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)
- Subject vehicles (above $100,000) remain subject to the luxury tax; only aircraft and vessels thresholds are impacted. (canada.ca)
- 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)
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.