What Is the Luxury Tax That’s Going Away?
Under the Select Luxury Items Tax Act (SLITA), certain vehicles, aircraft, and vessels above specific thresholds are taxed at 10% (or 20% on the portion above the relevant threshold). For example, aircraft valued over $100,000 and vessels over $250,000 were subject to this luxury tax on sales, importation, leases, and certain improvements. (budget.canada.ca)
The Proposed Changes from Budget 2025
- Abolish the luxury tax on subject aircraft and subject vessels as of Budget Day (once legislation is passed). This means no tax payable, whether it’s on sale, importation, or improvement. (budget.canada.ca)
- Final return for vendors must be filed for the period including Budget Day. Registrations maintained until February 1, 2028, for rebate purposes. After that, no registrations allowed. (budget.canada.ca)
Who Gains Here
- Aircraft owners or operators who were planning purchases or imports now face significantly lower acquisition costs.
- Vessel owners, especially those in provinces where boating is common, can save thousands in tax.
- Importers or lease companies of large vessels/aircraft will see cost savings and possibly regulatory simplifications.
Actionable Steps Before the Change Becomes Law
- Confirm timing of Budget Day legislation passage: Cost savings may only apply once the date is legally in force.
- If planning a purchase, evaluate whether acquiring just before or after Budget Day yields benefits. Vendors may still need to collect tax up to the effective date.
- Deal with registration status: If you’re a vendor currently registered under SLITA for aircraft or vessels, note that registrations will be allowed until 2028 but then cancelled.
- Accounting and cost-basis planning: For improvements made before the effective date, consider their depreciation and improvements schedules under the regime that existed.
Example Case
- Charter Company B based in Quebec is importing a high-value vessel worth CAD $300,000. Under the existing 10% SLITA rate, the tax would amount to $30,000. If the abolition takes effect on Budget Day, this purchase post-Budget Day would avoid that tax entirely, saving a full $30,000.
Category: Tax Planning