Canada’s new Luxury Tax will take effect on September 1, 2022, and apply to most new vehicles and certain personal use aircraft with before-tax selling prices over $100,000, as well as recreational boats with before-tax selling prices in excess of $250,000. Luxury Tax will be calculated as the lesser of 10% of the total price and 20% of the total price exceeding $100,000 for vehicles and aircraft and $250,000 for boats. Registration for this new tax is now open and can be completed through the Luxury tax registration page provided by the Canada Revenue Agency (CRA).
Manufacturers, wholesalers, retailers, and importers that sell or import certain vehicles, aircraft, or boats priced above the relevant price thresholds in the course of their business activities are required to register under the Select Luxury Items Tax Act on or before the day on which they first import or sell a taxable item. Registering in advance of the implementation date is a key planning point for affected businesses, as registration will permit an organization to obtain and hold a tax-free inventory of taxable items when the tax comes into effect on September 1.
The Department of Finance Canada recently announced further details about the implementation of the Luxury Tax, which include proposed amendments and regulations to:
- clarify that the Luxury Tax does not apply to an otherwise taxable item if a written sales agreement in respect of the item was entered into before January 1, 2022;
- provide tax relief on sales of certain aircraft intended to be exported at the time the sale is finalized, even if export occurs later; and
- simplify the reporting process for automobile vendors registered with the CRA by eliminating certain information return requirements.
The CRA has also created a Luxury Tax page to provide taxpayers with access to registration and technical (e.g., notices, memoranda, forms, and rates) information. Taxpayers are encouraged to refer to this page frequently as the implementation date approaches and more content is made available.
To learn more about the implementation of the Luxury Tax, check out Ryan’s on-demand webinar: The Luxury Tax – Planes, Boats and Automobiles.
If you have any questions about how the Luxury Tax might impact your organization, please do not hesitate to contact Ryan TaxDirect® at taxdirect@ryan.com.