Canada’s Luxury Vehicle Tax

by Jim Peplinski   Posted on Monday, September 12, 2022

Canada's Luxury Vehicle Text

When the federal budget was passed in July, it introduced a tax on the sale or import of “luxury” vehicles priced above $100,000. This takes effect on September 1st, 2022.

How does it work?

This new tax will apply to the sale of any vehicle that costs above the $100,000 price threshold and is payable by the vendor when the sale is completed. The $100k includes any dealer fees but excludes taxes. The amount be will equal to the lesser of 10% of its purchase price or 20% of the difference between its purchase price and the $100k threshold. Here is the example given by the Canadian Government in the article listed below:

“A registered vendor of subject vehicles sells a subject vehicle to a purchaser. The selling price for the subject vehicle is $160,000 but the registered vendor applies a discount of $10,000 to the price. The subject vehicle is sold to the purchaser for a total consideration of $150,000, which consists of a trade-in valued at $50,000 and a cash payment of $100,000. Therefore, the taxable amount of the subject vehicle for calculating the luxury tax is $150,000.

The luxury tax is equal to the lesser of:
$15,000 ($150,000 × 10%)
$10,000 [($150,000 − $100,000) × 20%]
The luxury tax payable is $10,000”

This new tax is applied only to vehicles that meet the “subject vehicle” criteria under the Act including being designed to carry people on highways and streets, having a seating capacity of ten or less individuals, gross vehicle weight ratings of 3,865 kg or less, manufacturing dates after 2018, and vehicles designed to travel with at least four wheels in contact with the ground – think sedans, coupes, hatchbacks, convertibles, SUVs, and light-duty pick-up trucks.

Two items worth noting for JPLI customers. Firstly, the luxury tax does not apply to the sale or lease of used vehicles that have been previously registered with the Government of Canada or a province. Secondly, modifications and upfitting are included in the $100k threshold for new vehicles.

While this can be slightly confusing and frustrating when purchasing vehicles to keep your fleet on the road, our team at Jim Peplinski Leasing is here to walk you through the process and help you find the vehicles that work for your company and your budget. For more information about the upcoming Luxury Sales Tax contact your JPLI representative or check out the rest of the government website below:

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