Looking to buy a new vehicle, aircraft or a vacation boat, you might find yourself spending a little extra. A new luxury tax was announced on September 1, 2022. It will be applied to recreational vehicles, aircrafts, and all boats. New Select Luxury Items Tax act applies to all aircraft and recreational vehicles over $100,000 retail price. Boats retailing over $250,000 will also be impacted as well.

How much tax will be applied?

Anyone who purchases or leases a recreational vehicle, aircraft and boat will have a luxury tax lesser of either 10% of purchase price, or 20% of difference between purchase price and price threshold of $100,000 for all aircrafts and vehicles and $250,000 for boats. All modifications, freight charges, excise tax and other costs added into the purchase is used in total for purposes of calculating luxury tax payable. Additionally, this new tax is added to total cost before HST has been calculated. If you were to purchase a sports car costing 150,000, you would be paying 10,000 (150,000 – 100,000 x 20%) and in total with HST you would end up paying 180,800 (150,000 + 10,000 x 1.13). Vehicles and aircrafts retailing over $200,000, 10% tax rate will apply.

Who is exempt from this new tax?

The luxury tax will only apply to boats built after 2018 and any commercial or float homes are exempt. Luxury tax will not be applied on purchase or lease for any second-hand vehicles, aircrafts, or boats.

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