The federal government tabled its 2021 budget, and one of the measures announced directly affects buyers of more expensive goods including boats, private planes and luxury vehicles. The main objective of this measure is to allow the government to replenish its coffers following the pandemic. According to Minister Chrystia Freeland, “If you’ve been lucky enough, smart enough or hard enough to afford to spend $ 100,000 on a car or $ 250,000 on a boat, congratulations! “.
Thus, the better-off will have to contribute even more. The new measure would allow the government, according to the minister, to rake in an additional $ 604 million over the next five years.
The tax on new luxury vehicles over $ 100,000 will be calculated based on the lower of the following two amounts:
– 20% of the value above the threshold ($ 100,000 for cars and personal aircraft, $ 250,000 for the boats);
– or 10% of the total value of the luxury personal car, boat or aircraft.
Simply put, it will be more beneficial to pay 20% of the value above the $ 100,000 threshold for any vehicle sold under $ 200,000. Above this amount, it is the rule of 10% of the value which becomes more favorable, and it is this which will be applied.
So you fall for a luxury SUV sold at $ 115,000? You will therefore pay $ 3,000 in additional tax (20% of $ 15,000 in excess of $ 100,000). Of course, the GST and the QST are added to this tax. Your purchase of $ 115,000 will therefore cost you $ 20,221.25 in tax in total.
Impossible to escape, this new measure will be applicable to both purchase and rental. It affects all new personal-use vehicles sold in Canada and includes coupes, sedans, station wagons, sports cars, vans and vans with less than 10 passengers, sport utility vehicles and pickup trucks.
However, there are a few exemptions:
– Motorcycles and certain off-road vehicles, such as all-terrain vehicles and snowmobiles.
– Racing cars (vehicles which are not legal on the street and which are intended to be used exclusively for racing on or off the track).
– Recreational vehicles.