The luxury vehicle tax comes into force today

The luxury vehicle tax comes into force today
The luxury vehicle tax comes into force today

It is finally today that the new Act respecting the tax on certain luxury goods, announced by the Canadian government in the spring of 2021 and sanctioned last June, comes into force.

This tax applies to sales and imports of vehicles and aircraft costing more than $100,000 and boats costing more than $250,000. Exceptions are police and emergency vehicles as well as recreational vehicles designed or fitted out to serve as temporary living quarters.

In addition, we are only talking about new models. Those who have already been registered in Canada are not subject to the tax.

Ironically, vehicles with a gross vehicle weight rating of more than 3,856 kilograms are also exempt, which includes, among others…the GMC Hummer EV!

How it works?

The tax is calculated according to the most advantageous scenario for the consumer: 20% of the portion of the price that exceeds $100,000 or 10% of the total value of the car.

Photo: Porsche AG

For example, a $150,000 Porsche 911 will be subject to a luxury tax of $10,000, or 20% of $50,000. However, a buyer who decides to get their hands on a $500,000 Rolls-Royce will have to pay $50,000 (10% of the total value) rather than 20% of $400,000, which would have resulted in an $80,000 tax. $.

Naturally, this tax is added to the GST, and in Quebec, to the QST. Important detail to add: any improvement made to a luxury vehicle subject to the Act will be included in the calculation of the tax the following year. Consider high-performance tires, an audio system or even a modified exhaust.

When it was announced last year, the federal government had estimated that this new measure would bring in more than $600 million over five years.

In the studio: Which luxury SUV to choose?



The article is in French

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