Starting this Thursday, September 1, 2022, the Government of Canada is introducing an incremental luxury tax on certain new vehicles priced over $100,000. This includes vehicles purchased at a dealership or online. There is a lot to unpack with the new tax, so we’ve put together a list of five key things you need to know:
- NEW VEHICLES ONLY – The luxury tax is only applicable on all NEW vehicles purchased or leased in Canada over $100,000 as of September 1, 2022.
- PRE-ORDERS SINCE 2022 – The luxury tax also applies to NEW vehicles over $100,000 that were ordered between January 1 to August 31, 2022, but delivered on or after September 1, 2022.
- TOTAL PRICE – The luxury tax applies to NEW vehicles with a total sale price of over $100,000, which includes all accessories and additions to the vehicle, taxes, duties, charges, fees, and amounts in respect of delivery or importation, and BC Luxury Tax (if applicable), but before GST/HST.
- INCREMENTAL CALCULATION – The luxury tax is calculated on an incremental scale – 10% of the taxable amount of $100,000, the base amount, or 20% of the taxable amount over $100,000, whichever is less. Trade-in amounts cannot be used to reduce the price used to calculate the tax.
- DUE UPON DELIVERY – The luxury tax is due upon delivery of the new vehicle.
The luxury tax does not apply to previously licensed vehicles or new vehicles pre-ordered before January 1, 2022. Cargo vans, or any vehicles not designed primarily to carry passengers, are also exempt from the luxury tax.
For more information about the new Federal Luxury Tax, please visit the Government of Canada’s website.