Taxes are calculated as 10 percent of the total sales price or 20 percent of the value above the price threshold, whichever is lower. This luxury tax will also affect zero-emission vehicles with prices above the threshold, something that has caused concern for the Canadian Association of Vehicle Manufacturers (CVMA). For instance, for the purpose of the Luxury Tax, a motor passenger vehicle would not include an ambulance, a hearse, a combine, a backhoe, a motorcycle, a snowmobile, a motorhome or a racing car, or an all-terrain vehicle that is not road legal. Companies that produce, import or sell luxury items that would be considered included items should be aware of their obligations under the proposed luxury tax rules and start making changes to existing business processes that may be necessary once the rules come into effect.
The person would need to make the payment to the CRA and file a luxury tax return to account for this luxury tax liability. The Luxury Tax would not apply to the delivery or importation of a specific vessel if the CRA had previously issued a certificate of tax payment for the specified vessel, indicating that the Luxury Tax has already been paid for that particular vessel. When the tax was implemented, luxury car sales dropped significantly, experiencing a five percent year-on-year decrease despite reporting growth of more than 10 percent year-on-year before the tax was implemented. The Luxury Tax would not apply to a delivery or import if the CRA had previously issued a certificate for the specified aircraft, indicating that the Luxury Tax has already been paid for that particular aircraft (referred to as a tax payment certificate).