Luxury vehicle tax proposed to begin Sept. 1

The Department of Finance released draft legislation on Friday to implement a proposed luxury tax on the sale of new cars and aircraft priced over $100,000, as well as new boats priced over $250,000. The effective date is proposed to be Sept. 1.

The tax would be calculated as the lesser of 20% of the value above the price thresholds or 10% of the full value of the luxury vehicle, aircraft or vessel.

Finance also launched a consultation period on the new draft legislation, ending April 11.

The legislative proposals released today reflect and respond to input from consultations the government conducted last summer on the design of the proposed tax.

The draft legislation replaces last year’s technical backgrounder and contains two new key provisions. One proposes relief in respect of after-sale improvements that are made to vehicles, aircraft or vessels purchased below the relevant price threshold.

The other proposes expanding relief for aircraft to take into account qualifying flights that are conducted in the course of a business with a reasonable expectation of profit.

The Liberals made the the luxury vehicle tax part of their 2019 federal election campaign platform and included it in last year’s 2021 federal budget, when it was proposed to come into effect Jan. 1, 2022. In the 2021 economic and fiscal update, the Liberals re-committed to introducing draft legislation in early 2022 to implement the luxury tax on vehicles.

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