Consultation on the Select Luxury Goods Tax

As part of Budget 2021, the Government of Canada announced its intention to introduce a new Tax on Select Luxury Goods (the Luxury Tax), effective as of January 1, 2022, aimed at helping to ensure that those Canadians who can afford to buy luxury goods are contributing a little more. Budget 2021 also included supplementary information regarding the proposed tax.

This technical paper seeks to provide Canadians and stakeholders with additional information about the Luxury Tax proposed in Budget 2021, and to obtain feedback regarding its design. Subject to final legislation being enacted, this paper lays out the proposed key design features of the Luxury Tax. Interested parties are invited to send written submissions on the proposed elements to the Department of Finance Canada, Tax Policy Branch, on or before September 30, 2021, at fin.luxury-luxe.fin@fin.gc.ca. Notably, in this regard, the Government of Canada acknowledges the feedback that it has received to date regarding the Luxury Tax proposed in Budget 2021 and seeks additional feedback, including any potential impacts that the proposed Luxury Tax, as outlined below, might have in remote communities.

Feedback received will be taken into consideration for the purposes of finalizing the design and drafting the legislative proposals in respect of the proposed Luxury Tax. It is anticipated that the legislative proposals in relation to the Luxury Tax regime would subsequently be included in a bill to be introduced in Parliament.

Overview – Luxury Tax Rates and Points of Imposition

The Luxury Tax would apply to deliveries in Canada by way of sale or similar arrangement, as well as importations into Canada, of new cars and new aircraft priced over $100,000, and new boats priced over $250,000 (the price thresholds, respectively). These goods (irrespective of their price) are sometimes referred to as select goods in this technical paper. In relation to deliveries in Canada, the Luxury Tax would apply if the total price (which would include charges and fees, but not include the applicable GST/HST or provincial sales tax) of the select good at the retail level exceeds the relevant price threshold. In relation to importations into Canada, the Luxury Tax would apply if the value of the select good (as determined for the purposes of calculating GST/HST on imported goods) at the time of importation exceeds the relevant price threshold. The Luxury Tax would be calculated as follows:

• for vehicles and aircraft priced over $100,000, at the lesser of 10% of the total price of the vehicle or the aircraft and 20% of the total price above $100,000; and
• for boats priced over $250,000, at the lesser of 10% of the total price of the boat and 20% of the total price above $250,000.

In most circumstances, no Luxury Tax would be applicable in relation to transactions occurring between persons that are registered with the Canada Revenue Agency (CRA) under the Luxury Tax regime, such as manufacturers, wholesalers and retailers of select goods above the relevant price threshold. In general, the Luxury Tax would be applicable only if the select good is delivered in Canada to, or imported into Canada by, a person that is not registered under the Luxury Tax regime, such as a consumer that acquires or imports the select good for their personal use and enjoyment. For deliveries in Canada, in most situations, the registered person that delivers the select good to the non-registered person would be responsible for paying the Luxury Tax and for the filing of a periodic Luxury Tax return. The liability to pay the Luxury Tax would rest with the registered person.

Under the Luxury Tax regime, a delivery in Canada of a select good would refer to the delivery of the select good in Canada by way of sale or similar arrangement. For example, the legal delivery of a select good in Canada from a vendor to a purchaser under a sale transaction would represent a delivery in Canada for Luxury Tax purposes. Leases of select goods would not be considered deliveries of select goods under the Luxury Tax regime (e.g., a select good provided to a person in Canada by way of lease or similar arrangement would not represent a delivery in Canada for Luxury Tax purposes, as there is no sale of the select good to the person). In most circumstances, the provision of a select good to a person by way of lease or similar arrangement would be preceded by an earlier delivery or importation of the select good, which would have been subject to Luxury Tax. For more information regarding how the Luxury Tax would affect leases of select goods, see the discussion below under Leases – All Select Goods.

For importations by non-registered persons, in most situations, the Luxury Tax would be payable at the border to the Canada Border Services Agency (CBSA) by the non-registered importer at the time of importation. The liability to pay the Luxury Tax would rest with the non-registered importer.

Exports of select goods would not be subject to the Luxury Tax.

The remainder of this technical paper will expand on the concepts introduced in this Overview, and provide other details regarding the application of the Luxury Tax regime for specified vehicles, specified aircraft and specified boats (as these terms are discussed below).

Price Thresholds

To determine whether the total price, or the value at importation, of a select good exceeds the relevant price threshold, the applicable GST/HST or provincial sales tax of general application in relation to the select good would not be taken into account. In addition, any deduction for a trade-in or down payment would not reduce the total price of a select good for the purposes of determining the applicable Luxury Tax.

All other taxes, duties, charges, fees and amounts paid in respect of the delivery, or importation, of the select good would be included in the total price for the purposes of calculating the Luxury Tax.

Illustrated Price Examples

Modifications in respect of a Select Good

Subject to the conditions and rules described below, any features or accessories that are installed on, or modifications that are made to, a select good (referred to as modifications in respect of a select good) would be subject to the Luxury Tax. These modifications would either be included in the total price of the select good or be subject to a self-assessment mechanism applied at a later date.

If the modifications in respect of a select good are purchased through a registered vendor (for information on registered vendors, see the discussion below under Registration Rules) in connection with the delivery of the select good from that registered vendor, the price paid for those modifications would be included in the total price in respect of the delivery of the select good for the purposes of calculating the Luxury Tax.

For any other modifications in respect of a select good, a person would be required to self-assess the Luxury Tax on the price paid for those other modifications if the following conditions are met:

• those modifications are installed or made within 12 months of
  • in the case of a delivery in Canada to the person, physical possession of the select good being transferred to the person, or
  • in the case of an importation of the select good by the person, the time of that importation; 
• the total price paid for all of those modifications (referred to as the total modifications price) is greater than or equal to $5,000; and
• the sum of the total modifications price and the total price (or value) in respect of the delivery (or importation) of the select good exceeds the relevant price threshold.

Under this self-assessment requirement, the Luxury Tax liability of a person would be equal to the following:

• the amount of Luxury Tax that would have been payable if the total price of the select good for the purposes of calculating the Luxury Tax payable were equal to the sum of
  • the total price (or value) in respect of the delivery (or importation) of the select good, and
  • the total modifications price,

less

• the amount of Luxury Tax, if any, that was payable in respect of the delivery to, or importation by, the person of the select good.

This Luxury Tax liability would become payable by the person at the end of the relevant 12-month period. The person would be required to make payment with the CRA and file a Luxury Tax return to account for this Luxury Tax liability. If this Luxury Tax liability is paid by the person in relation to a specified aircraft, or specified boat, for which there is no tax-paid certificate, the person would be permitted to request a tax-paid certificate from the CRA for that specified aircraft or specified boat (for information regarding tax-paid certificates, see the discussion below under Specified Aircraft – Priced over $100,000 and Specified Boats – Priced over $250,000).

Example 5:

On September 16, 2022, a non-registered person obtains physical possession of a boat within the Luxury Tax base with a price of $235,000 under a delivery in Canada. No Luxury Tax applies in respect of this delivery. Between September 16, 2022 and September 16, 2023, a number of modifications are installed on, or made to, the boat by one or more service providers: custom cabinetry; onboard lighting; a navigational chart plotter; and a satellite voice and data system. These modifications have a total price of $35,500. The non-registered person would be required to self-assess a Luxury Tax liability in the amount of $4,100.

Example 6:

On July 1, 2022, a non-registered person imports a vehicle within the Luxury Tax base with a value of $110,000 at the time of importation. Luxury Tax in the amount of $2,000 applies upon importation. Between July 1, 2022 and July 1, 2023, a number of modifications are installed on, or made to, the vehicle by one or more service providers: custom rims; enhanced dashboard instruments; custom racing seats; an upgraded audio system and a performance exhaust system. These modifications have a total price of $28,500. The non-registered person would be required to self-assess a Luxury Tax liability in the amount of $5,700.

Accessibility Modifications

There would be an exception to the rule discussed above for modifications in respect of a select good in the case of features, accessories, or modifications in respect of a vehicle that: 1) facilitate the use of the vehicle by, or the transportation of, an individual who uses a wheelchair; or 2) equip the vehicle with an auxiliary driving control that facilitates the operation of the vehicle by an individual with a disability. For instance, if a vehicle were modified for the purpose of adapting its use for a disabled person (e.g., the addition of ramps or lifts for wheelchair accessibility), the cost of these modifications would not be included in determining whether the total price of that vehicle exceeds the relevant price threshold. By way of example, if the price of a vehicle is below the $100,000 threshold and the additional cost of such modifications increases the total price of the vehicle beyond that threshold, that additional cost would not be taken into account for Luxury Tax purposes. Another example is illustrated below:

Application Framework under the Luxury Tax Regime

Specified Vehicles – Priced over $100,000

Passenger motor vehicles with certain specifications would fall within the scope of the Luxury Tax regime. A motor vehicle designed primarily to carry people on highways and streets would be considered a passenger motor vehicle. By way of example, for the purposes of the Luxury Tax, a passenger motor vehicle would not include an ambulance, a hearse, a combine harvester, a backhoe tractor, a motorcycle, a snowmobile, a motor home, or a racing car or all-terrain vehicle that is not road legal. In addition, a motor vehicle that is clearly equipped for police, emergency-response or military activities would not be a passenger motor vehicle if that vehicle is being delivered to, or imported by, a relevant police, emergency-response or military authority (respectively).

For the purposes of the Luxury Tax base, a specified vehicle would include all passenger motor vehicles that are equipped to accommodate less than 10 passengers; that have a gross vehicle weight rating of less than or equal to 3,856 kg; and that have a date of manufacture after 2018. Accordingly, specified vehicles would include a sedan, a station wagon, a sports car, a passenger van, a minivan, an SUV and a pick-up truck, any of which fulfills these specifications.

Broadly speaking, the Luxury Tax would apply on the delivery in Canada, or the importation into Canada, of a specified vehicle if the following conditions were satisfied:

• the specified vehicle has a total price upon delivery in Canada, or a total value upon importation into Canada, exceeding $100,000;
• the specified vehicle was not put into service in Canada (i.e., it was never previously registered with a motor vehicle authority in Canada), other than in connection with the delivery or importation; and
• the delivery is to, or the importation is by, a non-registered person.

If a delivery in Canada, or an importation into Canada, of a specified vehicle meets the above-noted conditions, it would be considered a taxable delivery or a taxable importation for the purposes of the Luxury Tax regime. For the coming-into-force rules related to such taxable deliveries and taxable importations, see the discussion below under Coming Into Force.

Non-registered Persons: Deliveries and Importations of Specified Vehicles

For taxable deliveries in Canada to a non-registered person, the Luxury Tax would become payable by the vendor of the specified vehicle at the time when physical possession of the specified vehicle is transferred to the non-registered person. The registered vendor would be required to make payment with the CRA and provide information regarding the taxable delivery in a periodic Luxury Tax return (see below for information regarding Luxury Tax returns). For taxable importations of a specified vehicle by a non-registered importer, the non-registered importer would pay the Luxury Tax upon importation. The non-registered importer would be required to make payment with the CBSA at the time of importation.

Example 8: Taxable Delivery to a Non-Registered Person

A registered vendor (e.g., a car dealership) sells a specified vehicle to a non-registered person (e.g., a consumer). When the dealership delivers the specified vehicle to the customer, the dealership would be required to pay the Luxury Tax on that specified vehicle.

Once that customer registers the specified vehicle with a provincial motor authority, the specified vehicle would be considered "put into service" for the purposes of the Luxury Tax regime. If that customer (being a non-registered person who took delivery of the specified vehicle on a tax-in basis) later delivers that vehicle to another person (registered or non-registered), that later delivery would occur on a tax-out basis.

Example 9: Taxable Importation by a Non-Registered Person

An individual may be interested in purchasing a specified vehicle from the Unites States and importing it into Canada. Upon importation into Canada, the non-registered importer (e.g., either the individual, or the non-resident seller if it is not registered) would be required to make payment with the CBSA.

Registered Vendors: Deliveries and Importations of Specified Vehicles

Deliveries in Canada of a specified vehicle by a registered vendor to another registered vendor would occur on a tax-out basis if the registered vendor that takes delivery certifies their status, for that delivery, as a registered vendor under the Luxury Tax regime in respect of specified vehicles. Importations of specified vehicles into Canada by a registered vendor would similarly occur on a tax-out basis if the registered vendor were able to indicate, on the relevant import documents for that importation, their valid registration number under the Luxury Tax regime in respect of specified vehicles. For additional details in this regard, see information below regarding Certification by Registered Vendors – All Select Goods.

Example 10: Delivery to a Registered Vendor

A registered vendor of specified vehicles (such as a car dealership that sells specified vehicles above the relevant price threshold as part of its business activities) may purchase its new inventory from a wholesaler in Canada that is also a registered vendor of specified vehicles under the Luxury Tax regime. The registered car dealership would certify its status, as a registered vendor of specified vehicles, to the registered wholesaler. The registered car dealership would take delivery of its inventory without Luxury Tax being payable. Luxury Tax would apply if that dealership later sells a specified vehicle above the relevant price threshold to a non-registered person (e.g., a customer).

Example 11: Importation by a Registered Vendor

The registered wholesaler in the above-noted example may purchase specified vehicles from a non-resident manufacturer of specified vehicles located overseas. The registered wholesaler opts to be the importer for the importation of these specified vehicles. This registered wholesaler (i.e., a registered vendor under the Luxury Tax regime) would provide its valid registration number to CBSA upon importation. Luxury Tax would not be payable upon importation. The Luxury Tax would apply if this registered wholesaler later sells a specified vehicle above the relevant price threshold to a non-registered person.

Specified Aircraft – Priced over $100,000

For the purposes of the Luxury Tax base, a specified aircraft would include any aeroplane, helicopter or glider, which is equipped with a certified maximum carrying capacity of less than 40 seats (i.e., not including the seats in the pilot's cockpit area) and which has a date of manufacture after 2018. A specified aircraft would explicitly exclude aircraft designed for military activities as well as those designed exclusively for cargo flight. Aircraft having a certified maximum carrying capacity of more than 39 passengers would fall outside the scope of the Luxury Tax regime.

Under the Luxury Tax regime, it would be possible to obtain relief related to the delivery or importation of a specified aircraft by way of certain exemptions based on the certified type of the non-registered acquirer or non-registered importer as well as certain exemptions based on the certified use by such an acquirer or importer. This potential relief is discussed below.

In general terms, the Luxury Tax would apply on the delivery in Canada, or the importation into Canada, of a specified aircraft if it has a total price upon delivery in Canada, or a total value upon importation into Canada, exceeding $100,000 unless one of the following sets of circumstances applies:

Luxury Tax-Paid – Certification

The Luxury Tax would not apply to a delivery or importation if a certificate for the specified aircraft had previously been issued by the CRA, indicating that Luxury Tax was already paid for that particular aircraft (referred to as a tax-paid certificate). This tax-paid certificate would have to accompany the aircraft in question.

For additional information regarding such tax-paid certificates to be issued by the CRA, see below under Deliveries in Canada of Specified Aircraft.

Qualifying User – Certification

The Luxury Tax would not apply if the delivery is to, or the importation is by, a person that certifies at the time of delivery or importation that they are a qualifying user in relation to the specified aircraft being delivered to, or imported by, them. In other words, certain persons would be eligible to obtain delivery of, or to import, a specified aircraft on a tax-out basis by certifying who they are and certifying that the specified aircraft is exclusively for their own use.

For the purposes of the Luxury Tax regime, a qualifying user would include the following:

• a police or fire department;
• a hospital;
• a municipality or an Indigenous governing body, including a person determined to be a municipality by the Minister of National Revenue;
• NAV CANADA or the airport authority of a listed airport under the Air Travellers Security Charge Act; and
• an entity constituting Her Majesty in right of Canada or in right of a Province.

Used All or Substantially All in Qualifying Exempt Activities – Certification

The Luxury Tax would not apply if the delivery is to, or the importation is by, a person that certifies at the time of delivery or importation of a specified aircraft that the specified aircraft is for use all or substantially all in any combination of the following qualifying exempt activities:

• flights to and from remote, fly-in communities (for a list of these remote communities, see the Transport Canada website – the Government of Canada has recently acknowledged these remote communities as depending on small air carriers for essential goods, services and access in and out of the community);
• scheduled service to the general public;
• transporting or delivering cargo and not passengers;
• an air ambulance service;
• an aerial fire-fighting service;
• an aerial forest fire management service;
• an aerial search and rescue operation;
• an aerial transportation service for the retrieval and transportation of human organs for human transplant;
• an aerial weather altering service;
• an aerial survey service;
• an aerial construction service;
• an aerial spraying or spreading service;
• an air flight training service; and
• the provision of a charter service in respect of which
  • the aircraft is for use all or substantially all in any combination of the above-noted qualifying exempt activities, or
  • all or substantially all of the seats on that aircraft are to be offered by a person for sale, on an individual basis, to individuals of the general public who are at arm's length with that person.

For instance:

• A commercial air carrier would be permitted to obtain delivery of a specified aircraft on a tax-out basis if they certify to the deliverer that their operation of that specified aircraft is to be all or substantially all for their scheduled service to the general public (e.g., for their transportation of passengers or cargo by air on a price per seat, price per unit of mass or price per volume of cargo basis, whether sold by them to the general public directly or indirectly).
• A courier service provider would be permitted to obtain delivery of a specified aircraft on a tax-out basis if they certify to the deliverer that their operation of that specified aircraft is to be all or substantially all for the transportation of cargo by air as part of their courier service.
• An individual would be permitted to obtain delivery of a specified aircraft on a tax-out basis if they certify to the deliverer that their operation of that specified aircraft is to be all or substantially all for their flights to and from remote, fly-in communities.
• A person would be permitted to obtain delivery of a specified aircraft on a tax-out basis if they certify to the deliverer that the operation of that specified aircraft is to be all or substantially all for the provision of a charter service in respect of which all or substantially all of the seats on that aircraft are to be offered by a person for sale, on an individual basis, to individuals of the general public who are at arm's length with that person (e.g., a tour operator books a block of seats on a chartered plane and sells those seats, on an arm's length and individual basis, to the general public as part of an all-included travel package).
• A flight school would be permitted to obtain delivery of a specified aircraft on a tax-out basis if they certify to the deliverer that their operation of that specified aircraft is to be all or substantially all for their air flight training services.

If a delivery in Canada to a non-registered person, or an importation into Canada by a non-registered person, of a specified aircraft priced over $100,000 does not meet one of the above-described exemptions, the delivery or importation would be considered a taxable delivery or taxable importation for the purposes of the Luxury Tax regime. For the coming-into-force rules related to such taxable deliveries and taxable importations, see the discussion below under Coming Into Force.

Deliveries in Canada of Specified Aircraft

For taxable deliveries in Canada to a non-registered person, the Luxury Tax would become payable by the vendor of the specified aircraft at the time when physical possession of the specified aircraft is transferred to the non-registered person.

For greater certainty, if a non-registered person obtains delivery of, or imports, a specified aircraft on a tax-out basis because that non-registered person certified their status as a qualifying user or the use of the specified aircraft in qualifying exempt activities, that non-registered person would be liable to pay the Luxury Tax in respect of any future taxable delivery that they make to another non-registered person for whom no certification is possible.

The vendor of a specified aircraft under a taxable delivery would be required to make payment with the CRA and to provide information regarding the taxable delivery of the specified aircraft in a Luxury Tax return. Within this information for the CRA, the vendor would be required to include the specified aircraft's unique identification number. These details would be necessary in order for the CRA to issue a tax-paid certificate to the vendor for the taxable delivery of that specified aircraft. The tax-paid certificate would include: the date of a taxable delivery of a specified aircraft by a vendor; that specified aircraft's unique identification number; and an indication by the CRA that the Luxury Tax in respect of that taxable delivery was paid by the vendor.

The CRA would maintain information with respect to all tax-paid certificates issued by the CRA in relation to specified aircraft. It would be possible for members of the public to submit a request to the CRA, based on an aircraft's unique identification number, in order to determine whether Luxury Tax had previously been paid in respect of that aircraft. Where the CRA receives a satisfactory request for this purpose, the CRA would be in a position to provide members of the public with a copy of the tax-paid certificate in relation to a specified aircraft.

The system of tax-paid certificates for specified aircraft is an integral part of the Luxury Tax regime. This system would permit a vendor to deliver a specified aircraft in Canada to a non-registered person on a tax-out basis if, at the time of delivery, the vendor provides a tax-paid certificate issued by the CRA in relation to the specified aircraft to the non-registered person. Deliveries in Canada of a specified aircraft to a registered vendor would occur on a tax-out basis if the registered vendor were able to certify their status, for that delivery, as a registered vendor under the Luxury Tax regime in respect of specified aircraft. (For additional details in this regard, see information below regarding Certification by Registered Vendors – All Select Goods.)

Importations into Canada of Specified Aircraft

Under most circumstances, importations of a specified aircraft by a non-registered importer would be taxable. For taxable importations of a specified aircraft, the non-registered importer would be required to make payment with the CBSA upon importation. The non-registered importer would also be required to submit import documentation to the CRA, evidencing that Luxury Tax was paid in respect of the taxable importation. Within this documentation for the CRA, the non-registered importer would be required to include the specified aircraft's unique identification number. These details would be necessary in order for the CRA to issue a tax-paid certificate to the non-registered importer for the taxable importation of that specified aircraft.

Non-registered importers would be permitted to import a specified aircraft on a tax-out basis by presenting the CBSA with a special import certificate in respect of that aircraft at the time of importation. To do so, the non-registered importer would be required to request and obtain the special import certificate for a specified aircraft from the CRA in advance of its importation. Where a non-registered person requests a special import certificate in respect of a specified aircraft from the CRA, that certificate would be issuable by the CRA, upon satisfactory validation, if:

• the non-registered person certifies to the CRA that the operation of the specified aircraft to be imported is to be all or substantially all for qualifying exempt activities;
• the non-registered person certifies to the CRA that they are a qualifying user and that the specified aircraft to be imported is to be exclusively for their own use; or
• the CRA had previously issued a tax paid certificate in respect of the specified aircraft to be imported.

Importations of a specified aircraft by a registered vendor would occur on a tax-out basis if the registered vendor were able to indicate, on the relevant import documents for that importation, their valid registration number under the Luxury Tax regime in respect of the specified aircraft.

Certification related to Qualifying Users and Qualifying Exempt Activities – False Declaration

If a person's certification to a vendor, or to the CRA in a request for a special import certificate, regarding their status as a qualifying user or regarding the operation of a specified aircraft in qualifying exempt activities, were to contain a false declaration, that person would be liable to pay the relevant Luxury Tax amount owing in relation to the delivery or importation plus a penalty equal to the greater of $1,000 and 50% of that Luxury Tax amount. For any delivery of a specified aircraft to a person that certifies their status as a qualifying user or that certifies the use of the specified aircraft in qualifying exempt activities, if the deliverer knows (or ought to have known) that the person's declaration was false, the deliverer would be jointly and severally liable with the person for the relevant Luxury Tax amount owing and the associated penalty.

Self-Assessment: Change in Use or Subsequent Taxable Delivery

In the case of a specified aircraft (for which there is no tax-paid certificate) that is delivered to, or is imported by, a non-registered person that certifies that the operation of that specified aircraft is to be all or substantially all for use in qualifying exempt activities, if the non-registered person ceases at any time to meet that all or substantially all test in relation to the specified aircraft, the non-registered person would be required to self-assess at that time and pay the Luxury Tax. The price for the purposes of this self-assessment calculation would be equal to the fair market value of the specified aircraft at the time when the non-registered person ceases to meet that all or substantially all test.

Similarly, if a qualifying user that acquired a specified aircraft (for which there is no tax-paid certificate), either by way of delivery or importation, ceases to be a qualifying user at any time, a self-assessment would be required at that time. The price for the purposes of this self-assessment calculation would be equal to the fair market value of the specified aircraft at the time of that person ceasing to be a qualifying user.

In each of the above-noted scenarios where a non-registered person becomes liable to pay the Luxury Tax, the non-registered person would be required to make payment with the CRA and provide the CRA with information, including the specified aircraft's unique identification number. These details would be necessary for the CRA to issue a tax-paid certificate to the non-registered person in respect of their Luxury Tax payment for that specified aircraft.

Specified Boats – Priced over $250,000

The Luxury Tax regime would apply to specified boats. For the purposes of the Luxury Tax base, a specified boat would include any boat that is designed for leisure, recreation or sport and that has a date of manufacture after 2018. For Luxury Tax purposes, a select specified boat would be any specified boat that has a cabin with sleeping amenities (e.g., a yacht, a houseboat, or any sailboat or motorboat with such a cabin). The Luxury Tax regime would apply to select specified boats irrespective of how or why they are used (as further discussed below). For greater certainty, a floating home (as defined for GST/HST purposes) would fall outside the scope of the Luxury Tax regime (as it is not a boat), and boats that are not designed for leisure, recreation or sport – such as commercial fishing vessels, ferries and cruise ships – would also fall outside the Luxury Tax base.

In general terms, the Luxury Tax would apply on the delivery in Canada, or the importation into Canada, of a specified boat if it has a total price upon delivery in Canada, or a total value upon importation into Canada, exceeding $250,000 unless one of the following sets of circumstances applies:

Luxury Tax-Paid – Certification

The Luxury Tax would not apply to the delivery or importation of a specified boat if a tax-paid certificate for the specified boat had previously been issued by the CRA, indicating that Luxury Tax was already paid for that particular boat. This tax-paid certificate would have to accompany the boat in question.

For additional information regarding such tax-paid certificates to be issued by the CRA, see below under Deliveries in Canada of Specified Boats.

Not a Select Specified Boat and Used All or Substantially All in Qualifying Exempt Activities – Certification

The Luxury Tax would not apply to the delivery or importation of a specified boat if the specified boat is not a select specified boat and the non-registered person that takes delivery of, or that imports, the specified boat certifies at the time of delivery or importation, that the specified boat is for use all or substantially all in qualifying exempt activities.

For the purposes of this exemption, a qualifying exempt activity refers to the operation of a specified boat for a purpose other than the leisure, recreation, sport or other enjoyment of:

• the purchaser;
• guests of the purchaser (including family and employees);
• persons that are non-arm's length with the purchaser;
• other invitees of the purchaser for nominal consideration; and
• lessees, or renters, of the purchaser (other than a lessee, or renter, that is to be the operator of the specified boat and whose operation of the specified boat is not for the leisure, recreation, sport or other enjoyment of guests of the operator; persons that are non-arm's length with the operator; and other invitees of the operator for nominal consideration).

In other words, for a non-registered person that is taking delivery, or importing, a specified boat that they intend to lease or rent, such a certification would be permitted only if the specified boat is for use all or substantially all in qualifying exempt activities of both the non-registered person and their anticipated lessees or renters.

By way of example, a water-skiing school would be permitted to obtain delivery of a specified boat (other than a select specified boat) on a tax-out basis if the school is able to certify to the deliverer that the specified boat is for use all or substantially all in qualifying exempt activities. Use of the specified boat by the water-skiing school for teaching its paying customers would be considered a qualifying exempt activity. This potential exemption from the application rule for specified boats does not apply in respect of select specified boats. Select specified boats delivered in Canada to a non-registered person, or imported into Canada by a non-registered person, are subject to Luxury Tax if their total price, or value, exceeds $250,000, irrespective of their intended use.

If a delivery in Canada to a non-registered person, or an importation into Canada by a non-registered person, of a specified boat valued over $250,000 does not meet one of the above-described exemptions, the delivery or importation would be considered a taxable delivery or taxable importation for the purposes of the Luxury Tax regime. For the coming-into-force rules related to such taxable deliveries and taxable importations, see the discussion below under Coming Into Force.

Deliveries in Canada of Specified Boats

For taxable deliveries in Canada to a non-registered person, the Luxury Tax would become payable by the vendor of the specified boat at the time when physical possession of the specified boat is transferred to the non-registered person.

For greater certainty, if a non-registered person obtains delivery of, or imports, a specified boat that is not a select specified boat on a tax-out basis because that non-registered person certified that the specified boat was for use all or substantially all in qualifying exempt activities, that non-registered person would be liable to pay the Luxury Tax in respect of any future taxable delivery that they make to another non-registered person for whom no certification is possible.

The vendor of a specified boat under a taxable delivery would be required to make payment with the CRA and to provide information regarding the taxable delivery of the specified boat in a Luxury Tax return. Within this information for the CRA, the vendor would be required to include the specified boat's unique identification number. These details would be necessary in order for the CRA to issue a tax-paid certificate to the vendor for the taxable delivery of that specified boat. The tax-paid certificate would include: the date of a taxable delivery of a specified boat by a vendor; that specified boat's unique identification number; and an indication by the CRA that the Luxury Tax in respect of that taxable delivery was paid by the vendor.

The CRA would maintain information with respect to all tax-paid certificates issued by the CRA in relation to specified boats. It would be possible for members of the public to submit a request to the CRA, based on a boat's unique identification number, in order to determine whether Luxury Tax had previously been paid in respect of that boat. Where the CRA receives a satisfactory request for this purpose, the CRA would be in a position to provide members of the public with a copy of the tax-paid certificate in relation to a specified boat.

Analogous to the system of tax-paid certificates for specified aircraft, a similar system for specified boats would be an integral part of the Luxury Tax regime. It would permit a vendor to deliver a specified boat in Canada to a non-registered person on a tax-out basis if a tax-paid certificate issued by the CRA accompanies the specified boat under that delivery.

Deliveries in Canada of a specified boat to a registered vendor would occur on a tax-out basis if the registered vendor were able to certify their status, for that delivery, as a registered vendor under the Luxury Tax regime in respect of specified boats. (For additional details in this regard, see information below regarding Certification by Registered Vendors – All Select Goods.)

Importations into Canada of Specified Boats

Under most circumstances, importations of a specified boat by a non-registered importer would be taxable if there were no tax-paid certificate in respect of that specified boat. For taxable importations of a specified boat, the non-registered importer would be required to make payment with the CBSA upon importation. The non-registered importer would also be required to submit import documentation to the CRA, evidencing that Luxury Tax was paid in respect of the taxable importation. Within this documentation for the CRA, the non-registered importer would be required to include the specified boat's unique identification number. These details would be necessary in order for the CRA to issue a tax-paid certificate to the non-registered importer for the taxable importation of that specified boat.

In certain cases, non-registered importers would be permitted to import a specified boat on a tax-out basis by presenting the CBSA with a special import certificate in respect of that boat at the time of importation. To do so, the non-registered importer would be required to request and obtain the special import certificate for the specified boat from the CRA in advance of its importation. Where a non-registered person requests a special import certificate in respect of a specified boat from the CRA, that certificate would be issuable by the CRA, upon satisfactory validation, if the non-registered person certifies that the specified boat is for use all or substantially all in qualifying exempt activities.

Importations of a specified boat by a registered vendor would occur on a tax-out basis if the registered vendor were able to indicate, on the relevant import documents for that importation, their valid registration number under the Luxury Tax regime in respect of specified boats.

Certification related to Qualifying Exempt Activities – False Declaration

If a person's certification to a vendor, or to the CRA in a request for a special import certificate, regarding the use of a specified boat in qualifying exempt activities were to contain a false declaration, that person would be liable to pay the relevant Luxury Tax amount owing in relation to the delivery or importation plus a penalty equal to the greater of $1,000 and 50% of that amount. For any delivery of a specified boat to a person that certifies the use of a specified boat in qualifying exempt activities, if the deliverer knows (or ought to have known) that the person's declaration was false, the deliverer would be jointly and severally liable with the person for the relevant Luxury Tax amount owing and the associated penalty.

Self-Assessment: Change in Use or Subsequent Taxable Delivery

In the case of a specified boat (for which there is no tax-paid certificate) that is delivered to, or is imported by, a non-registered person that certifies that the specified boat is for use all or substantially all in qualifying exempt activities, if the non-registered person ceases at any time to meet that all or substantially all test in relation to the specified boat after the delivery or importation, the non-registered person would be required to self-assess at that time and pay the Luxury Tax. The price for the purposes of this self-assessment calculation would be equal to the fair market value of the specified boat at the time when that non-registered person ceases to meet that all or substantially all test.

In both of the above-noted scenarios where a non-registered person becomes liable to pay the Luxury Tax, the non-registered person would be required to make payment with the CRA and provide the CRA with information, including the specified boat's unique identification number. These details would be necessary for the CRA to issue a tax-paid certificate to the non-registered person in respect of their Luxury Tax payment for that specified boat.

Requests for Tax-Paid Certificates – Specified Aircraft and Specified Boats

Any request by a person for a tax-paid certificate in relation to a specified aircraft or a specified boat would be required to be made within 1 year of the relevant taxable delivery or taxable importation of the specified aircraft or specified boat. If such a request is not made within this timeframe, the person would be liable to pay a penalty equal to $1,000.

Exports under the Luxury Tax Regime – All Select Goods

Relief of the Luxury Tax would be available in relation to deliveries in Canada of a select good, made by a registered vendor of that select good, to any non-registered person if the non-registered person subsequently exports the select good out of Canada. Under the Luxury Tax regime, relief for the registered vendor would be available in respect of the exported select good if certain conditions were satisfied:

• tax was payable by the registered vendor in respect of the select good and was accounted for in a return of the registered vendor;
• the non-registered person exports the select good and provides to the registered vendor evidence satisfactory to the Minister of National Revenue of that exportation;
• the registered vendor retains that evidence; and
• prior to the exportation, the non-registered person does not put the select good into service in Canada or use the select good in Canada except to the extent reasonably necessary or incidental to its transportation out of Canada.

In certain circumstances, the registered vendor of a select good may also be the exporter of that good. For instance, in the case of a registered vendor of a select good that obtained its delivery in Canada on a tax-out basis, the subsequent export of the select good by that vendor would also not be subject to the Luxury Tax.

Leases – All Select Goods

As noted in the Overview of this technical paper, leases of select goods would not be considered deliveries of select goods under the Luxury Tax regime. For Luxury Tax purposes, a lease would include any arrangement under which a person (referred to as a lessor) provides the use of a type of select good to another person (referred to as a lessee).

A person that is not otherwise eligible to become a registered vendor in respect of a type of select good under the Luxury Tax regime would not be eligible to become so registered merely because, in the ordinary course of the person's business activities, the person is a lessor of that type of select good.

A person whose ordinary business activities are leasing out, but not selling, a type of select good would not be permitted to register under the Luxury Tax regime. As a non-registered person, when such a lessor takes delivery of select goods that they intend to lease out, the non-registered lessor would be required to obtain their business inventory on a tax-in basis.

For instance, consider a person (referred to as LeaseCo) that carries on the business of leasing, but not selling, specified vehicles in Canada and, consequently, is not required (or eligible) to become a registered vendor of specified vehicles under the Luxury Tax regime. The non-registered LeaseCo takes legal title to a specified vehicle, which was never previously registered in Canada, under a sale transaction, from a registered vendor of specified vehicles for Luxury Tax purposes (e.g., a car dealership). The non-registered LeaseCo then provides physical possession and the right to use the specified vehicle to a customer by way of lease. The sale transaction between the registered vendor and the non-registered LeaseCo would be a taxable delivery in Canada of a specified vehicle if the fair market value of the specified vehicle under the sale transaction exceeds $100,000. Accordingly, the price for the purposes of calculating the Luxury Tax payable by the registered vendor in relation to the taxable delivery to the non-registered LeaseCo would be the fair market value of the specified vehicle at the time of that taxable delivery.

A person that is a registered vendor in respect of a type of select good under the Luxury Tax regime may also be a lessor of that type of select good. Where such a registered vendor holds in inventory a select good in respect of which Luxury Tax would be payable under a taxable delivery and the registered vendor leases out (rather than sells) that select good, the registered vendor would be treated as having taken that select good for their own use at the time of transferring physical possession of the select good to the lessee. Consequently, Luxury Tax in respect of the leased select good would become payable by the registered vendor at that time and accounted for in the corresponding Luxury Tax return. The total price for the purposes of this self-assessment calculation would be the fair market value of the select good at that time.

Temporary Importations – All Select Goods

In some instances, where a select good is imported into Canada on a temporary basis by a non-registered importer, relief of the Luxury Tax would be available, as outlined below.

International Commercial Transportation of Goods or Passengers – All Select Goods

A select good that is imported into Canada in the course of commercial transportation would not be subject to the Luxury Tax if it is, among other things:

• engaged in the carriage of persons or goods for hire or reward between Canada and other countries;
• exported from Canada within 30 days of the date of importation;
• not used for incidental domestic purposes within Canada; and
• owned or leased by a person in a foreign country.

International Non-Commercial Transportation by Residents – All Select Goods

A select good imported into Canada for non-commercial transportation by a person that is resident in Canada would not be subject to Luxury Tax upon importation if, among other things, the select good:

• is used for the transportation of the importer and accompanying persons only;
• is exported from Canada within 30 days of its importation; and
• is not used in Canada for the purposes of:
  • touring or other leisure activities;
  • carrying passengers or goods for compensation; or
  • transporting goods for sale.

International Non-Commercial Transportation by Non-Residents – All Select Goods

A select good that is imported into Canada for non-commercial transportation by a person that is not resident in Canada would not be subject to Luxury Tax upon importation if, among other things:

• the select good is exported from Canada within 12 months;
• a security deposit, if required, is provided by the non-resident person; and
• the select good is not used in Canada to carry passengers or goods for compensation.

Additional Rules for Temporary Importations – Maintenance, Overhaul or Repair

A select good that is imported into Canada on a temporary basis, either for the sole purpose of maintenance, overhaul or repair or diverted in Canada for maintenance, overhaul or repair while engaged in the international commercial transportation of goods or passengers, would not be subject to Luxury Tax upon importation if the following conditions are met:

• neither title to, nor beneficial use of, the select good is intended to pass, or passes, to a person in Canada while the select good is in Canada; and
• the select good is exported out of Canada as soon after the maintenance, overhaul or repair is completed as is reasonable in the circumstances.

Additional Rules for Temporary Importations – Temporary Storage for Boats

In the case of a specified boat, additional relief for a temporary importation would be available if the specified boat is placed in storage in a Canadian port facility for a period not exceeding 12 consecutive months. This relief would apply only if the specified boat remains in the relevant storage facility throughout the 12 consecutive months.

Other Relief from the Luxury Tax – All Select Goods

Where an amount of Luxury Tax becomes payable by a person (registered or non-registered), there may be circumstances in which the person inadvertently or erroneously pays more than the amount that they were required to pay. For such circumstances, the Luxury Tax regime would provide relief by way of a rebate for tax paid in error. While it would not be possible to claim such a rebate through a Luxury Tax return, the person would be permitted to apply for such a rebate from the CRA via a standalone application.

The Luxury Tax regime would also include relief elements related to certain accredited representatives stationed in Canada (such as foreign diplomatic agents as well as consular officers and employees) aligned with those found in other taxation statutes administered by the CRA.

Registration Framework and Associated Rules under the Luxury Tax Regime

Overview – Registration and Non-registration

Broadly speaking, the Luxury Tax regime would have a set of registration rules that would create a class of registered persons called registered vendors. These registration rules would be compulsory and require certain persons to register for Luxury Tax purposes. Registered vendors would typically be persons that, in the course of their business activities, manufacture, wholesale, retail or import select goods that are priced above the relevant price threshold ($100,000 for specified vehicles and specified aircraft, and $250,000 for specified boats). Registered vendors would generally be permitted to import, acquire and hold these select goods (e.g., as part of their business inventory) without application of the Luxury Tax. As previously noted, the main treatments that result from becoming a registered vendor would include:

• for imports by registered vendors, in most cases, there would effectively be a deferral of the Luxury Tax until the first purchase by a non-registered person, for whom no certification is possible, occurs in Canada;
• for deliveries in Canada by registered vendors, the Luxury Tax would typically be applicable only if a registered vendor delivers a select good to a non-registered person for whom no certification is possible; and
• as a general rule, if a select good held by a registered vendor becomes a capital asset of their business (e.g., no longer held as part of their business inventory), the Luxury Tax would apply on a self-assessed basis.

In contrast to registered vendors, non-registered persons would typically be individual consumers that acquire or import select goods for their personal use or enjoyment, or for the use or enjoyment of another individual at their expense. Non-registered persons would also include business end-users that acquire or import select goods for use in their business. As discussed above in the portions of this technical paper related to specified aircraft and specified boats, certain non-registered persons that are business end-users would be permitted to obtain delivery or importation of the select good on a tax-out basis if they can provide the appropriate certification (e.g., in the case of specified aircraft: qualifying users, or use in qualifying exempt activities; and in the case of specified boats other than select specified boats: use in qualifying exempt activities).

Registration Rules

A person would be required to register with the CRA under the Luxury Tax regime as a registered vendor in respect of a type of select good if:

• the person sells a select good of that type in the ordinary course of their business activities; and
• one of the following sets of circumstances exists:
  1. the person has, at any time, sold a select good of that type for which the specified price exceeds the relevant price threshold and physical possession of the select good has been transferred to another person in Canada; or
  2. the person reasonably expects, in the next year, to sell a select good of that type for which the specified price exceeds the relevant price threshold and reasonably expects that physical possession of the select good is to be transferred to another person in Canada.

For the purposes of the above-noted registration requirements in relation to a person, the specified price for a select good would be the highest of the following: the price at which a sale of the select good is made by the person; the manufacturer's suggested retail price for the select good; and the price at which the person reasonably expects a sale of the select good to be made by another person to a consumer of the select good.

The first time that a person makes a sale, or reasonably expects to make a sale, and reasonably expects that physical possession of the select good is to be transferred to another person in Canada, the obligation to be registered for Luxury Tax purposes would be triggered. Any person that is required to register under the Luxury Tax (referred to as a registrant) would be required to apply for registration before:

• in the case of a registrant that is the importer of a select good triggering the obligation to register, the day on which the registrant imports the select good; or
• in any other case, the earlier of the day on which physical possession of a select good triggering the obligation to register is transferred to the registrant and the day on which physical possession of the select good is transferred to its purchaser.

A person that is no longer required to be registered under the Luxury Tax regime as a registered vendor may have their registration status revoked by the CRA, unless that person provides information satisfactory to the Minister of National Revenue that it would be inappropriate for their registration status to be revoked. For example, consider a registered vendor of specified vehicles that has not, at any time in the past 12 months, sold a specified vehicle at a price exceeding $100,000 and that holds in inventory various specified vehicles in respect of which Luxury Tax would be payable under a taxable delivery. The CRA would be permitted to revoke this vendor's registration status, unless this vendor were able to provide information satisfactory to the Minister of National Revenue that, for example, they reasonably expect to sell a specified vehicle at a price exceeding $100,000 in the next year.

Importations by Non-registered Persons that are required to be Registered

The taxable importation into Canada of a specified aircraft or a specified boat by a person that is required to register under the Luxury Tax regime, but is not so registered, would be subject to the Luxury Tax upon importation. If, at the time of the taxable importation, the person has not appropriately applied to be registered for Luxury Tax purposes, the person would be subject to a penalty equal to the greater of $1,000 and 50% of the Luxury Tax amount paid by the person in respect of the taxable importation. The person would also be required to submit import documentation to the CRA, evidencing that Luxury Tax was paid in respect of the taxable importation, in order to request a tax-paid certificate in relation to the imported specified aircraft or specified boat.

Certification by Registered Vendors – All Select Goods

As discussed above, deliveries in Canada of a select good to a registered vendor in respect of that type of select good would occur on a tax-out basis if the registered vendor certifies their status, for that delivery, as a registered vendor under the Luxury Tax regime in respect of that type of select good. Importations into Canada of a select good by a registered vendor in respect of that type of select good would similarly occur on a tax-out basis if the registered vendor indicates, on the relevant import documents for that importation, their valid registration number under the Luxury Tax regime in respect of that type of select good.

If a person's certification regarding their status as a registered vendor were to contain a false declaration, the person would be liable to pay the relevant Luxury Tax amount owing in relation to the delivery or importation, plus a penalty equal to the greater of $1,000 and 50% of that Luxury Tax amount. For any delivery of a select good to a person that certifies their status as registered vendor under the Luxury Tax regime, if the deliverer (i.e., the vendor) knows, or ought to have known, that the person's declaration was false, the deliverer would be jointly and severally liable with the person for the relevant Luxury Tax amount owing and the associated penalty.

Self-Assessment on Leases and Ceasing to be Registered

As noted in the discussion above under Leases – All Select Goods, if a registered vendor leases, at any time, a select good that they hold in inventory in respect of which the Luxury Tax would be payable under a taxable delivery, that vendor would be required to self-assess at that time and pay the Luxury Tax in respect of that select good. The price for the purposes of this self-assessment calculation would be equal to the fair market value of the select good at the time of transferring physical possession of the select good to the lessee.

If a registered vendor ceases to be a registered vendor, that vendor would be required to self-assess and pay the Luxury Tax in respect of any select good that they hold in inventory in respect of which Luxury Tax would be payable under a taxable delivery. In the case of a specified aircraft or a specified boat held in inventory, no tax would be payable if a tax-paid certificate had been issued in respect of the specified aircraft or specified boat, prior to the time the person ceased to be registered. In addition, if a registered vendor takes for use a select good (i.e., puts the select good into service for their own use), that vendor would be required to self-assess and pay the Luxury Tax in respect of that select good. The price for the purposes of these self-assessment calculations would be equal to the fair market value of the select good at the time the vendor ceases to be a registered vendor or takes for use the select good.

Luxury Tax Returns for Registered and Non-registered Persons

Under most circumstances, the reporting periods of registered vendors under the Luxury Tax regime would be calendar quarters. Registered vendors would be required to file a Luxury Tax return with the CRA for each reporting period. In that Luxury Tax return, registered vendors would be required to determine their total Luxury Tax payable for the particular reporting period. Returns would be due at the end of the month following the quarterly reporting period. If a registered vendor has an amount of Luxury Tax owing for a particular reporting period, they would be required to pay that amount to the Receiver General on (or before) the same day that the related return is required to be filed with the CRA. In addition, the Minister of National Revenue may require a registered vendor to give, and maintain, security in an amount determined by the Minister.

Reporting periods for non-registered persons would also generally be calendar quarters. The reporting period of a non-registered person would become relevant in circumstances where an amount of Luxury Tax becomes payable to the CRA by the non-registered person. For example, if an amount of Luxury Tax becomes payable by a non-registered person during a reporting period (e.g., if self-assessment is required by a qualifying user that ceases, during a reporting period, to be the qualifying user of a specified aircraft), the non-registered person would be required to file a Luxury Tax return in respect of that reporting period.

Other Administrative Aspects

Administration and Enforcement

To promote compliance with the Luxury Tax, its regime would also include modern elements of an enforcement regime (e.g., keeping books/records, interest, penalties, offences and specific anti-avoidance rules, as may be required) aligned with those found in other statutes administered by the CRA. For instance, registered vendors would be required to keep books and records sufficient to enable a determination to be made of whether they have complied with the payment requirements and other rules under the Luxury Tax regime. The default period for retaining records would be six years following the end of the year pertaining to those records.

Treatment of the Luxury Tax for GST/HST and Income Tax Purposes

The GST/HST would apply to the final sale price, inclusive of the proposed Luxury Tax.

As with other non-income taxes, the deductibility of the Luxury Tax liability of a person in computing taxable income for Canadian income tax purposes would be determined based on general principles – e.g., whether the Luxury Tax liability is incurred for the purpose of earning the person's income subject to Canadian income tax.

Coming Into Force

Specified Vehicles – Priced over $100,000

The Luxury Tax would apply to the taxable delivery or taxable importation of a specified vehicle if the specified vehicle is delivered or imported after 2021 (i.e., on or after January 1, 2022). This general coming-into-force rule for specified vehicles would be subject to the following transitional rules:

1. Taxable Deliveries in Canada – Agreement Prior to Budget 2021

The Luxury Tax would not apply to an otherwise taxable delivery of a specified vehicle to a non-registered person made on or after January 1, 2022 if:

• the vendor of the specified vehicle and the non-registered person entered into a bona fide agreement in writing for the sale of the specified vehicle prior to April 20, 2021; and
• physical possession of the vehicle is transferred to the non-registered person.

2. Taxable Importations into Canada – Agreement Prior to Budget 2021

The Luxury Tax would not apply to an otherwise taxable importation of a specified vehicle by a non-registered person on or after January 1, 2022 if

• the vendor of the specified vehicle and the non-registered person entered into a bona fide agreement in writing for the sale of the specified vehicle prior to April 20, 2021; and
• the non-registered person imports the vehicle.

3. Taxable Importations into Canada –Date of Manufacture Between 2018 and 2022

The Luxury Tax would not apply to an otherwise taxable importation of a specified vehicle on or after January 1, 2022 if:

• the specified vehicle has a date of manufacture before 2022;
• the specified vehicle was registered with a motor vehicle authority outside Canada (i.e., put into service outside Canada) before 2022; and
• physical possession of the specified vehicle is transferred to a user of the specified vehicle outside Canada before 2022.

Specified Aircraft – Priced over $100,000

The Luxury Tax would apply to the taxable delivery or taxable importation of a specified aircraft if the specified aircraft is delivered or imported after 2021 (i.e., on or after January 1, 2022). This general coming-into-force rule for specified aircraft would be subject to the following transitional rules:

1. Taxable Deliveries in Canada – Agreement Prior to Budget 2021

The Luxury Tax would not apply to an otherwise taxable delivery of a specified aircraft to a non-registered person made on or after January 1, 2022 if:

• the vendor of the specified aircraft and the non-registered person entered into a bona fide agreement in writing for the sale of the specified aircraft prior to April 20, 2021; and
• physical possession of the specified aircraft is transferred to the non-registered person.

2. Taxable Importations into Canada – Agreement Prior to Budget 2021

The Luxury Tax would not apply to an otherwise taxable importation of a specified aircraft by a non-registered person on or after January 1, 2022 if:

• the vendor of the specified aircraft and the non-registered person entered into a bona fide agreement in writing for the sale of the specified aircraft prior to April 20, 2021; and
• the non-registered person imports the aircraft.

3. Taxable Importations into Canada – Date of Manufacture Between 2018 and 2022

The Luxury Tax would not apply to an otherwise taxable importation of a specified aircraft on or after January 1, 2022 if:

• the specified aircraft has a date of manufacture before 2022; and
• the specified aircraft was registered with a relevant authority outside Canada before 2022 to a person other than the aircraft manufacturer; and
• physical possession of the specified aircraft is transferred to a user of the specified aircraft outside Canada before 2022.

4. Taxable Deliveries in Canada – Date of Manufacture Between 2018 and 2022

The Luxury Tax would not apply to an otherwise taxable delivery of a specified aircraft on or after January 1, 2022 if:

• the specified aircraft has a date of manufacture before 2022;
• the specified aircraft was registered in Canada before 2022 (i.e., registered with Transport Canada) to a person other than the aircraft manufacturer; and
• physical possession of the specified aircraft is transferred to a user of the specified aircraft in Canada before 2022.

Specified Boats – Priced over $250,000

1. Taxable Deliveries in Canada – Agreement Prior to Budget 2021

The Luxury Tax would not apply to an otherwise taxable delivery of a specified boat to a non-registered person made on or after January 1, 2022 if:

• the vendor of the specified boat and the non-registered person entered into a bona fide agreement in writing for the sale of the specified boat prior to April 20, 2021; and
• physical possession of the specified boat is transferred to the non-registered person.

2. Taxable Importations into Canada – Agreement Prior to Budget 2021

The Luxury Tax would not apply to an otherwise taxable importation of a specified boat by a non-registered person on or after January 1, 2022 if:

• the vendor of the specified boat and the non-registered person entered into a bona fide agreement in writing for the sale of the specified boat prior to April 20, 2021; and
• the non-registered person imports the specified boat.

3. Taxable Importations into Canada – Date of Manufacture Between 2018 and 2022

The Luxury Tax would not apply to an otherwise taxable importation of a specified boat on or after January 1, 2022 if:

• the specified boat has a date of manufacture before 2022;
• the specified boat was registered with a relevant authority outside Canada before 2022 to a person other than the boat manufacturer; and
• physical possession of the specified boat is transferred to a user of the specified boat outside Canada before 2022.

4. Taxable Deliveries in Canada – Date of Manufacture Between 2018 and 2022

The Luxury Tax would not apply to an otherwise taxable delivery of a specified boat to a person on or after January 1, 2022 if:

• the specified boat has a date of manufacture before 2022;
• the specified boat was registered in Canada before 2022 (i.e., registered with Transport Canada) to a person other than the boat manufacturer; and
• physical possession of the specified boat is transferred to a user of the specified boat in Canada before 2022.