The United States is not the only country with lawmakers attempting to legalize marijuana. Recently, Germany and Ireland have shown interest in legalizing the use of recreational cannabis. Currently in-process, this will increase the variety of areas for businesses to expand into.
The Legality of Marijuana Around the World
The use of cannabis for recreational purposes is prohibited in most countries. However, many have adopted a policy of decriminalization to make simple possession a non-criminal offense — often similar to a minor traffic violation. Countries that have legalized the recreational use of cannabis are Canada, Georgia, Malta, Mexico, South Africa, Thailand, and Uruguay, plus 21 states, two territories, and the District of Columbia in the U.S. and the Australian Capital Territory in Australia. Commercial sale of recreational cannabis is legalized nationwide in three countries (Canada, Thailand, and Uruguay) and in all subnational U.S. jurisdictions that have legalized possession, except Washington, D.C.
Countries that have legalized medical use of cannabis include:
- Costa Rica
- Czech Republic
- the Netherlands
- New Zealand
- North Macedonia
- Saint Vincent and the Grenadines
- San Marino
- South Africa
- Sri Lanka
- the United Kingdom
In the U.S., 37 states, four territories, and the District of Columbia have legalized the medical use of cannabis, but at the federal level, its use remains prohibited.
How Global Expansion Can Boost Cannabis Business
Abroad, the cannabis market is booming with the support of local governments everywhere, making it a great opportunity for U.S. marijuana businesses to position their brands to succeed overseas. As long as you are clear about the value you bring to the market, you will be able to position yourself in any country where there is a demand for cannabis.
MJ Freeway offers some steps to help businesses prepare for global expansion:
- Be clear on what you offer and the value it brings to the marketplace in general, not just your local jurisdiction.
- Pick one emerging market where the product fit makes a compelling case for your business offering.
- Consider how your brand has unique appeal in this market.
- Learn about some of the challenges of operating in this new market and how you can overcome them.
- Work to ensure your product is consistent so consumers know what they are buying and can build loyalty.
German Efforts Toward Legalization
On October 26, Germany announced the first steps towards legalizing the use of recreational cannabis, making them one of the first European countries to do so.
“Germany is the largest economy in the European Union,” Franziska Katterbach, President of Khiron Europe, said. “We can already see that the German plans and discussions to legalize recreational cannabis will kick-off a domino effect in other European countries. For example, in September this year, the Czech government commissioned drug commissioner Jindřich Vobořil to draft a law to legalize adult-use cannabis. Vobořil announced that Czech officials are in close contact with the German government to consult each other regarding their approach to legalize recreational cannabis.”
As yet, no draft law has yet been introduced, but Federal Health Minister Karl Lauterbach has announced a draft law for late 2022 or early 2023. Katterbach says the content of the key points paper has yet to be discussed. Once the German three-party government agrees on a draft law, it must then go through a very complex legislative process before the law becomes valid.
Ireland Aiming to Legalize Recreational-Use Cannabis
Ireland recently introduced a bill to legalize recreational cannabis for personal use, according to Forbes. The Irish Parliament will discuss this bill, which was introduced by the People Before Profit MP Gino Kenny. This aims to modify the Misuse of Drug Act entered into effect in 1977 by allowing adults of at least 18 years of age to possess up to seven grams of cannabis or 2.5 grams of cannabis resin.
One major problem is that the bill does not include the sale of cannabis products or the cultivation of cannabis plants for personal use. This means users will continue to purchase marijuana from the illegal market. The bill needs to be voted by the Dáil to be approved and will amend the Misuse of Drugs Act.
What to Know
While Germany and Ireland work through their legalization bills, there are plenty of other legal countries that you can successfully expand into (listed above). Deloitte offers some important factors that cannabis businesses should research when expanding globally:
Most tax authorities incorporate every level of production: cultivation, production, testing, packaging, distribution, and retail within the scope of their tax regimes. This means that organizations need to stay up to date with the applicable tax rules as they prepare a strategy to ensure compliance while optimizing their supply chain. Multi-nationals also have an added layer of complexity to consider as they navigate conflicting rules between different countries.
Given the complexity and the material impact tax can have, both the C-suite and the board should regularly review and consider legislative developments. Organizations must fully comprehend changes to the tax code, and the impact on their operations now and in the future. This requires an in-depth understanding of banking and financial regulations, and the tax regime.
Regulations can make or break any business, but in the cannabis space, compliance becomes even more critical. As cannabinoids and cannabis gain traction as treatments to manage chronic pain, seizures, and sleep issues, more and more governments are taking steps toward legalization. European countries, especially, are becoming more open to the potential health applications associated with cannabis. These countries are intent on ensuring public safety and responsible usage, and that shows their nascent regulatory regimes.
Access to capital and funding can be challenging within the highly regulated cannabis space. Although, it is an area that is likely to evolve as more decisions are made on the rules governing international trade and taxation. For the time being, companies need to factor financing challenges into their plans.
The next step is to ensure the financial plan includes all the necessary variables to support international expansion. Regulatory frameworks and rules regarding access to capital vary a great deal across different jurisdictions, and for virtually every financial option. Company leaders should not be so focused on getting assets into the local country that they underestimate the challenges once cash gets there.
International expansion can be exciting for cannabis businesses looking to increase brand awareness and their bottom lines. But, there is still much that needs to be researched and discussed before crossing waters. Schedule a meeting with your team and see if overseas opportunities can benefit your company.