The purpose of this is post is to provide information relating to the application of the Automotive Luxury Tax in Canada on certain vehicles. Vehicles that could be subject to the automotive luxury tax include sedans, coupes, hatchbacks, convertibles, sport utility vehicles, and light-duty pickup trucks priced above $100,000. Canada’s new Automotive Luxury sales tax has officially come into effect as of September 1, 2022, specifically targeting luxury cars, private jets, and yachts.
The new tax policy was first introduced back in August 2021 when the Department of Finance Canada proposed a luxury tax, titled The Select Luxury Items Tax Act, for public consultation. The Select Luxury Items Tax Act imposes a tax on the sale and import of certain vehicles and aircraft priced above $100,000 and certain vessels priced above $250,000. The proposed tax was later included in the 2022 Budget Implementation Act (Bill C-19), which received royal assent on June 23, 2022.
According to the CRA, the luxury tax will be calculated at the lesser of 20% of the value above a set threshold ($100,000 for cars, personal aircraft, and $250,000 for vessels) and 10% of the item’s full value subject to tax.
Subject Vehicles Under the Select Luxury Items Tax Act
The luxury tax will apply to vehicles that meet the definition of a subject vehicle under the Act and are priced or valued above the $100,000 price threshold.
Subject vehicle means a passenger motor vehicle that meets all of the following conditions:
>it has a date of manufacture after 2018
>it is designed primarily to carry individuals on highways and streets
>it has a seating capacity of not more than 10 individuals
>has a gross vehicle weight of 3,856 kg or less
>and is designed to travel with four or more wheels in contact with the ground.
Examples of subject vehicles include sedans, coupes, hatchbacks, convertibles, sport utility vehicles, and light‑duty pickup trucks. The Luxury Tax applies to all provinces and teritories across Canada.
Motorcycles and certain off-road vehicles, such as all-terrain vehicles and snowmobiles, racing cars (i.e., vehicles that are not street legal and are owned solely for on-track or off-road racing), and certain motor homes are not subject vehicles and are not in the scope of Luxury Tax. Similarly, ambulances, hearses, and vehicles marked for policing activities or marked and equipped for emergency medical, and fire response will also fall outside the scope of the tax.
Who is required to pay the Luxury Tax?
The Luxury Tax will be payable by registered vendors on the sale of subject items delivered in Canada that exceed the price threshold of $100,000 for vehicles and aircraft and $250,000 for vessels. Sales of subject items to manufacturers, wholesalers, and retailers that are registered for the Luxury Tax will qualify for an exemption. Non-registered importers will also pay the Luxury Tax on the importation of subject items.
Manufacturers, wholesalers, retailers, and importers will have to file with the Canada Revenue Agency (CRA) as a registered vendor under the Act. Registration should be made by the earlier of the day the sale is completed. In the case of importation, it should be done by the earlier of the day the subject item is accounted for under s. 32 of the Customs Act.
If a person required to be registered has not applied for registration, they may be liable to pay $2,000. Meanwhile, an importer required to be registered but has not applied for registration is liable to a penalty under s. 114, in addition to any other penalty. The penalty will be $1,000 or 50 percent of the amount of the luxury tax payable, whichever is greater.
Looking to get a vehicle? Get a real offer today!
Luxury tax only applies to vehicles built in 2018 or newer and are sold for $100,000 or more. Any vehicle that is 2018 or newer, but is sold for less than $100,000, is not impacted by the new luxury tax. If you are looking to get a vehicle in and around Edmonton, Canada, we can assist. We are Edmonton Auto Loans, and we have numerous vehicles built in 2018 or earlier. You don’t have to pay the luxury tax on those vehicles. We have vehicles built in 2018 or newer as well. Browse used vehicles here and shop with confidence. Let us assist you with your vehicle needs and we promise that you’ll only be satisfied. It’s free of charge and has no obligation to know your best financing options, so feel free to apply anytime you want. Call us at 1-855-227-1669 or click her to Get pre-approved here now!
For more information about Automotive Luxury Tax, check on the Government of Canada.