Luxury tax coming Sept. 1, but draft regulations still pending

The Department of Finance confirmed on Friday that the luxury tax on expensive cars, aircraft and boats will take effect on Sept. 1.

Finance also announced that draft regulations would be released in the “near term” to clarify that the luxury tax will not apply if a written sales agreement was entered into for the item prior to 2022, as previously stated in Bill C-19. That bill, which enacts the Select Luxury Items Tax Act, received royal assent on June 23.

The draft regulations would provide relief in two other areas. The tax would not be payable on certain aircraft exports at the time the sale is completed by a registered vendor, even if the exportation occurs later. That relief is intended to “mitigate certain cash flow issues” raised by manufacturers and exporters during the comment period on the draft legislation.

The government also plans to eliminate the requirement for automotive vendors registered with the Canada Revenue Agency to complete certain information returns related to the tax.

The Liberals campaigned on the luxury vehicle tax in the 2019 election and it was first introduced in the 2021 federal budget. The tax applies to the sale of new cars and aircraft priced over $100,000, as well as new boats priced over $250,000. The amount levied would be the lesser of 10% of the total price of the item and 20% of the total price of the item above the threshold.

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