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FCN7 Users Under the Greenhouse Gas Pollution Pricing Act

From: Canada Revenue Agency

March 2019

The purpose of this notice is to provide information on registration, filing and reporting requirements to persons that choose to register as users of fuel or are required to register as users of combustible waste under Part 1 of the Greenhouse Gas Pollution Pricing Act.

Persons that are not registered as distributors, and are not required to be so registered, and that use, in the ordinary course of business, fuel of a type in a non-covered activity in a listed province may register in respect of that type of fuel as users of fuel.

Persons that burn combustible waste, such as tires or asphalt shingles, in a listed province for the purpose of producing heat or energy are required to register as users of combustible waste.

Such persons should carefully review the information contained in this notice since a clear understanding of the legislative provisions is key to remaining compliant with the Act.

For more information on the other types of registration under the Act and the registration process, refer to Fuel Charge Notice FCN1, Registration Under the Greenhouse Gas Pollution Pricing Act.

The information in this notice is for reference purposes only and does not replace the Greenhouse Gas Pollution Pricing Act or its regulations. The information described in this notice is also based, in part, on the Draft Regulations Amending Part 1 of Schedule 1 and Schedule 2 to the Greenhouse Gas Pollution Pricing Act. The Draft Regulations were included as attachments to the news release entitled Department of Finance Announcing Climate Action Incentive Payments and Launch of Fuel Charge Consultations, that was issued on October 23, 2018. Any reference that is made in this notice to April 1, 2019 or July 1, 2019 is as proposed in the Draft Regulations. Any reference that is made in this notice to a particular listed province refers to Manitoba, New Brunswick, Nunavut, Ontario, Saskatchewan and Yukon, as proposed in the Draft Regulations. Any commentary contained in this notice should not be taken as a representation by the Canada Revenue Agency (CRA) that the Draft Regulations will eventually be made in their current form.

Should there be any discrepancy between the information in this notice and the legislative provisions in the Act or its regulations, the legislative provisions apply. For more information about the Act and its regulations, including all related technical publications, go to Fuel charge technical information.

All legislative references in this publication are to the Act, unless otherwise specified.

Table of Contents

Overview

As part of the Government of Canada’s initiative to implement a federal carbon pollution pricing system, and taking into consideration provincial carbon pollution pricing systems, the Government of Canada has developed a federal carbon pollution pricing system composed of a fuel charge that applies to fossil fuels and an output-based pricing system (OBPS) for industrial facilitiesFootnote 1.

The federal system applies in provinces and territories where a provincial or territorial carbon pollution pricing system has not been put into place or the system does not meet the federal standard. The Canada Revenue Agency (CRA) will be responsible for administering and enforcing the fuel charge component of the federal system beginning April 1, 2019, as proposed, for the proposed listed provinces of Manitoba, New Brunswick, Ontario and Saskatchewan and beginning July 1, 2019, as proposed, for the proposed listed provinces of Nunavut and Yukon (the listed provinces). For the applicable rates of the charge on the various fuel types and combustible waste, go to Fuel Charge Rates.

This notice provides information on voluntarily registering as a user of fuel and the requirements to register as a user of combustible waste, as well as on reporting and filing obligations. Persons that choose to apply for registration as users of fuel or that are required to register as users of combustible waste should carefully review the information included in this notice and should also familiarize themselves with the Act, its regulations and other related notices. They may also contact the CRA for additional information and clarification.

Information on registration

Registration as a user of fuel is voluntary and registration as a user of combustible waste is mandatory. Registered users of fuel and registered users of combustible waste are collectively referred to as registered users.

Users of fuel

Voluntary registration

Under subsection 58(1), a person may apply for registration as a user of a type of fuel if the person:

Non-covered activity is defined in section 3 as “an activity in respect of which fuel

  1. is used
    1. as a raw material in an industrial process that produces another fuel or another substance, material or thing,
    2. as a solvent or diluent in the production or transport of crude bitumen or another substance, material or thing, or
    3. in prescribed circumstancesFootnote 2; and
  2. is not put into a fuel system that produces heat or energy and is not burned or flared.”

Example – User of fuel

A company located in a listed province blends unleaded gasoline with non-fuel products to produce a substance used in the manufacturing of plastics. The company is not a registered distributor and is not eligible to be registered as such.

The company may register as a user of gasoline in the listed province. Since the unleaded gasoline is used as raw material in the manufacturing of the substance and that gasoline is not put into a fuel system that produces heat or energy and is not burned or flared, it is considered to be a non-covered activity.

A registered user of fuel can accept delivery of fuel without a charge being payable, at that time, when the registered user of fuel provides an exemption certificate to the registered distributor that delivers the fuel. For more information, refer to the section “Exemption certificates” in this notice.

The information relating to users of fuel in the remainder of this notice is for users of fuel who voluntarily register.

Timing of registration

A person that qualifies to voluntarily register as a user of fuel may apply for registration at any time.

Users of combustible waste

Mandatory registration

Under subsection 59(1), a person that burns combustible waste, such as tires or asphalt shingles, in a listed province for the purpose of producing heat or energy is required to be registered as a user of combustible waste.

Timing of registration

A person that is required to be registered as a user of combustible waste must apply for registration before the later of:

Under section 126, if a person is required to be registered as a user of combustible waste but does not apply for the registration as and when required, that person is liable to pay a penalty of $2,000.

Applying for registration

To apply for registration as a user of fuel or a user of combustible waste, a person must complete Form L400, Fuel Charge Registration. Even where the person applies for more than one type of registration, only one registration form is required, unless an application for authority to file separate returns under subsection 88(1) is submitted. The person must also complete Form L400-1, Fuel Charge Registration Schedule, or Form L400-2, Fuel Charge Registration Schedule – Road Carrier, or both, depending on the type of registration for which it is applying. Information regarding other registration types can be found in Fuel Charge Notice FCN1, Registration Under the Greenhouse Gas Pollution Pricing Act.

Registration forms can be submitted electronically using the “Submit documents” function in My Business Account. If the person submits a registration application electronically, that person will be provided with a confirmation number. This confirmation number should be retained for follow-up on the status of the application.

The person can also send the completed registration forms by mail to the following address:

Sudbury Tax Centre
Fuel Charge Program
Post Office Box 20000, Station A
Sudbury ON  P3A 5C1

The processing of the fuel charge registration may be delayed in the case of missing or incomplete information.

If the application for registration is approved, the CRA will inform the person in writing of its registration number and the effective date of registration.

Authority for separate returns

Under subsection 88(1), a person that engages in one or more activities in separate branches or divisions may apply to the CRA for authority to file separate returns and rebate applications under Part 1 of the Act for a branch or division. The application to file separate returns must be submitted in the form of a letter at the time of registration.

The person must complete the application and, for each branch or division, confirm that the following requirements are met:

A separate Form L400 should be used for each branch or division, along with Form L400-1 or Form L400-2 or both, depending on the type of registration for which the person is applying.

The application and forms can be submitted electronically using the “Submit documents” function in My Business Account or by mail to the Sudbury Tax Centre at the address listed above.

If the application to file separate returns is approved, the CRA will inform the person in writing and the authorization will remain in effect until:

Under these conditions, the CRA will revoke the authorization and send a notice in writing to the person, specifying the effective date of the revocation.

Applying for more than one type of registration

In addition to applying for registration as a user of fuel, a person may also register or be required to register as an emitter, an air carrier, a specified air carrier, a marine carrier, a specified marine carrier, a rail carrier, a specified rail carrier or a road carrier if the person meets the conditions for these types of registration. A registered user of fuel may also be required to register as a user of combustible waste.

A registered user of combustible waste may also register or be required to register as a distributor, an emitter, a user of fuel, an importer, an air carrier, a specified air carrier, a marine carrier, a specified marine carrier, a rail carrier, a specified rail carrier or a road carrier if it meets the conditions for these types of registration.

Refer to the following fuel charge notices for additional information on these types of registration:

Cancelling a registration

Under subsection 65(7), if a person is registered as a user in respect of a type of fuel, the CRA must cancel that registration when registering the person as a distributor in respect of that type of fuel.

Also, a registered user of fuel that no longer wishes to be registered or meets the requirements for voluntary registration may request that the CRA cancel its registration. In this case, the registered user of fuel must notify the CRA in writing when this occurs, noting the reason for requesting the cancellation and the effective date. The CRA must cancel the registration if satisfied that the registration is not required.

Similarly, a registered user of combustible waste that believes it is no longer required to be registered (for example, if ownership changes or business activity ceases) may also request that the CRA cancel its registration. In this case, the registered user of combustible waste must notify the CRA in writing when this occurs, noting the reason for requesting the cancellation and the effective date. The CRA must cancel the registration if satisfied that the registration is not required.

In both cases, the registered user can submit the request electronically using the “Submit documents” function in My Business Account or by mail to the Sudbury Tax Centre at the address listed in the section “Applying for registration” above. Filing and reporting requirements remain in effect until the effective date of cancellation.

Finally, the CRA may also cancel a registration if it is satisfied that the registration is not required, after giving the person reasonable notice. In this case, the CRA will notify the person of the cancellation and the effective date of the cancellation.

Information on the fuel charge

Generally, a charge applies to 21 types of fuel delivered, transferred, used, produced, imported or brought into Manitoba, New Brunswick, Ontario or Saskatchewan beginning April 1, 2019, and Nunavut or Yukon beginning July 1, 2019. A charge also applies on combustible waste when it is burned in a listed province for the purpose of producing heat or energy.

Registered user of fuel

Generally, a charge applies on fuel delivered and used in a non-covered activity in a listed province unless the person is registered as a user of that type of fuel. However, as mentioned above, fuel can be delivered to a registered user of fuel without a charge being payable at that time when the registered user of fuel provides an exemption certificate to the registered distributor that delivers the fuel. For more information, refer to the section “Exemption certificates” later in this notice.

Under subsection 23(1), a registered user of fuel of a type is liable for a charge in respect of the type of fuel and the listed province when, at a later time, it:

The charge becomes payable at that later time and the amount of the charge is determined in accordance with section 40. For more information, refer to the section “Calculating the charge payable by a registered user of fuel in respect of fuel and a listed province” in this notice.

The charge is not payable if, at the later time, the person is no longer a registered user (a charge under subsection 23(4) may apply at the time the registration is cancelled) or a charge was payable by the person under section 37.

Ceasing to be a registered user of fuel

A charge applies under subsection 23(4) when fuel is held by a registered user at a time when the CRA cancels its registration as a user of fuel of that type if the fuel had previously been delivered to the registered user of fuel by a registered distributor in respect of that type of fuel and an exemption certificate was provided to the registered distributor by the registered user.

The charge becomes payable at the time the CRA cancels the person’s registration as a user.

The amount of the charge is determined in accordance with section 40. For more information, refer to the section “Calculating the charge payable by a registered user of fuel in respect of fuel and a listed province” of this notice.

Subsection 23(5) provides that the charge under subsection 23(4) is not payable if any of the following apply:

Registered user of combustible waste

Every person that burns combustible waste in a listed province for the purpose of producing heat or energy must pay a charge, payable at the time the combustible waste is burned. The amount of the charge is determined in accordance with section 41. For more information, refer to the section “Calculating the charge payable by a registered user of combustible waste in respect of combustible waste and a listed province” in this notice.

A registered user of combustible waste cannot use an exemption certificate.

Exemption certificates

An exemption certificate is a document that is provided by certain persons, including registered users of fuel, to a registered distributor to enable the registered distributor to deliver fuel in a listed province without the application of the charge at the time of delivery.

A registered distributor can deliver fuel to a person that is registered as a user of fuel without a charge being applied at the time of delivery if the registered user of fuel provides to the registered distributor an exemption certificate in accordance with section 36. The exemption certificate must include a declaration that the person is a registered user in respect of that type of fuel and that the fuel is for use in a non-covered activity.

To use an exemption certificate, registered users of fuel must obtain and complete Form L401-1, Fuel Charge Exemption Certificate for Registered Emitters or Users of Fuel under section 36 of the Greenhouse Gas Pollution Pricing Act, and the Fuel Charge Regulations. For the purpose of the fuel charge, an exemption certificate does not have an expiry date.

The exemption certificate must be signed and provided to the registered distributor that delivers the fuel, and it can be used for subsequent deliveries made by the same registered distributor to the same registered user of fuel as long as the conditions for the exemption continue to be met. The registered distributor must retain a copy of the exemption certificate.

Section 37 sets out the consequences of making a false declaration on an exemption certificate. Where a particular person delivers fuel in a listed province to another person that provides an exemption certificate and makes a false declaration, the other person becomes liable to pay the charge otherwise payable, a penalty of 25% of the amount of the charge and any other additional penalties and interest that may be applicable. Paragraph 37(1)(c) further provides that if the particular person knows, or ought to know, that the declaration is, at that particular time, false, both the particular person and the other person are jointly and severally, or solidarily, liable for the payment of the charge in respect of the fuel and the listed province, the penalty mentioned above and any related interest and penalties.

Filing and reporting

The reporting period of a registered user is a calendar month. A registered user must file a return monthly with the CRA, even if there is no amount owing. The return must be filed by the end of the month following the reporting period.

Forms to complete

The quantity of fuel subject to a charge must be reported by type of fuel and listed province. A registered user must file Form B400, Fuel Charge Return – Registrant, for each reporting period, for each registration type, as well as Form B400-4, Fuel Charge Return Schedule – Registered User of Fuel, or Form B400-5, Fuel Charge Return Schedule – Registered User of Combustible Waste, or both, depending on the type of registration held.

More than one type of registration

If the registered user holds more than one type of registration, the quantity of fuel or combustible waste subject to a charge must be reported by type in the case of fuel and by listed province for each registration type. This means that the registered user must file Form B400, for each registration type and once for each reporting period, as well as:

Section 104 provides that registered users must keep their records for 6 years after the end of the year to which they relate.

A registered user must determine the net charge by type, in the case of fuel and by listed province for each registration type for the reporting period for which the return and accompanying return schedule(s) must be filed.

Calculating the charge payable by a registered user of fuel in respect of fuel and a listed province

A registered user of fuel must pay a charge under subsection 23(1) in respect of a type of fuel and a listed province on the quantity of fuel of that type that is used in the listed province otherwise than in a non-covered activity or that is delivered to another person unless the other person is a registered distributor in respect of fuel of that type and an exemption certificate applies in respect of the delivery in accordance with section 36.

The amount of the charge payable is calculated using the formula:

A × B [under subsection 40(1)]
Where  
A is the quantity of fuel in respect of which the charge becomes payable
B is the rate in respect of fuel of that type for the listed province applicable at the time the charge becomes payable

Calculating the charge payable by a registered user of combustible waste in respect of combustible waste and a listed province

A registered user of combustible waste must pay a charge under section 25 in respect of combustible waste and a listed province when it burns combustible waste in a listed province for the purpose of producing heat or energy. The charge becomes payable by the registered user of combustible waste at that time.

The amount of the charge payable is calculated using the formula:

A × B [under subsection 41(1)]
Where  
A is the quantity, expressed as a weight measured in tonnes, of the combustible waste
B is the rate in respect of combustible waste for the listed province applicable at the time the charge becomes payable

Calculating the net charge

Under section 71, every person that is required to file a return must, in the return, determine the net charge for a reporting period for which the return is required to be filed.

After calculating the charge(s) payable and rebate(s)Footnote 3, if applicable, in respect of fuel or combustible waste and the listed province(s), the registered user must determine the net charge for a particular reporting period.

The net charge is calculated using the following formula, which is set out in section 71:

A + B
Where  
A

is the total of all amounts, each of which is the amount determined for a listed province by the formula

C − D

where

C

is the total of all amounts, each of which is a charge in respect of fuel, other than a charge under subsection 20(3), or combustible waste and the listed province that becomes payable by the person in the particular reporting period

 

D

is the total of all amounts, each of which is an amount of a rebate, other than a rebate for a payment in error under section 49 or a net charge rebate under subsection 71(4), in respect of the listed province payable by the CRA for a reporting period and that is claimed by the person in the return that is required to be filed under section 69 for the particular reporting period
B is 0 at this timeFootnote 4

If the net charge for a reporting period of a registered user is a positive amount, the registered user must pay that amount to the Receiver General no later than the day on or before which the return for the reporting period is required to be filed (that is, by the end of the month following the reporting period for which the net charge becomes payable). For example, a charge that becomes payable in April must be reported and paid by the end of May.

Interest and/or penalties may apply to late payments. For information on payment methods, go to Payments to the Canada Revenue Agency.

If the net charge for a reporting period of a registered user of fuel is a negative amount, the registered user of fuel may claim the amount of that net charge as a net charge rebate in the return filed under section 69 for that reporting period. The rebate is payable to the registered user by the CRA.

A registered user of combustible waste can only claim a rebate under section 49 if it meets those conditions. For more information, refer to the section “Claiming a rebate” later in this notice.

Special rules

Fuel brought into a listed province on behalf of a registered user of fuel

Under section 10, when another person transports fuel into a listed province on behalf of a registered user of fuel, the registered user of fuel, and not the person transporting the fuel, is considered to have brought the fuel into the listed province.

Similar rules apply when fuel is removed from a listed province.

Fuel in transit through a listed province

Under section 11, fuel in transit through a listed province is deemed not to have been brought into the listed province if the following conditions are met:

Similar rules apply under section 12 for imported fuel that is in transit through a listed province.

Fuels in a mixture

Under section 16, a mixture of 2 or more fuels is deemed to be fuel of the type that is present in the highest proportion in the mixture. Therefore, the rate to be used when calculating the amount of the charge payable in respect of a mixture is the rate for the type of fuel present in the highest proportion in the mixture.

Biogasoline, biodiesel and biomethane

When biogasoline contained in gasoline, biodiesel contained in light fuel oil, or biomethane contained in natural gas exceeds a certain threshold, the number of litres in the case of gasoline or light fuel oil, or cubic metres in the case of marketable natural gas (MNG) or non-marketable natural gas (NMNG), is adjusted through the following formulas.

Gasoline that contains more than 10% biogasoline

Under subsection 8(5), the quantity of gasoline is calculated using the following formula:

A × (100% − B) ÷ 95%
Where  
A is the number of litres that the gasoline occupies at 15°C
B is the proportion of biogasoline in the product

Example – Biogasoline

A registered user of fuel has 100 litres of gasoline that contains 12% biogasoline.

The quantity of gasoline that is subject to the charge is calculated using the formula A × (100% − B) ÷ 95%

where

A  is 100 litres (the number of litres that the gasoline occupies at 15°C)

B  is 12% (the proportion of biogasoline)

Therefore, 100 litres × (100% − 12%) ÷ 95% equals 93 litres of gasoline.

Because the gasoline contains 12% biogasoline, only 93 of the 100 litres are subject to the charge.

Light fuel oil that contains more than 5% biodiesel

Under subsection 8(6), the quantity of light fuel oil is calculated using the formula

A × (100% − B) ÷ 98%
Where  
A is the number of litres that the light fuel oil occupies at 15°C
B is the proportion of biodiesel in the product

Example 1 – Biodiesel

A registered user of fuel has 100 litres of light fuel oil that contains 2% biodiesel.

The formula does not apply because the proportion of biodiesel contained in the quantity of light fuel oil does not exceed 5%. Therefore, the full quantity of 100 litres will be used in the calculation of the charge payable.

Example 2 – Biodiesel

A registered user of fuel has 100 litres of light fuel oil that contains 6% biodiesel.

The quantity of light fuel oil that is subject to the charge is calculated using the formula A × (100% − B) ÷ 98%

where

A  is 100 litres (the number of litres that the light fuel oil occupies at 15°C)

B  is 6% (the proportion of biodiesel)

Therefore, 100 litres × (100% − 6%) ÷ 98% equals 96 litres of light fuel oil.

Because the light fuel oil contains 6% biodiesel, only 96 of the 100 litres are subject to the charge.

Natural gas that contains biomethane

Under subsection 8(7), the quantity of MNG or NMNG is calculated using the formula

A × (100% − B)
Where  
A is the number of cubic metres that the MNG or NMNG occupies at 15°C and 101.325 kPa
B is the proportion of biomethane in the product

Example – Biomethane

A registered user of fuel has 100 cubic metres of MNG that contains 2% biomethane.

The quantity of MNG that is subject to the charge is calculated using the formula A × (100% − B)

where

A  is 100 cubic metres (the number of cubic metres that the MNG or NMNG occupies at 15°C and 101.325 kPa)
B  is 2% (the proportion of biomethane)

Therefore, 100 cubic metres × (100% − 2%) equals 98 cubic metres of MNG.

Because the MNG contains 2% biomethane, only 98 of the 100 cubic metres are subject to the charge.

Claiming a rebate

A registered user of fuel can claim a rebate under section 43, 45 or 49, as explained below.

A registered user of combustible waste can only claim a rebate under section 49, as explained below.

Under section 51, a rebate will not be paid to a person at any time unless the person has filed all returns of which the CRA has knowledge and that are required to be filed on or before that time by the person under the Excise Tax Act, the Income Tax Act, the Excise Act, 2001, and the Air Travellers Security Charge Act.

Fuel removed from a listed province

Under subsection 43(1), a rebate must be paid to a person that is a registered user and that removes a quantity of fuel from a listed province at a particular time if, at an earlier time in a particular reporting period:

The amount of the rebate is equal to the amount of the charge payable under section 19.

The rebate under section 43 is not to be paid in respect of a particular reporting period unless an application for a rebate is filed as part of Form B400-4 with the CRA:

Fuel used in a non-covered activity

Under subsection 45(1), if a person, at a particular time in a reporting period of the person, is a registered user of a type fuel and the person uses a quantity of fuel of that type in a non-covered activity in a listed province, a rebate must be paid to the person in respect of the fuel, the listed province and the reporting period if,

  1. the registered user of fuel imported or brought the quantity of fuel into a location in the listed province at an earlier time in a particular reporting period;
  2. a charge under section 19 was payable by the registered user of fuel at the earlier time in respect of the quantity fuel and the listed province and that charge was taken into account in the determination of the net charge for the particular reporting period of the registered user of fuel; and
  3. the fuel is used at a location that is not a covered facility of the registered user of fuel.

Subsection 45(2) provides that the amount of the rebate under subsection 45(1) is equal to the amount of the charge payable under section 19.

The rebate under section 45 is not to be paid in respect of a particular reporting period unless an application for a rebate is filed as part of Form B400-4 with the CRA:

Example – Rebate

A company that is located in a listed province is a producer of varnish. The following 3 components are used in the production of varnish: drying oil, resin and solvent. The manufacturing of varnish qualifies as a non-covered activity.

The company is a registered user of naphtha. It uses naphtha as the solvent in its production process.

In May 2019, the company places a purchase order for 1,000 litres of naphtha with a supplier in the United States. In June, the company imports the fuel, which is all used in non-covered activities. A charge becomes payable at that time under section 19, and is calculated using the formula A × B set out in section 40

where

A  is 1,000 litres (the quantity of fuel)
B  is $0.0451 per litre (the rate for naphtha in the listed province in June 2019)

The charge payable is $45.10 (1,000 litres × $0.0451 per litre).

However, since all the fuel is used in a non-covered activity, which is not an activity that is subject to the fuel charge, the company is entitled to a rebate of $45.10, which is the amount of the fuel charge payable at the time of importation. The company can claim the rebate on its return and include the amount of the rebate in determining its net charge for its June reporting period or a subsequent reporting period subject to the time limitation for claiming the rebate.

Payment in excess of the amount payable

Under section 49, a person may claim a rebate if it paid an amount in excess of the amount of the charge that was payable. The rebate is available whether the amount was paid by mistake or otherwise. The amount of the rebate is equal to the amount of the excess.

The rebate payable under section 49 for an amount paid in excess of the amount payable is not to be paid to a person to the extent that:

This rebate is not to be included in the calculation of the net charge. Instead, a registered user that intends to claim this rebate must submit an amended Form B400 and any related schedule to the CRA.

Further information

For all technical publications related to the Greenhouse Gas Pollution Pricing Act and its regulations, go to Fuel charge technical information.

To make a technical enquiry on the fuel charge or for additional information on the application of the fuel charge for each type of registrant, go to Contact Information – Excise and Specialty Tax Directorate.

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