Tax & Trade Blog
Canada’s Fuel Charge: Required CRA Registration!
Carbon pricing in Canada can be confusing for both new entrants to the market and established players. Part of this comes from Canada’s patchwork system and mix of different rules across the country. Adding to the complexity is the fact that the Greenhouse Gas Pollution Pricing Act (“GGPPA”) acts as a “backstop” if provincial/territorial legislation is not strict enough!
Businesses need to be aware of multiple different rules – federal (under the GGPPA, which applies in the so-called “listed provinces” outlined below) and provincial/territorial (if applicable to the particular jurisdiction in which they are operating). Figuring out where one has to register is just the first step!
What is the Canadian “Fuel Charge”?
Canada’s federal government essentially taxes fossil fuels and combustible waste, which is meant to set a “price” on the emission of carbon dioxide. One part of this – the so-called “Fuel Charge” – is pegged to an estimated per-tonne price of emissions, which rises each year. This filters through as different unit rates for different fuels (e.g., 11.05 cents/L of gasoline starting April 1, 2022 – a significant amount to add at the pump!).
Where does the Fuel Charge Apply?
Because the federal Fuel Charge is meant to be a backstop where particular Canadian provinces and territories choose not to implement their own system that is “up to the federal minimum standards”, it does not apply everywhere in Canada. Currently, the federal Fuel Charge applies in Ontario, Manitoba, Yukon, Alberta, Saskatchewan and Nunavut (i.e., “listed provinces”) – essentially because these provinces/territories have resisted implementing their own systems (for example, Ontario scrapped its cap-and-trade system, while Alberta repealed its carbon tax). Other Canadian jurisdictions which have implemented carbon pricing systems have their own, separate requirements (e.g., BC’s carbon tax and Québec’s cap-and-trade system).
Who has to Register for the Federal Fuel Charge?
Businesses are generally required to register if they are distributors, importers, emitters or certain users of fuel or combustible waste (namely, air carriers, marine carriers, rail carriers, and road carriers). However, there are some situations where businesses may voluntarily register.
For example, under section 56 of the GGPPA, a person is generally required to register as an importer if they import or bring fuel into a listed province. However, certain interjurisdictional rail carriers of fuel may voluntarily register as an importer.
Note that the federal system may also require a single business to register under multiple categories (e.g., distributor, importer, etc.).
In short, businesses meeting these requirements, and with operations in any of the “listed provinces” noted above must register with the CRA immediately (although voluntary registrants may register at any time).
What Happens After Registering?
After registering, businesses are expected to submit periodic returns, generally each calendar month: see section 68 of the GGPPA.
What to do Next?
Businesses with carbon operations in Canada need to get professional advice, register for the applicable system, and begin complying!
Do you require assistance in this area? If so, please click here.