What is ‘luxury tax’ in Canada and how is it going to affect expats?
The luxury tax was first proposed on 10th August 2021 (2021 budget). However, the necessary steps were taken very recently on 11th March 2022 to create the draft legislation. Stakeholders were invited to share their views on the draft by 11th April 2022. As of now, the luxury tax is all set to come into effect on 1st September 2022. If you are yet to know the details of the draft and especially how it impacts expats, you should contact expats Tax Consultants in Toronto.
Here we will discuss the fundamental aspects of luxury tax and how it will affect the expats.
What is Luxury Tax?
Officially referred to as the Select Luxury Items Tax Act, the luxury tax introduces the term “subject item” which encompasses vehicles, aircraft and vessels manufactured after 2018.
A registered vendor is liable to pay the luxury tax on the sale of any of these “subject items”. In simpler words, if you are a manufacturer of boats, for instance, and selling a vessel on Canadian soil that is manufactured after 2018, you should pay a luxury tax to the government.
First of all, registered and non-registered vendors who are importing the aforementioned subject items to Canada should pay the luxury tax. However, there is a threshold amount you should know.
- For vehicles and aircraft, the threshold price is $100,000. If your trade exceeds the amount, you are liable to pay the luxury tax
- For vessels, the threshold amount is $250,000 and any amount after that will incur a luxury tax
There is an exemption mentioned in the new policy for the vendors which you must know. If you sell the subject item(s) to a manufacturing company or a wholesaler or a retailer who is registered for Luxury Tax already, you are automatically eligible for the exemption.
For further clarifications, contact the international tax consultancy service in Toronto.
Calculation of the Luxury Tax
The calculation of Luxury Tax is fairly simple.
- 20% of the retail sales price for an amount exceeding the threshold (already mentioned), (or),
- 10% of the total retail sales price
You should pay the lesser amount as the Luxury Tax. Get in touch with the best tax consultants in Toronto for a clearer idea of the bill.
How does it affect expats?
As an expat doing trades in Canada, you should be aware of the new policies that affect your business. This policy is newly introduced and is set to be effective from 1st September onwards. Contact expats tax consultants in Toronto who will guide you through the new policy so that you can evaluate your business policies and stay on the sunny side!
