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Details of New Luxury Tax on Vessels and Aircraft

Luxury boating in Canada is about to get more expensive. The Department of Finance recently released its draft legislative proposals to implement a luxury tax on some vessels, aircraft and luxury cars. After a period of consultation, the draft proposals are expected to become law as part of the Select Luxury Items Tax Act.

The new tax is going to affect all pleasure craft with a value of $250,000. It will also affect all private aircraft and vehicles with a retail price of $100,000 or more and built after 2018.

The tax will be assessed on the value of the asset. The amount of the tax will be 20% of the value of the boat, car or plane above the price thresholds or 10% of the full value of the “luxury” vessel, aircraft or vehicle, whichever is less.

The vendor of the asset is intended to be principally liable for the new tax. However, such taxes are ultimately likely to be passed on to the ultimate consumers of the goods. The draft proposals include registration rules, which will require vendors of the luxury goods, such as manufacturers, distributors, and retailers, to register under the Act.

This new luxury tax was first announced in 2021. The current draft legislative proposals replace a detailed backgrounder released on August 10, 2021. The luxury tax was originally expected to be effective as of January 1, 2022, but is now expected to come into effect on September 1, 2022.

The government is inviting comments on the draft legislative proposals which can be submitted by April 11, 2022.

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