Case Studies
Case Study: Impact of Luxury Tax Removal on Aircraft & Vessel Transactions
Budget 2025 proposes ending the luxury tax on aircraft and vessels—see how that affects sales, importations, and vendor obligations through real-world scenarios.
By NomadicTax Research Team • 6-7 min read • April 7, 2026
## The Policy Change: Luxury Tax on Aircraft & Vessels Ends
- Under Budget 2025, Canada proposes to **remove the luxury tax** on **subject aircraft and subject vessels** as of **November 5, 2025**. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/news121/news121-excise-gst-hst-news-no-121.html?utm_source=openai))
- Subject vehicles (above $100,000) remain subject to the luxury tax; only aircraft and vessels thresholds are impacted. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/news121/news121-excise-gst-hst-news-no-121.html?utm_source=openai))
- Registrations for vendors dealing with aircraft/vessels will be automatically cancelled by **February 1, 2028**, and return-filing obligations cease for reporting periods after **December 2025**, subject to certain conditions. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/news121/news121-excise-gst-hst-news-no-121.html?utm_source=openai))
## Case Scenarios: How Business Players Are Affected
| Role | Before Removal | After Removal | Key Actions |
|---|---|---|---|
| **Aircraft vendor** | Must register under SLITA, charge luxury tax, file quarterly returns, maintain import/export certificates. |
No luxury tax required for subject aircraft/vessels sales or leases; no requirement to register or file returns after reporting periods post-Dec 2025. |
Stop charging luxury tax on aircraft/vessels; cancel registration by vendor; manage existing certificates until 2028. |
| **Importer/person using subject vessel** | Luxury tax due on importation above thresholds; improvements are taxed; certificates required. |
No tax for new purchases, importations, or improvements after date; existing certificates retained until 2028. |
Confirm purchase/lease dates, ensure no tax applies; retain records until required by law; plan acquisition timing accordingly. |
| **After-sales service providers** | If improving or upgrading a luxury item (within the improvement period), luxury tax applied. |
No luxury tax after removal date for aircraft/vessels; tax still applies if vehicle. |
Assess past and upcoming enhancements through expiry of improvement period; for improvements on aircraft/vessels after that date, no tax applies. |
## Practical Example
- **Case**: Grace, an aviation company, orders a new subject aircraft for $5 million on November 10, 2025.
− Since the luxury tax is **proposed to end Nov. 5**, and Grace's agreement is after that, no luxury tax applies on the sale, importation, or improvements done later. |
− Vendor should not collect luxury tax; registrations no longer required for these items. |
## What Vendors & Buyers Should Do Now
- **Review purchase/leasing agreements**: Confirm dates to establish whether luxury tax still applies. |
- **System & pricing updates**: Vendors must remove luxury tax calculations from their systems for aircraft/vessels. |
- **Certificate management**: Existing export/import or exemption certificates still must be retained for six years for reconciliation and audit. |
- **Advisory for customers**: Inform clients who may have expected luxury tax that there will be no tax on aircraft/vessels after removal. |
## Broader Implications
- Cost reductions for businesses and individuals dealing with aircraft or vessels. |
- Simplified compliance and fewer administrative burdens—no quarterly reporting or filings for these item categories after reporting periods are cleared. |
- Possible incentives to defer purchases until after the luxury tax removal date, boosting demand in the aircraft/vessel market. |
This removal of luxury tax marks a significant shift for certain capital purchases. If you engage in deals involving high-value aircraft or vessels, confirming your dates and status under SLITA is essential to avoid unexpected taxes or misstatements.