Compliance
Understanding Canada’s Luxury Tax Exemption for Aircraft and Vessels
Effective November 5, 2025, subject aircraft and vessels are no longer subject to Canada’s luxury tax. What this means for buyers, sellers, and tax registrants.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What Changed
A key announcement in **Budget 2025**: **subject aircraft and subject vessels** will **no longer be subject to Canada’s luxury tax** effective **November 5, 2025**, partly to reduce the tax burden and simplify the tax regime. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ltn5/ltn5-luxury-tax-not-payable-subject-aircraft-and-vessels.html?utm_source=openai))
## Who’s Affected
- Individuals who buy or import aircraft or vessels above the luxury tax thresholds (valued above defined price thresholds).
- Vendors who were previously registered under luxury tax for aircraft or vessels now need not file under that part.
- Individuals or entities with exemption certificates or registration associated with subject aircraft or vessels will need to adjust.
## Practical Implications & Effects
- **Price reduction**: Buyers of vessels/aircraft will save on luxury tax cost when purchase is on or after November 5, 2025.
- **Registration & exemptions**: Registrants in respect of aircraft/vessels can cancel reg. after Nov 5; no need for exemption or special import certificates for these items post-effective date. Still must keep six years records.
- **Filing timing**: Periods crossing the changeover (Oct-Nov) need pro rata reporting: quarterly returns include items up to Nov 4, 2025.
## Example Scenario
Thomas imports a vessel worth CAD 300,000. Under rules prior to Nov 5, luxury tax was payable, and Thomas needed special import certificates and registration as vendor. Under new rule:
- No luxury tax due if the import occurs on or after Nov 5, 2025.
- No vendor registration needed for the vessel part, but vessel still needs records under relevant rules.
If a vendor holds both subject vehicles and subject vessels/aircraft, the registration for vehicles remains—only the aircraft/vessels portion is auto-cancelled by Feb 1, 2028.
## Actionable Advice
- Review ongoing contracts and purchases: items crossing Nov 4-Nov 5 boundary might need adjusted pricing or tax accounting.
- Vendors: stop charging luxury tax on vessels/aircraft sold/imported after Nov 5; ensure filings for periods containing pre-change transactions are correct.
- Buyers: double check invoices to make sure vendor isn’t incorrectly including tax.
- Keep documentation for six years for import and sales of luxury items (especially those acquired close to Nov 5).
Canada’s change reflects a simplification and removal of compliance burden for fewer-used luxury assets—and significant savings for affected parties.