Tobacco Charges Regulations Guide: Charge calculation
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Calculation of the annual charge
Health Canada calculates each designated manufacturer’s (herein referred to as “manufacturer”) annual charge based on their share of domestic net sales revenue in the previous fiscal year (April 1 to March 31) using the net sales revenues reported in the statements of sales and revenue (herein referred to as the “statements”).
The annual charge for each manufacturer is calculated by the following formula:
A ÷ B × C
where
A is the manufacturer’s total net sales revenue for the previous fiscal year;
B is the aggregate of the total net sales revenue of all manufacturers for the previous fiscal year; and
C is the annual cost base for the previous fiscal year.
This means your annual charge depends on the annual cost base from the previous fiscal year and your market share of total domestic tobacco product net sales revenue for the same fiscal year.
See Appendix 1 for an example of an annual charge calculation.
Exception
If your total net sales revenue is less than 0.001% of the total domestic net sales revenue of all manufacturers in a previous fiscal year, you do not have to pay the annual charge. Health Canada determines who is below this threshold from the submitted statements and will inform those manufacturers.
All manufacturers must still submit the statement no later than April 30.
See Appendix 1 for the application of the 0.001% threshold in the annual charge example.
Estimate
If you do not submit a statement for a specific fiscal year, or Health Canada has reasonable grounds to believe your statement is incorrect or incomplete, Health Canada may estimate your total net sales revenue using any relevant available information to calculate the annual charge and issue an invoice. The invoice will state that an estimate was used.
You must pay the full invoiced amount no later than November 30 of each fiscal year, even if you disagree with the estimate. It is your responsibility to demonstrate the estimate was inaccurate; this does not extend the payment deadline. You may submit information to contest the estimate, but any corrections will appear on the following year’s invoice (see section Corrections). Health Canada inspectors may also visit the manufacturer to collect the needed information using the inspection powers under the subsection 35 (2) of the Tobacco and Vaping Products Act.
Corrections
Corrections help to ensure correct and fair annual charges when new information shows that one or more manufacturers were charged too much or too little in a previous fiscal year. If, based on new information, Health Canada has reasonable grounds to believe a correction is needed to a manufacturer’s previously calculated annual charge, it will recalculate the annual charge using the new information. This may create either an amount owed or a credit. If other manufacturers’ market shares are affected by the recalculation, their charges could also be corrected for that previous fiscal year depending on the facts of each case.
Recalculation of annual charge
Health Canada recalculates the annual charge (see the formula above in section Calculation of the annual charge) and subtracts the original amount from the recalculated amount (i.e., recalculated annual charge – original annual charge calculated). If the result is positive, you owe an amount. If negative, you are owed a credit.
If the result is an amount owing:
- If your impacted previous market share was at least 0.001% and you had paid an annual charge, you must pay the positive difference (the extra amount)
- If your impacted previous market share was below 0.001% but is now at least 0.001% after recalculation, you must pay the full recalculated annual charge
If the result is a credit:
- If your impacted previous market share was at least 0.001% and you paid an annual charge, Health Canada must credit you the difference.
- That difference will consist of the full original annual charge you had paid if, after recalculation, your market share is below 0.001%.
- If your impacted previous market share was below 0.001%, no credit is issued
Correction sources
Corrections may be started by you (for example, if you find an error in a submitted statement) or by Health Canada (for example, after inspections or by comparing the statement to other relevant sources of information).
Correction time limit
Health Canada may correct an annual charge within seven years after November 30 of the fiscal year following the fiscal year to which the new information relates. For example, for fiscal year 2025–26, new information received no later than November 30, 2033, can lead to a correction of a previously calculated annual charge.
Correction payment
Amounts owed or credits from a correction are combined with the next annual charge invoice. The invoice will note that a correction was made. Manufacturers must pay amounts owing no later than November 30 each fiscal year. Health Canada must issue credits by the same date.