In 2019, the Canadian Craft Brewers Association announced that 1,000 craft breweries were operating in the True North, including 269 in Ontario alone. According to Statistics Canada, beer is the most popular drink in the nation – accounting for almost 35% of all alcoholic beverage sales. Although the 2 billion liters of beer Canadians currently drink annually is a historically low rate of consumption compared to previous decades, brewing remains a profitable enterprise – Canadians spent $9 billion on beer between 2021 and 2022. Canadian craft beer is also popular on an international scale, and breweries like 33 Acres and Sooke Brewing have won medals at the World Beer Cup. Despite being profitable and enjoyable, however, brewing can also be highly complex from a taxation perspective. Filing requirements in Canada can be challenging due to unique regulations and taxes for alcoholic beverages. To navigate these challenges with a degree of confidence, consider working with a Canadian tax lawyer at Jeremy Scott Law. With our help, brewers can handle filing requirements in Canada in an efficient manner – so call (902) 403-7201 today to get started.
What Is the Excise Act for Canadian Breweries?
The Excise Act subjects breweries to excise duties. In Canada, the federal government collects beer excise taxes twice: Once when the beer is manufactured by the brewery, and a second time when the beer is purchased by the end consumer. Certain provinces may also charge additional taxes at the time of manufacturing and at the point of sale. If the brewery sells beer directly to consumers, they are responsible for collecting and paying both of these taxes. A classic example of this situation is a “brew pub,” which brews its own beer in-house and sells to consumers from the same location. In this case, the brew pub would need to pay two different excise duties, one for manufacturing the beer and one for selling the end product to the final consumer.
With all that said, excise duties represent only one potential form of taxation for Canadian breweries. These businesses may also incur additional federal and provincial taxes that vary greatly from one province to the next. For example, Ontario breweries can expect to pay basic beer taxes, beer volume taxes, environmental taxes, and of course income tax. Other provinces have adopted a tiered approach that taxes breweries differently based on their net production and profit levels. Smaller breweries, generally speaking, pay less tax in these jurisdictions. Breweries may wish to consult with Jeremy Scott Law to learn more about the specific tax requirements that may apply to their operations based on these highly variable complexities.
What Is Form K50B for Canadian Breweries?
Complex taxes for breweries not only lower net profits, but they also inevitably lead to more complicated filing requirements in Canada. The Canada Revenue Agency (CRA) states that all licensed brewers must file Form 50B, Excise Duty Return – Brewer. As the name implies, this form deals specifically with excise duties – and it requires brewers to calculate and pay all outstanding excise duties within the relevant fiscal year. Importantly, even if a brewery does not sell any beer or incur excise duties with a filing period, the business still needs to file Form 50B.
The form is multi-faceted, requiring brewers to report both the total hectoliters of beer sold and the total beer-related revenue. There are also three separate columns to consider: One for beer containing less than 1.2% alcohol, a second for beer containing between 1.2% and 2.5% alcohol, and a third for beer containing between 2.5% and 11.9% alcohol. These three different columns are necessary because the Canadian government taxes each type of beer differently. Completely non-alcoholic beer may not incur any excise duties whatsoever.
When Do I Need To File Form K50B for a Canadian Brewery?
The CRA states that brewers must file Form K50B within ten working days of the month that follows the filing period. The default filing period for Canadian breweries is a calendar year, which means Form K50B is usually due within ten working days of January 31st. However, some brewers may file twice per year instead.
Semi-Annual Filing Eligibility
Only certain brewers are eligible to file semi-annually, so brewers may wish to consult with a Canada tax lawyer who can help determine whether this is possible or even beneficial. Brewers may only file twice per year if they have been licensed for at least 12 months, and they pay less than $120,000 in duties on beer and malt liquor. In addition, breweries must be in good standing with the Excise Act to file twice per year. If it meets all of these requirements, a brewery may file Form K50B twice per year: once for the period between January 1st and June 30, and a second time for the period between July 1st and December 31st.
How Are Beer-Making Kits Taxed in Canada?
The CRA handles “brew on premises” operators slightly differently from other breweries, dedicating an entire section to this subject on its website. These operations generally revolve around selling beer-making kits to consumers, who may subsequently brew their own beer at home. Federal taxation varies greatly depending on the nature of these kits and whether or not the brewing process takes place on the business premises.
If the kits contain only ingredients (like yeast or hops) and the consumer brews the beer at home, there is no Goods and Services Tax (GST). If the kit contains both “apparatus” (such as containers and valves) and ingredients, however, the GST is 7%. If the company sells only the ingredients but subsequently brews the beer on behalf of the customer on its premises, the GST is also 7%.
Handle Filing Requirements in Canada With a Canadian Tax Lawyer
Although alcohol-related tax regulations can cause complex challenges for breweries, an experienced Canadian tax lawyer can overcome these roadblocks efficiently. Each brewery approaches its craft with unique recipes, scales of production, and philosophies. Just like brewing a perfect pint of beer, tax planning is a nuanced process that takes into account numerous factors. Jeremy Scott Law may be able to help brewers streamline filing requirements in Canada with a measure of confidence. To learn more about targeted tax strategies for Canadian brewers, call (902) 403-7201 and book a consultation today.