Sherwood Motorcars

Luxury tax

Effective September 1, 2022, the Department of Finance has implemented a luxury tax on subject vehicles above $100,000.
The luxury tax is included in Bill C-19, Budget Implementation Act, No. 1.

What is a Subject Vehicle?

Bill C-19, Budget Implementation Act, No. 1

Definition:
New Vehicles
Designed and adapted primarily to carry individuals on highways and streets
Seating capacity: no more than 10
Gross vehicle weight: less than 3,856 kg
Manufacture date: after 2018
Designed to travel with four or more wheels on the ground
luxury tax at sherwood motorcars

Application of the Luxury Tax

The luxury tax applies:

  • On sales and importations of a subject vehicle priced or valued above $100,000.
  • If a person registers, leases out, or has improvements made to a subject vehicle of at least $5,000.
Definition of Improvements:
  • Tangible personal property that is installed in/on or affixed to the subject vehicle
  • A service that modifies the subject vehicle and is physically performed on the subject vehicle

Calculation of the Tax

The luxury tax is calculated as follows:

Subject vehicles are calculated as the lesser of:
  • The taxable amount multiplied by 10%
  • The amount that results from subtracting $100,000 from the taxable amount and multiplying the difference by 20%
Taxable amount of the sale of a subject vehicle is the sum of the following:
  • The value of the consideration for the sale of the subject vehicle
  • The value of the consideration for any improvements made by the vendor to the subject vehicle in connection with the sale that is not included above

Exclusions

The luxury tax does not apply to:

  • Used vehicles that have been registered within Canada
  • Ambulances, hearses
  • Motor vehicles marked for policing activities or emergency medical/fire response activities
  • Motor vehicles registered before September 2022, provided that possession was also transferred to the user of the vehicle before this date
  • A recreational vehicle designed or adapted to provide temporary residential accommodations and equipped with certain features (e.g., cooking facilities, heating)

Excluded Improvements

The following improvements are not subject to the tax:

  • Any repair, cleaning, or maintenance service
  • Replacing tangible personal property that is damaged, defective, or non-functioning
  • Improvements related to child safety seating or restraint systems
  • Improvements related to trailers or campers
  • Any improvement that equips or adapts the subject vehicle for transporting an individual using a wheelchair
  • Any improvement that equips or adapts the subject vehicle with auxiliary driving control for an individual with a disability

Would you like more information?

Note: Information is directly from the Canada Revenue Agency website. It is subject to change based on regulations and policies.