Canada Luxury Tax Guide (Select Luxury Items Tax)
the Select Luxury Items Tax (the "luxury tax") in Canada. The luxury tax was introduced in the 2021 Federal Budget (the "Select Luxury Items Tax Act" — the "luxury tax legislation") and is effective September 1, 2022. The luxury tax is a 10% tax on the retail price of the luxury vehicles (the "luxury cars" — the cars, the SUVs, the pickup trucks with the retail price above $100,000), the luxury boats (the "luxury vessels" — the boats, the yachts, the cruisers with the retail price above $250,000), and the luxury aircraft (the "luxury aircraft" — the aircraft with the retail price above $100,000). The 2024 Federal Budget proposed the repeal of the luxury tax effective January 1, 2025 — the luxury tax may be phased out in the 2025-26 legislative session. The luxury tax registration — the manufacturers, the wholesalers, and the retailers of the luxury items must register for the "luxury tax account" (the BN + the "LT" program code). The luxury tax return (the Form B500 — the "Luxury Tax Return") is filed monthly or quarterly. The luxury tax exemptions include the vehicles used for the "emergency services" (the police cars, the ambulances, the fire trucks), the "commercial boats" (the fishing boats, the cargo ships, the ferries), and the "aircraft used for the public transportation" (the commercial airlines).
Luxury Tax Rates
- Luxury vehicles: 10% of the retail price above $100,000. The luxury tax is the "lesser of 10% of the full price or 20% of the amount above $100,000." The maximum tax is $20,000 for the $200,000 vehicle.
- Luxury boats: 10% of the retail price above $250,000. The luxury tax is the "lesser of 10% of the full price or 20% of the amount above $250,000." The maximum tax is $50,000 for the $500,000 boat.
- Luxury aircraft: 10% of the retail price above $100,000. The luxury tax applies to the aircraft with the seating capacity of 40 or fewer passengers (the private aircraft, the business jets).
Luxury Tax Registration
- Registration: The "luxury tax account" (the BN + the "LT" program code) is required for the "luxury tax registrants" — the manufacturers, the wholesalers, the retailers, and the importers of the luxury items.
- Luxury tax return: The Form B500 (the "Luxury Tax Return") is filed by the registrant. The filing frequency is monthly (for the registrants with the luxury tax payable of $50,000+ in the year) or quarterly (for the registrants with the luxury tax payable below $50,000).
- Proposed repeal: The 2024 Federal Budget proposed the "repeal of the Select Luxury Items Tax" effective January 1, 2025. The luxury tax is expected to be phased out in the 2025-26 legislative session.
For the GST/HST on the luxury items and the input tax credits, see our GST/HST Guide →. For the carbon tax and the environmental levies, see our Carbon Tax Guide →.