Canada Goes Full Speed Ahead on Aircraft Luxury Tax

 - July 21, 2022, 10:44 AM

Following the Canadian government’s announcement last week that the proposed luxury tax on certain vehicles—including essentially all new general aviation aircraft purchases—will be enacted on September 1, the Canadian Business Aviation Association (CBAA) warned the new law will have "serious implications for business aviation in particular."

The tax applies to new cars and aircraft with a retail sales price exceeding $100,000 and to boats exceeding $250,000. The tax would be calculated at the lesser of 20 percent of the value above these retail price thresholds or 10 percent of the vehicle's full value. These regulations would provide that the tax is applied to "written sales agreements" entered into after Jan. 1, 2022.

The government intends to release draft regulations in the near term that would clarify transitional provisions and that would relieve the tax on sales of certain aircraft for export. "This refinement would mitigate certain cash flow issues raised by Canadian manufacturers and exporters of aircraft," the government's announcement said. 

"Issues remain and, crucially, we have lost faith in the constructive dialogue with government on decisions of vital importance to our members," CBAA lamented. "We urge this government to return to the table and, at the very least, consult with our sector on reasonable timelines for tax policy changes that should not be punitive but indeed supportive for all Canadians."