Tax Planning
Luxury Aircraft & Vessels Luxury Tax Removed — Key Planning Opportunity for Buyers
The government proposes to abolish the luxury tax on aircraft and large vessels, effective Budget Day 2025, offering major savings for potential owners.
By NomadicTax Research Team • 5-8 min read • November 24, 2025
## 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](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## 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](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
- 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](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## 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
1. **Confirm timing** of Budget Day legislation passage: Cost savings may only apply once the date is legally in force.
2. **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.
3. **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.
4. **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**