As part of the 2021 Federal Budget, the Government of Canada proposed the introduction of a new luxury tax in Canada on the sale of certain new luxury cars, aircraft, and boats. On September 1, 2022, the Select Luxury Items Tax Act (the Luxury Tax Act), a part of Bill C-19, came into force.

What is the luxury tax in Canada and what items are subject to it?

The Luxury Tax Act now imposes a new "Luxury Tax" on the sale, lease or import of certain vehicles and aircraft worth more than $100,000, as well as certain vessels or boats that are worth more than $250,000. The items subject to tax are discussed in more detail below:


  • Most passenger motor vehicles manufactured after 2018 that are equipped to accommodate 10 or fewer passengers and have a gross vehicle weight rating of 3,856 kilograms or less. Exceptions apply to certain recreational vehicles, emergency vehicles, military vehicles, and any other vehicle with a seating capacity for more than 10 individuals


  • Any aeroplane, helicopter, or glider manufactured after 2018 that has a maximum capacity of 40 passengers. Exemptions include commercial aircraft, military aircraft, and cargo aircraft.


  • Any boat designed for leisure, recreation, or sporting activities manufactured after 2018 (i.e yachts, sailboats, deck boats, waterskiing boats etc.) Exemptions are available for certain types of boats (including cruise ships and boats equipped for commercial use).

How is the luxury tax calculated?

Image Of Luxury Tax In Canada Calculation

The Luxury Tax is generally calculated using the taxable amount of the subject items. This means that luxury tax is applicable on the following when retail value is over:

  • $100,000 for vehicles
  • $100,000 for aircraft
  • $250,000 for vessels

*Please note that retail value includes the fair market value of the item, freight fees, and any amount paid for the improvements (excluding accessibility modifications). When the item is imported, the retail value includes the sum of any taxes, duties, or fees (other than GST/HST) levied on importation or as assessed by the seller (for example environmental levies).

The Luxury Tax is calculated at the lesser of:

  1. 10 percent of the full retail value of the item; and
  2. 20 percent of the amount exceeding the set threshold (($100,000 for vehicles and aircraft, and $250,000 for vessels).

For purposes of calculating GST/HST, Luxury Tax is added to the cost of the item. As a result, the Luxury Tax is subject to GST/HST.

Let's look at an example:

An Ontario resident is purchasing a $155,000 vehicle. The taxpayer has incurred $8,000 in delivery charges and improvements. The applicable Luxury Tax is calculated as:

Luxury Item (Vehicle)Retail valueLuxury Tax
Retail price of vehicle$163,000
Calculation of luxury tax

Lesser of :

a) 10 percent of the full retail value of the item;

b) 20 percent of the amount exceeding the set threshold


Luxury tax amount (lesser of a and b)$12,600
Total cost of vehicle$198,428

If you have any questions or concerns about the new Luxury Tax, and how it could impact your purchases of certain items, please contact us.  We are here to help!

If you want to learn more about other tax and accounting topics, explore the rest of our blog!


The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. NBG Chartered Professional Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.

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Written by Neena Gambhir

I'm a Chartered Professional Accountant and have been navigating the waters of public accounting for over a decade. I've had the privilege to work with all sorts of clients – from small family-owned businesses to those big names on the stock exchange, spanning various sectors. Through these experiences, I've gathered a ton of knowledge, especially when it comes to Canadian corporate and individual taxes. I've also got a solid handle on the ins and outs of partnership, trust, and estate taxes.

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