As of September 1, 2022, Canada has a new luxury tax for some big-ticket items—luxury cars, boats, and aircraft will now have a luxury tax applied to them. Most passenger vehicles would be subject to this tax; it’s not clear at this point how this tax will affect leasing.
Per Carhub.ca, “There are some vehicles which are exempt from the new tax such as some recreational vehicles, some heavy duty trucks, and specialty vehicles like those marked for policing activities. Also, vehicles manufactured before 2018 or vehicles registered with the government prior to Sept. 1, 2022 are excluded.”
How Is This Going To Work?
According to BDO.ca, “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…. The tax will apply at the point of purchase if the final sale price paid (including applicable duties, charges, and taxes other than GST/HST or provincial sales tax) is above the price threshold.”
Here's a short video that gives a good description of what this tax will look like.
How Will the Tax Be Calculated?
Again per BDO.ca,
“The tax will be calculated as the lesser of:
20% of the retail sale price above the relevant price threshold ($100,000 for vehicles and aircraft; $250,000 for vessels); or
10% of the retail sale price of the subject vehicle, aircraft, or vessel."
"For example, a $101,000 car:
Calculation A (20% of anything over the threshold of $100,000)
This vehicle has $1,000 above the threshold and 20% of that $1000 is $200, so the calculation would indicate a $200 luxury tax
Calculation B (10% of the full price)
That same car taxed at 10% of the full amount, would indicate a $10,100 luxury tax.
Clearly Calculation A is the lower of the 2, and the luxury tax would be $200.”
As always, Shaw & Associates would love to sit down with you and discuss your finances and potential purchase of a future vehicle that might have the Luxury Tax applied to it.
Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.