Refunds

Excise Duty Memorandum EDM10-3-1

October 2012

NOTE: This version replaces the one dated August 2007.

Disclaimer:
The information in this document does not replace the law found in the Excise Act, 2001 and its regulations. It is provided for your reference. As it may not completely address your situation, you may refer to the Act or its regulations, or contact any Canada Revenue Agency regional excise office for additional information. These offices are listed in Contacts – Excise and Specialty Tax Directorate.

Table of Contents

• Refunds
• Claiming refunds
• Authority to file separate refund applications
• Reasons for refund
• Overpayment of refunds and other amounts
• Trustee appointment
• Set-off of refunds
• Interest paid on refunds
• Submitting refund applications
• Retention of information
• Enquiries
• Offences and penalties

Refunds

Statutory recovery rights
s 174^{Footnote 1}

1. No person has a right to recover any money paid to Her Majesty as excise duty, interest or other amount payable under the Excise Act, 2001 except as specifically provided for under that act, the Customs Act, the Customs Tariff, or the Financial Administration Act. 

Application
ss 175(1)

2. A person applying for a refund under the Excise Act, 2001 must do so in the form and manner prescribed by the Minister. Generally, a person applying for a refund must complete Form B256, Excise Act, 2001 – Application for Refund. There is also a special refund application for foreign importers of tobacco products, Form E681, Excise Act, 2001 – Refund Claim of Tax on Exported Tobacco Products. These forms are available on the CRA Web site.

ss 175(2)

3. Only one application may be made for a particular refund in respect of any matter under the Excise Act, 2001.

Time limits

4. All refund applications must be filed within two years after payment of the amount to be refunded. There are specific time limit provisions for each type of refund, as provided in the section of this memorandum, entitled "Reasons for refund".

Assessment of refund
ss 189(1)

5. Where a person applies for a refund, the CRA shall, without delay, consider the application and assess the amount of the refund owing.

Payment
ss 189(3)

6. Where the CRA determines that a refund is payable to a person, the CRA shall pay the refund.

Restriction
ss 189(4)

7. A refund shall not be paid to a person until that person has filed with the CRA or Canada Border Services Agency all returns or other records that are required to be filed under the Excise Act, 2001, the Air Travellers Security Charge Act, the Customs Act, the Excise Act, the Excise Tax Act, and the Income Tax Act.

Refunds for beer

8. Since excise duty on beer falls under the Excise Act, rather than the Excise Act, 2001, refunds of excise duty on beer are to be filed using Form N10, Application for Refund/Drawback.

Claiming refunds

9. A refund or a deduction of excise duty can only be claimed by submitting a completed Form B256, Excise Act, 2001 – Application for Refund. In addition, foreign importers of tobacco products should use Form E681, Excise Act, 2001 – Refund Claim of Tax on Exported Tobacco Products to claim refunds on their imported tobacco products.

Certification

10. An authorized person must print their name and title, sign and date the refund application, and provide a current telephone number.

Exception - duty free shop licensee

11. A duty free shop licensee will not require pre-authorization to claim a refund of special duty on the first 200 cigarettes, 200 tobacco sticks or 200 grams of other manufactured tobacco that are sold by the licensee to an individual, who is a non-resident of Canada and who is about to leave Canada.

Authority to file separate refund applications

ss 164(1)

12. A licensee who engages in one or more activities in more than one branch or division may apply to the CRA for authority to file separate returns and applications for refunds for each branch or division.

ss 164(2)

13. A person wishing to file separate excise duty returns and refund applications must show that:

• the branch or division can be separately identified by reference to its location or the nature of the activities engaged in by it; and
• separate records, books of account and accounting systems are maintained in respect of that branch or division.

Permission

14. To obtain permission to file separate returns or refund applications for branches or divisions, or to cancel an authorization to file separate returns or refund applications, a licensee must file Form B269, Application or Revocation of the Authorization to File Separate Excise Duty Returns and Refund Applications for Branches or Divisions, with any CRA regional excise office or the Summerside Tax Centre.

Reasons for refund

15. In addition to the amount requested, a person or licensee applying for a refund of excise duty must indicate on Form B256, Excise Act, 2001 – Application for Refund the reason for making the application in the “Reason for refund” section of the application. Only one reason may be used per application. However, more than one application may be made at the same time.

Reason 1 – Amount paid in error

Application and time limit
ss 176(1) and (3)

16. A person who pays an amount as excise duty, interest or other amount payable under Excise Act, 2001 in circumstances where the amount was not payable, whether it was paid by mistake or otherwise, shall receive a refund of that amount. The person must apply for the refund of the amount paid in error within two years after the amount was paid.

Restriction
ss 176(2)

17. An amount cannot be refunded to a person if it has been taken into account as excise duty assessed by the CRA for a reporting period of the person, or if it was excise duty, interest or other amount assessed by the CRA.

Reasons 2 and 3 – Re-work or destruction of tobacco products

s 181

18. A tobacco licensee may request a refund of the duty paid on a tobacco product that is re-worked or destroyed by the tobacco licensee in accordance with Excise Act, 2001.

Time limit
s 181

19. The tobacco licensee must apply for the refund of the duty paid within two years after the tobacco product is re-worked or destroyed.

Reason 4 – Sale of imported manufactured tobacco to non-residents by a duty free shop

Refund of special duty to duty free shop licensee
s 183

20. A duty free shop licensee who sells, in accordance with the Customs Act, imported manufactured tobacco to a non-resident individual who is about to depart Canada may request a refund of the special duty paid.

21. The refund of special duty is limited to the special duty paid on a quantity of exported tobacco that does not exceed 200 cigarettes, 200 tobacco sticks and 200 grams of other manufactured tobacco that are sold by the licensee to the non-resident.

Time limit
s 183(2)

22. A duty free shop licensee must apply for the refund of the special duty paid within two years after the sale is made.

Reason 5 – Claim for bad debt on sale of cigars

ss 184(1)

23. A tobacco licensee who is owed a debt in respect of an arm’s length sale of cigars, on which the licensee paid ad valorem duty (67% after December 31, 2007), may claim the ad valorem duty portion of the bad debt relief in respect of the sale if all or part of the debt is written off in the licensee’s books as a bad debt.

24. The amount of the refund is equal to the proportion of the amount of duty paid that the bad debt written off is of the price at which the cigars were sold (this includes duty imposed under section 42 of the Excise Act, 2001).

Time limit
ss 184(1)

25. The tobacco licensee must apply for the refund of the amount of the bad debt written off within two years after the fiscal month in which the bad debt was written off.

Recovery of payment
ss 184(2)

26. If a tobacco licensee recovers all or part of a bad debt previously written off and has received a refund in relation to the bad debt, the licensee must immediately repay an amount equal to the proportion of the refunded amount that the amount of the debt recovered is of the amount of the debt written off.

Reason 6 – Imported bulk spirits returned to spirits licensee

ss 185(1)

27. A spirits licensee may request a refund of the special duty paid in respect of imported bulk spirits supplied to, and subsequently returned by, a licensed user.

Time limit
ss 185(1)

28. The spirits licensee must apply for the refund of the special duty paid within two years from the day the spirits are returned.

Reason 7 – Packaged imported spirits returned to excise warehouse licensee

Imported packaged spirits, ss 185(2)
Return of Packaged Alcohol to an Excise Warehouse Regulations, s 6

29. An excise warehouse licensee may request a refund of the special duty paid in respect of imported packaged spirits supplied to a licensed user that is subsequently returned under prescribed conditions by that licensed user to the warehouse of the excise warehouse licensee.

Time limit
ss 185(2)

30. The excise warehouse licensee must apply for the refund of the special duty paid within two years from the day the spirits are returned.

Reason 8 – Packaged alcohol returned to excise warehouse licensee

Alcohol returned to warehouse, s 186
Return of Packaged Alcohol to an Excise Warehouse Regulations, s 4

31. If packaged alcohol (i.e., spirits and wine) that has been removed by an excise warehouse licensee for entry into the duty-paid market is returned to the licensee’s warehouse in accordance with section 152 of the Act, the licensee may request a refund of the excise duty that was paid when the alcohol was removed.

Time limit
s 186

32. The excise warehouse licensee must apply for the refund of the excise duty paid within two years from the day the alcohol is returned to the warehouse.

Reason 9 – Marked special container of alcohol returned to excise warehouse and destroyed

Alcohol in special containers
s 187

33. If a marked special container of alcohol is returned to the excise warehouse licensee who paid excise duty on it, the licensee may request a refund of the excise duty on the alcohol remaining in the container when it is returned, provided that the licensee destroys the alcohol in an approved manner.

Time limit
s 187

34. The excise warehouse licensee must apply for the refund of the excise duty paid within two years from the day the marked special container is returned to the excise warehouse licensee.

Reason 10 – Excess special duty payable to a tobacco licensee for exported tobacco products <1.5%

Refund to importer if foreign taxes paid
ss 182(4)

35. The special duty paid by a tobacco licensee in respect of tobacco products that are manufactured and subsequently exported by the licensee under the provisions of paragraph 50(4)(a) of the Excise Act, 2001 may be refunded under certain conditions.

36. The refund is limited to the special duty paid less the amount refunded to a foreign importer under subsection 182(1) of the Excise Act, 2001. A refund of special duty is only payable to the manufacturer after the foreign importer’s refund claim has been approved.

Time limit
ss 182(4)

37. The tobacco licensee must apply for the refund within two years from the day the tobacco products were exported.

Reason 11 – Other reason

Refund on destroyed imported manufactured tobacco – duty free shop licensees

s 181.1

38. A duty free shop licensee may claim a refund of the special duty imposed under section 53 of the Excise Act, 2001, which was paid on imported manufactured tobacco that is destroyed by the licensee in accordance with the Customs Act.

Time limit
s 181.1

39. The duty free shop licensee must apply for the refund of the special duty paid within two years after the tobacco product is destroyed.

Refund on exported tobacco products – foreign importers

Refund of special duty paid
ss 182(1) and (2)

40. A refund of special duty is payable to a person who has imported into a foreign country tobacco products manufactured in Canada. The refund is limited to the lesser of

• the taxes and duties imposed by the national government of the foreign country where the tobacco products were exported, and
• the amount of the special duty imposed under the Excise Act, 2001 that was paid by the tobacco licensee who manufactured the tobacco products.

Satisfactory evidence
para 182(1)(a)

41. The person who imported the tobacco products into a foreign country must provide satisfactory evidence that

• all taxes and duties imposed on the tobacco under the laws of the foreign country have been paid, and
• the container of the product has printed on it or affixed to it tobacco markings.

Time limit
para 182(1)(b)

42. The person who imported the tobacco products into a foreign country must apply for the refund within two years from the day the tobacco products were exported using Form E681, Excise Act, 2001 – Refund Claim of Tax on Exported Tobacco Products.

43. The importer must include copies of customs forms relating to the refund claim and a copy of Form E60, Tobacco Products Export Form, supplied by the exporter. If this is the first claim the importer is filing, the following must also be included:

• for importers in the United States, a copy of their Alcohol and Tobacco Tax and Trade Bureau (TTB) permit to import tobacco products or processed tobacco, or, 
• for importers in all other countries, their tobacco products commercial permit.

Excess refunded to tobacco licensee
ss 182(4)

44. If the special duty paid by the tobacco licensee in respect of the exported tobacco products exceeds the amount of the refund paid to the importer, the tobacco licensee may apply for a refund of the amount by which the special duty exceeds the refund paid to the importer using Form B256, Excise Act, 2001 – Application for Refund. (Please refer to paragraphs 9, 35 and 36 of this memorandum.)

Overpayment of refunds and other amounts

s 179

45. If a person receives a refund or an amount that is applied to a liability, and that person is not entitled to such refund or amount, the person is required to pay the amount of the refund or overpayment to the Receiver General on the day the refund is paid or the amount is applied to the liability.

Trustee appointment

Restrictions with respect to trustees
s 178

46. If a trustee is appointed to administer the estate of a bankrupt person pursuant to the Bankruptcy and Insolvency Act, any refunds or other payments owing under the Excise Act, 2001 that the bankrupt person was entitled to prior to the appointment will not be paid unless all the returns required to be filed under that act prior to the appointment are filed and all outstanding amounts are paid.

Set-off of refunds

s 162 and 177

47. The Excise Act, 2001 allows a person to deduct any refund due to the person from amounts payable under this Act or any other Act of Parliament. In this situation, the person is deemed to have paid, and the CRA is deemed to have refunded an amount equal to the lesser of the amount payable by the person and the amount of the refund. Paragraph 9 of this memorandum sets out how to claim a refund and reduce amounts payable.

Interest paid on refunds

ss 189(5)

48. If a refund is paid to a person, interest shall be paid at the prescribed rate on the refund for the period beginning 30 days after the refund application is filed with the CRA and ending on the day the refund is paid. The prescribed interest rates are available on the CRA Web site at canada.ca/taxes-interest-rates.

Submitting refund applications

By mail

49. You may submit your excise refund or deduction application by mailing it to the following address:

Canada Revenue Agency
Specialty Business Returns Section
Summerside Tax Centre
275 Pope Road, Suite 101
Summerside PE  C1N 6E7

Retention of information

Keeping records
s 206

50. Persons claiming refunds under the Excise Act, 2001 are required to maintain all records that are necessary to determine whether they comply with the Act.

51. Additional information on the requirement to maintain books and records is available in Excise Duty Memorandum EDM9-1-1, General Requirements for Books and Records.

Enquiries

52. Additional refund application forms can be obtained on the CRA Web site. If you have questions about a refund application already submitted, you can write to the Summerside Tax Centre or call toll free at one of the numbers below:

• 1-877-432-5472 within Canada; or
• 902-432-5472 outside Canada and the United States.

53. When you contact the CRA, you must be ready to provide the following information: your Business Number (BN) and RD account number, telephone number, the refund period, the date you sent your application, and the amount of your claim.

Offences and penalties

Enforcement
Part 6

54. Persons who wilfully, in any manner, obtain or attempt to obtain a refund to which they are not entitled are guilty of a punishable offence.