Luxury tax alert

Updated: April 2, 2026

The Select Luxury Items Tax Act was part of Bill C-29 and received Royal Assent on June 23, 2021. The luxury tax came into effect on September 1, 2022 and applied to the sale and importation of certain new cars, aircraft over $100,000, and boats over $250,000.

What does the luxury tax apply to?

Vehicles subject to the luxury tax include:

• Most passenger vehicles manufactured after 2018
• Doesn’t include RVs, emergency vehicles, and vehicles with seating capacity for more than 10 individuals.

Aircraft and vessels formerly subject to the luxury tax included:

• Luxury tax on aircraft eliminated effective November 5, 2025. Prior to that date, the tax applied to most aircraft acquired for the leisure, recreation, sport or enjoyment of the owner or a guest, manufactured after 2018
• Luxury tax on vessels eliminated effective November 5, 2025. Prior to that date, the tax applied to vessels (e.g., boats) designed or adapted for leisure, recreation or sports activities, manufactured after 2018, subject to certain exclusions for larger passenger and commercial vessels

How is the luxury tax calculated?

The luxury tax is applicable for vehicles with a retail value over $100,000.

The retail value includes the following:

• The Fair Market Value before trade-ins, discounts, and down payments
• Any taxes, duties, fees levied on importation or as assessed by the seller (for example, document fees and environmental levies) excluding the GST/HST and the PST (PST includes BC PST at all rates)
• Freight charges
• Modifications or improvements equal to or greater than $5,000 made within 12 months of purchase

The luxury tax is calculated at the lesser of 20% of the amount above the threshold or 10% of the full value of the luxury vehicle, aircraft or vessel. Vendors of qualifying vehicles must register with the federal government to collect and remit the luxury tax.

Example of how the tax is calculated

What rebates are available?

Rebates may be available in specific circumstances where the vehicle is exported outside of Canada. The rebates are only available to registered vendors and applications for rebates may only be made once per quarter.

For help navigating the luxury tax and how it may impact you, contact your local advisor or reach out to us here.

^Disclaimer 

^{The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Doane Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.}