Taxing luxury: Canada’s new luxury items tax

Published by Rebecca Loo & Brendan Forrest

Canada’s new tax on luxury cars, aircraft, and boats – levied under the Select Luxury Items Tax Act (the “SLITA”) – came into effect on September 1, 2022. The luxury tax was first announced in Budget 2021 as a tax measure targeting those “who can afford to buy luxury goods”. The following is an overview of the luxury tax and the relevant legislative framework. 

Legislative framework


Under the SLITA, the luxury tax applies on the sale or importation of certain new cars, aircraft, and boats (referred to as subject items) valued over a certain price threshold. The price threshold is $100,000 for cars and aircraft, and $250,000 for boats. The tax is equal to the lesser of:

  1.  10% of the total price of the subject item; and
  2.  20% of the total price above the price threshold for the subject item.

The intent is for the luxury tax to apply on either the sale of a subject item to an end consumer, or the importation of a subject item by an end consumer. That is accomplished by way of a mandatory registration regime for persons who are manufacturers, wholesalers, retailers, or importers of subject items in the course of their business activities. Once registered, those registered vendors are able to purchase or import subject items without payment of the luxury tax. When a registered vendor makes a taxable sale to an unregistered purchaser, the luxury tax is payable by the vendor. An unregistered person who imports a subject item into Canada must pay the luxury tax to the Canada Border Services Agency (CBSA) upon importation.

Items subject to tax

  • A subject item is defined as a subject aircraft, a subject vehicle, or a subject vessel. The definitions of those terms are highly detailed, but can be summarized as follows:
    • A subject aircraft generally means an aeroplane, glider, or helicopter with a date of manufacture after 2018 that meets certain conditions, such as having a seating configuration of fewer than 40 seats (excluding pilot seats). Exclusions exist for aircraft designed and equipped for military activities or equipped exclusively for the carriage of goods.
    • A subject vehicle generally means a passenger motor vehicle with a date of manufacture after 2018 that has a seating capacity of not more than 10 individuals and a gross vehicle weight rating that is less than or equal to 3,856 kg. Exclusions exist for ambulances, hearses, certain recreational vehicles designed to provide temporary residential accommodation, and vehicles clearly marked for policing, or clearly marked and equipped for emergency medical or fire response activities.
    • A subject vessel generally means a vessel with a date of manufacture after 2018 that is designed or adapted for leisure, recreation or sport activities. Exclusions exist for floating homes as well as for certain commercial fishing boats, ferries, and cruise ships.
    • Additionally, subject aircraft, subject vehicles, and subject vessels do not include aircraft, vehicles, or vessels that were registered with a government before September 2022, if possession was transferred to a user of the item prior to that date. To be “registered with a government”, the item must have been registered with or licensed by that government for the purposes of permitting the aircraft, vehicle, or vessel to travel within the jurisdiction of that government. This should have the effect of excluding goods that were used by an end consumer prior to September 2022 from the luxury tax.
  • The luxury tax also applies to improvements to the subject item. If a person purchases improvements through a registered vendor in connection with the purchase of a subject item, the improvements will be included in the price of the subject item for purposes of calculating the luxury tax payable. If improvements are made after the purchase or importation of the subject item, the person may be required to self-assess the luxury tax on the value of the improvements – meaning that the person is responsible for determining if any additional luxury tax is payable and, if so, paying that amount to the CRA.


In addition to the exemption for purchases or importations of subject items by registered vendors, exemptions from the luxury tax apply in respect of certain qualifying users or qualifying activities. These exemptions are also detailed, but can be summarized as follows:

  • For subject aircraft:
    • The luxury tax does not apply to a person who certifies that they are a qualifying aircraft user in relation to the specified aircraft. A qualifying aircraft user is defined to include the Crown, a municipality, and an Indigenous governing body.
    • The luxury tax does not apply in respect of a qualifying subject aircraft, which generally means an aircraft that is reasonably expected to be used 90% or more of the time for qualifying flights. Qualifying flights are flights made for certain specified purposes, including air ambulance services, aerial fire fighting services, aerial search and rescue operations, the transportation of goods, and flights to and from remote communities.
  • For subject vessels:
    • The luxury tax does not apply in respect of a qualifying subject vessel (with some exceptions), which generally means a vessel that is reasonably expected to be used in Canada 90% or more of the time in the course of a qualifying activity. A subject vessel is used in a qualifying activity if it is used in Canada otherwise than for the leisure, recreation, sport, or other enjoyment of the owner, a guest of the owner, or lessees of the vessel.

Importantly, a purchaser seeking to rely on an exemption from the luxury tax must complete an exemption certificate and provide it to the vendor of the subject item. An importer must apply to the CRA for a special import certificate in order to rely on the exemptions for qualifying aircraft users, qualifying subject aircraft, or qualifying subject vessels.

Further, the scheme of the SLITA evinces an intention for the luxury tax to be paid only once. Accordingly, the SLITA provides for the following:

  • For a subject aircraft or subject vessel, a tax certificate must be obtained from the CRA upon payment of the luxury tax. The tax certificate will indicate the unique identification number of the aircraft or vessel, and will allow a subsequent sale or importation of that aircraft or vessel to be made without application of the luxury tax.
  • For a subject vehicle, once the vehicle has been registered with the Government of Canada or a province (otherwise than in connection with the sale of the vehicle), a subsequent sale or importation of the vehicle will not be subject to the tax.

Administration and enforcement

The SLITA contains similar administration and enforcement provisions as found in the federal Income Tax Act (“ITA”) and Excise Tax Act (“ETA”). Notably:

  • There is a general anti-avoidance rule for the luxury tax similar to those found in the ITA and ETA.
  • Similar objection and appeal provisions as those found in the ITA and ETA are in place. There is a 90-day period to object to an assessment made under the SLITA, with the potential for an extension of time in certain circumstances. A subsequent appeal may be made to the Tax Court of Canada.
  • There are limits on collection actions that can be taken following the issuance of an assessment, similar to the limitations set out in the ITA. Generally, the CRA cannot undertake collection actions until 90 days after the assessment is issued or, where an objection or appeal has been instituted, until after such objection or appeal has been resolved.


On August 9, 2022, the federal government released draft regulations to the SLITA. The draft Select Luxury Items Tax Regulations relieve the luxury tax on certain sales of subject aircraft for export, reduce the reporting requirements for certain registered vendors of subject vehicles, and set out transitional provisions for the luxury tax. Additionally, the CRA has published several notices which provide guidance in relation to its administration of the luxury tax. Persons dealing in subject items should continue to monitor new developments respecting the luxury tax to ensure they are compliant with their obligations under the SLITA.