New Luxury Tax for Businesses
A new luxury tax will go into effect for select aircraft on September 1, 2022, the same day it will go into effect on the cars and boats covered by the new tax.
The Canada Revenue Agency (CRA) has published instructions for companies that would be subject to the new tax, such as producers, distributors, retailers, and importers of the subject goods, and who must register as "registered vendors."
Automobiles, planes, and boats costing more than $200,000 each are subject to the new luxury tax. The tax will often be equal to the lesser of:
20% of the entire transaction price over $100,000 for cars and airplanes, and over $250,000 for vessels or 10% of the total sale price.
However, the new tax might not be applicable to cars, boats, and planes that are bought by qualified businesses or that are intended for use in approved activities.
Start Date: September 1, 2022
The new luxury tax will start to apply to subject airplanes on September 1, 2022, the same date it would start to apply to subject cars and boats, according to a decree signed by the governor in council on July 14, 2022.
Finance also recently disclosed its intention to publish proposed regulations for the new tax to:
Clarify that the present transitional provisions for the new tax would continue to apply to all subject commodities, including airplanes.
Relieve the new tax on sales of certain aircraft for export at the time the sale is completed by a registered vendor, even if the exportation occurs at a later time
Reduce and simplify the reporting obligations for specific automotive vendors.
Vendor Registration for Luxury Tax
Businesses selling or importing goods that are subject to the new luxury tax are required to register under the CRA's Luxury Tax system. Businesses that purchase these specific vehicles/vessels are required to register prior to purchasing inventory to be eligible for exemption certificates and to avoid paying the additional tax on those purchases. The CRA states that the registration application procedure could take up to 30 days based on its guidelines.
The CRA further points out that companies who must register for the new tax must say if they are doing so for one or more of the following:
Subject automobiles
Subject aircraft
Subject boats
Some businesses might therefore be required to register under more than one category. Businesses can apply online or with the new L500 "Luxury Tax Registration Application" form.
If you have any questions about this new luxury tax or what it may mean for your business, contact me at 705-427-2006 or brenault@liahona.ca to book time for a conversation. 