Q&A
When will the luxury tax take affect? September 1, 2022.
What vehicles apply for luxury tax? New vehicles priced or valued above the $100,00 price threshold.
How much is the luxury tax? The lesser of: taxable amount multiplied by 10% or the amount that results from subtracting $100,000 from the taxable amount and multiplying the difference by 20%.
Example– A subject vehicle is sold for $150,000: The taxable amount is $150,000. The luxury tax will be the lesser of:
- $15,00 ($150,000 x 10%)
- $10,000 [($150,000 – $100,000) x 20%]
The luxury tax payable is $10,000
What if I purchased the subject vehicle before September 1, 2022? The luxury tax will not be applied.
Who pays the luxury tax? The luxury tax is to be paid by the buyer, once the sale is complete.
How do you report/ file returns for the luxury tax? You are required to fill out Form B501, Luxury Tax and Information Return for Non-Registrants for each reporting period.
For more information on the luxury tax, please call your sales consultant at Sherwood Motorcars today!
Effective September 1, 2022, the Department of Finance has implemented a luxury tax on subject vehicles above $100,000. The luxury tax is included in Bill C-19, Budget Implementation Act, No. 1.
Subsection 2 (1), Subject Vehicle means:
It is designed and adapted primarily to carry individuals on highways and streets
Seating capacity of no more than 10
Gross vehicle weight less than 3,856 Kg or less
Manufacture date after 2018
Designed to travel with four or more wheels on the ground
Calculations
The luxury tax is calculated using the taxable amount of the subject vehicle, in accordance with section 34.
Subject vehicles are calculated as the lesser of:
A) The taxable amount multiplied by 10%
B) The amount that results from subtracting $100,000 from the taxable amount and multiplying the difference by 20%.
Taxable Amount
Subsection 18 (4), taxable amount of the sale of a subject vehicle is the sum of the following:
The value of the consideration for the sale of the subject vehicle
The value of the consideration for any improvements made by the vendor to the subject vehicle in connection the sale that is not included in the above
Exclusions:
Excluded Improvements:
Information is directly from the Canada Revenue Agency website. Information is subject to change based on regulation and policies.