaping provinces. The framework includes the imposition of excise duties that generally apply to vaping products manufactured in Canada or imported into Canada and intended for the duty-paid market. The vaping duty and additional vaping duty, as applicable, apply to vaping products whether or not they contain nicotine.

Definitions

Additional vaping duty means a duty imposed under section 158.58 in respect of a specified vaping province. This is in addition to vaping duty imposed under section 158.57. 

Specified vaping province means a prescribed province under the Excise Duties on Vaping Products Regulations. The following are prescribed provinces:

• Ontario
• Quebec
• New Brunswick
• Manitoba
• Prince Edward Island
• Alberta
• Yukon
• Northwest Territories
• Nunavut

Vaping duty means a duty imposed under section 158.57.

Who is required to be a vaping prescribed person

Every person that is not a vaping product licensee and that intends to import stamped, packaged vaping products to be released under the Customs Act for entry into the duty-paid market must apply to become a vaping prescribed person to obtain vaping excise stamps by following the process explained in the "Application process" section of this notice. 

Under section 158.47, vaping products that are being imported into Canada need to be packaged and have vaping excise stamps affixed to the products before they can be released under the Customs Act to enter the duty-paid market. If an imported vaping product intended for the duty-paid market is not stamped prior to importation, it must be placed in a sufferance warehouse for the purpose of being stamped by the importer or owner of the imported vaping products. For more information about vaping excise stamps and the stamping regime, refer to Notice EDN80, Overview of vaping excise stamps.

Who is not required to be a vaping prescribed person

An application to be a vaping prescribed person is not required when a person is manufacturing vaping products in Canada or importing packaged vaping products for stamping in Canada or both. In order to carry on any of these activities, a person must apply for a vaping product licence. A vaping product licensee can also import stamped, packaged vaping products into Canada for the duty-paid market. For additional information, refer to Notice EDN79, Obtaining and renewing a vaping product licence.

Under paragraph 158.47(2)(c) of the Act and subsection 5.1(1) of the Regulations, if a person is importing vaping products for personal use in quantities that do not exceed the prescribed limit of five units, they do not need to apply to be a vaping prescribed person. Personal use means the use of the good by the individual or by others at the individual's expense. It does not include the sale or other commercial use of the good.

Eligibility requirements

Under the Regulations, a person may be eligible to become a vaping prescribed person to obtain vaping excise stamps if the person:

• is not the subject of a receivership in respect of their debts
• has not failed, in the past five years immediately before the date of the application, to comply with any Act of Parliament (other than the Excise Act, 2001) or of a provincial or territorial legislature that deals with the taxation of or controls on alcohol, tobacco products, cannabis products or vaping products or with any regulations made under that act
• has not acted to defraud His Majesty in the past five years immediately before the date of the application

All individuals applying to be, or as part of a partnership or unincorporated body that is applying to be, a vaping prescribed person under the Act are required to be at least 18 years of age.

A person has to demonstrate that they have sufficient financial resources to conduct their business in a responsible manner.

Application process

Every person that intends to apply to be a vaping prescribed person must complete Form L603, Vaping Prescribed Person Application, and submit it to their regional excise office.

Mandatory documents

In addition to Form L603, the following documents are also required:

• a business plan (including a business overview)
• a sales and marketing plan
• a financial plan (including a source of funds)
• a 12-month projection of vaping excise stamp usage
• financial security
• Form L601, Registration for Vaping Stamping Regime

To identify additional individuals, partners, directors, officers or shareholders involved in the business, Form L600-B, Schedule B – Information Relating to Individuals, Partners, Directors, Officers or Shareholders, must also be completed and submitted.

All forms and accompanying documents must be submitted to the applicant's regional excise office with Form L603.

There are no fees related to the application to become a vaping prescribed person.

Registration for vaping stamping regime

A vaping prescribed person must register under the vaping excise stamping regime by completing and submitting Form L601. For more information, refer to Notice EDN80.

Under subsection 158.36(1), on application, the CRA may issue vaping excise stamps to a vaping prescribed person. The purpose of the vaping excise stamp is to indicate that duties are paid on the vaping product and that the vaping product is destined for the duty-paid market.

Financial security requirements

Under subsection 158.36(3), financial security must be provided before the issuance of vaping excise stamps to a vaping prescribed person. The amount is determined in accordance with the Regulations and in a form and amount acceptable to the CRA.

The financial security must be provided, in Canadian funds, in the form of a bank draft, certified cheque, surety bond issued by an approved entity, or a Canada Post money order. If the applicant provides the financial security by means of a surety bond, Form L604, Surety Bond for Vaping – Prescribed Person, may be submitted with the application package.

Calculating financial security

The amount of financial security to be provided by a vaping prescribed person for vaping excise stamps is determined in subsection 4.11(1) of the Regulations. The amount is calculated as the greater of either:

• the total of:
  • $2 multiplied by the number of vaping excise stamps in respect of any specified vaping province that are either:
    • in the possession of the vaping prescribed person at the time of application for stamps
    • to be issued in respect of the application
  • $1 multiplied by the number of vaping excise stamps that are not in respect of any specified vaping province and that are either:
    • in the possession of the vaping prescribed person at the time of application for stamps
    • to be issued in respect of the application
• $5,000

The maximum amount of financial security required is $5 million.

Vaping excise stamps considered to be in the possession of a person includes stamps:

• physically in the possession of the vaping prescribed person that are not affixed to products
• affixed to products that have not yet been accounted for on their monthly information return
• purchased and currently in transit from the stamp provider

Anyone requiring assistance in determining the correct amount of financial security to be provided to the CRA may contact their regional excise office.

Maintaining financial security

With respect to vaping excise stamps, failure to maintain sufficient financial security will result in the denial by the CRA of requests for the issuance of additional stamps until sufficient security is posted.

Increase in financial security required

If the CRA has reviewed the financial security requirements and advises the vaping prescribed person that increased security is required, the additional security amount must be posted without delay and before additional stamps are issued.

Certification

An authorized person must sign the completed Form L603. If the applicant is a corporation, an association, or an organization that has duly elected or appointed officers, the authorized person is the president, vice-president, secretary or treasurer (or other equivalent officer). If the applicant is a sole proprietorship or partnership, the proprietor or a partner, respectively, must sign the application.

Authorized representative

A vaping prescribed person may wish to authorize an individual (such as an accountant, a lawyer or an employee) or a firm as their representative for their excise duty program account.

To authorize a representative to discuss their excise duty program account, the vaping prescribed person may use the "Authorize a representative" service in My Business Account.

A representative that wishes to request online access to a vaping prescribed person's account information must follow the electronic authorization process under Represent a Client.

Email notification

A vaping prescribed person may provide their email address on Form L603 if they would like to register to receive any CRA mail online.

To view CRA mail online, the vaping prescribed person must be registered through My Business Account.

If the vaping prescribed person has a representative, then the representative must be registered under Represent a Client and be authorized on the prescribed person's account.

All CRA mail available in My Business Account will be considered to have been received on the date that the email notification is sent. Any mail that is eligible for electronic delivery will no longer be printed and mailed.

Effect and duration

Once a decision is made to issue a vaping prescribed person registration, the regional excise office will issue a vaping prescribed person approval letter. The letter specifies:

• the legal name of the vaping prescribed person
• the complete mailing address
• the address where the books and records will be located
• the account number
• the effective date of the registration approval

A person becomes a vaping prescribed person effective from the date indicated on the approval letter, and the approval remains in effect until the person either requests to cancel the registration or no longer meets the eligibility requirements outlined above.

Responsibilities of a vaping prescribed person

Vaping prescribed persons are responsible for all vaping excise stamps issued to them and may be liable to a penalty for any stamps that are unaccounted for.

It is the responsibility of the vaping prescribed person to remit all duties on stamped, imported vaping products to the Canada Border Services Agency at the time of importation.

Under section 4.01 of the Regulations, vaping prescribed persons must fill out Form B601, Vaping Information Return – Prescribed Person, for each calendar month, with respect to the possession and use of any vaping excise stamps issued to them.

All documents relating to stamp usage must be kept for at least six years after the end of the year to which they relate.

Notification of changes

A vaping prescribed person must notify their regional excise office, in writing, of any changes to their information without delay. Such changes may include: 

• a change of name or legal entity
• the discontinuance of the operations
• a change in any other information provided on, or in support of, the vaping prescribed person application, including officers and directors
• a change to the address where the books and records are maintained

Name change

In the case of a name change, a vaping prescribed person must notify their regional excise office in writing before the change occurs. If the name change is not the result of a change in legal entity, no new excise duty program account number will be issued for the vaping prescribed person.

Change of legal entity

Where a change of legal entity occurs (for example, a proprietorship incorporates or a corporation merges with another corporation), the existing vaping prescribed person account will be cancelled.

The new legal entity will have to apply to become a new vaping prescribed person by completing Form L603 and submitting it to their regional excise office. A copy of the new or revised certificate of incorporation or the certificate of amalgamation, along with a replacement form of financial security, must be submitted with the form. 

When an application is not approved

An application will not be approved if the applicant does not meet the eligibility requirements described in this notice. The decision to approve an application to become a vaping prescribed person rests with the CRA.

Further information