ETSL79 Application of the Excise Tax to Fuel Sold in Canada for Immediate Export

Excise Taxes and Other Levies Notice

April 2021

This notice has been updated to include a link to Form RC565, Federal Excise Tax Exemption Certificate for Immediate Export of Fuel.

In this publication, all legislative references to the "Act" are to the Excise Tax Act. The information included in this publication is for reference purposes only and does not replace the Act or its regulations.

If the information in this publication does not completely address your particular situation, you may wish to refer to the Act or relevant regulation, or call 1‑866‑330‑3304 for additional information.

Any commentary in this publication should not be taken as a statement by the CRA that the proposed amendments will be enacted in their current form.

Table of Contents

• Issue
• CRA's administrative position
• Conditions
• Exemption certificate
• Evidence of exportation

Issue

The current wording of paragraph 66(a) of the Act does not provide an exemption of excise tax for fuel that a licensed manufacturer or licensed wholesaler (licensee) sells and delivers to a purchaser in Canada for immediate export at the time the fuel is delivered. Consequently, excise tax is imposed and payable under section 23 of the Act on fuel that is delivered to a purchaser in Canada but intended to be immediately exported. The excise tax paid on fuel sold by a licensee to a purchaser in Canada for export becomes refundable under subsection 68.1(1) of the Act only when the fuel is actually exported. This may result in cash flow disadvantages, international competitiveness challenges and an administrative burden for industry members.

In response to industry feedback, the Department of Finance Canada is prepared to recommend to the Minister of Finance amendments that would have the effect of providing an excise tax exemption for fuel sold by a licensee to a purchaser in Canada for immediate export, where certain conditions are met. The measure would apply to fuel that is delivered on or after April 1, 2021.

CRA's administrative position

In view of the above, the CRA will administratively allow licensees to sell fuel to purchasers in Canada for immediate export without the excise tax becoming payable at the time of delivery, provided that certain conditions are met. The exemption would apply to fuel that is delivered to a purchaser in Canada on or after April 1, 2021.

If, after delivery to the purchaser but before exportation, the purchaser delivers the fuel to another person in Canada or appropriates the fuel for its own use in Canada, the licensee who originally sold the fuel to the purchaser would be liable for the excise tax on that fuel. If a third-party carrier is retained by the purchaser to transport the fuel, the licensee must maintain evidence satisfactory to the CRA to establish that the third-party carrier has been retained to transport the fuel outside Canada on behalf of the purchaser. For any transaction where the excise tax exemption is improperly applied, liability for the excise tax remains with the licensee who sold the fuel to the purchaser.

If the proposed amendments are not enacted, the CRA may assess or reassess tax obligations and collect excise tax in accordance with the Act.

Conditions

The following conditions must be met to qualify for the excise tax exemption for fuel sold for immediate export:

• the purchaser must intend, at the time the fuel is delivered by the licensee, to export the fuel
• the purchaser must certify that the fuel will be exported (refer to the "Exemption certificate" section of this notice for more information)
• the licensee must reasonably believe that the purchaser will export the fuel
• the quantity of fuel that is being exported must be at least 1,000 litres per transaction
• the fuel must be exported as soon as is reasonable after it is delivered to the purchaser and, after delivery to the purchaser but before exportation, the fuel must not be further processed, transformed or altered in Canada except to the extent reasonably necessary or incidental to its transportation
• the licensee must maintain evidence satisfactory to the CRA to establish that the fuel has been exported from Canada

Exemption certificate

In order to sell fuel to a purchaser for immediate export without the excise tax becoming payable at the time of delivery, an exemption certificate must be provided for each transaction to the licensee selling the fuel. An exemption certificate is a document in which the purchaser attests to the licensee that they are purchasing fuel that meets the requirements for exemption from the excise tax.

An exemption certificate must be duly signed and dated by an authorized person and include all of the following information:

• the attestation that the requirements for the exemption have been met
• the date of delivery, the country of export and the transportation mode
• the name, address and telephone number of the purchaser that will export the fuel
• the name and account number of the licensee selling the fuel
• the quantity and type of fuel purchased and delivered

The CRA recommends that purchasers use Form RC565, Federal Excise Tax Exemption Certificate for Immediate Export of Fuel, for this purpose.

Evidence of exportation

Documents used as evidence of exportation must enable the entire transportation of fuel to be traced from its origin in Canada to its destination outside Canada. No single document will necessarily provide adequate evidence that the fuel has left Canada. However, a combination of the following documents could be used to establish evidence satisfactory to the CRA that the fuel has been exported from Canada:

• a commercial sales invoice
• a purchase agreement or billing between the licensee and the purchaser
• a copy of the transportation document that describes the delivery service (for example, a bill of lading issued by or on behalf of a carrier or a non-negotiable document such as a pro-bill, waybill, consist sheet, sea waybill, liner waybill, freight receipt or combined transportation documents)
• a customs broker's or freight forwarder's invoice
• export documentation submitted to and validated by an authorized officer of the Canada Border Services Agency (go to Exporting commercial goods for more information on export documents)
• import documentation required by the country where the fuel is exported
• a landing certificate issued by port authorities of the country to which the fuel is exported, authenticated by a principal officer of customs, establishing that the fuel has been landed and duly delivered to the customs authorities of the country named in the certificate

It is important to note that this is not an exhaustive list. Other documents may provide equally reliable evidence.

Further information