As it turns out, the luxury tax will go into effect starting September 1 and applies to new motor vehicles and aircraft that retail for more than $100,000 and ships priced over $250,000.
Manufacturers, retailers, wholesalers, and importers that sell or import luxury vehicles and aircraft need to register with the Canada Revenue Agency (CRA) under the new Tax Act. They need to do so on the first day of sale or importation of all orders from now on, even if they are already registered as a recognized vendor within their respective sector.
The tax, which is one of the measures contained in Bill C-19, will be calculated at the lesser of 10 percent of the luxury item’s full value and 20% of its total price where it exceeds the relevant price threshold. It will apply retroactively too, so any “written sales agreements” made after January 1, 2022, also have to abide by the new regulations.
According to the Parliamentary Budget Office, the new luxury tax is expected to generate $600 million in revenue over five years. However, there were voices that criticized the bill, saying that it could lead to job cuts.
For instance, Anthony Norejko, president and CEO of the Canadian Business Aviation Association, commented that “the economic impact of the luxury tax will be significant and have not been studied with a comprehensive understanding of our industry.”
“We urge this government to return to the table and, at the very least, consult with our sector on reasonable timelines for tax policy changes that should not be punitive but indeed supportive for all Canadians,” Norejko added.