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.
Subsection 2 (1), Subject Vehicle means:
New vehicles
It is designed and adapted primarily to carry individuals on highways and streets
Seating capacity of no more than 10
Gross vehicle weight less than 3,856 Kg or less
Manufacture date after 2018
Designed to travel with four or more wheels on the ground
Application
In a brief overview; the luxury tax will be applied on sales and importations of a subject vehicle priced or valued above $100,000. The luxury tax can also be applied if a person registers, leases out or have an improvement made to a subject vehicle of at least $5,000.
Subsection 8 (1), an improvement means:
-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
Calculations
The luxury tax is calculated using the taxable amount of the subject vehicle, in accordance with section 34.
Subject vehicles are calculated as the lesser of:
A) The taxable amount multiplied by 10%
B) The amount that results from subtracting $100,000 from the taxable amount and multiplying the difference by 20%.
Taxable Amount
Subsection 18 (4), 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 the sale that is not included in the above
Information is directly from the Canada Revenue Agency website. Information is subject to change based on regulation and policies.