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Government announces details about the implementation of Luxury Tax
Today, the Government of Canada announced clarifications to the implementation of the Luxury Tax, which was included in Bill C-19 (An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures), which received Royal Assent on June 23, 2022.
First, an amendment made to Bill C-19 during the legislative process authorizes the Governor in Council to set the coming into force date of the Luxury Tax as it applies to aircraft. The Deputy Prime Minister and Minister of Finance has accordingly recommended to the Governor in Council a coming into force date of September 1, 2022, for all subject items, including aircraft.
Furthermore, the government intends to release draft regulations in the near term that would clarify that the existing transitional provisions in Bill C-19 for the Luxury Tax will continue to apply to all subject items, including aircraft. These regulations would provide that the Luxury Tax is relieved from a subject item, if a written sales agreement in respect of the subject item was entered into before January 1, 2022.
Second, the government intends to release draft regulations in the near term that, effective September 1, 2022, would relieve the Luxury Tax on sales of certain aircraft for export at the time the sale is completed by a registered vendor, even if the exportation occurs at a later time. This refinement would mitigate certain cash flow issues raised by Canadian manufacturers and exporters of aircraft. Following feedback from stakeholders at the conclusion of the public consultation, this refinement provides an administratively similar approach to achieving the overarching objective of the legislation and is consistent with the government’s longstanding commitment to exempt export sales.
Third, the government intends to release draft regulations in the near term that would simplify and reduce the reporting requirements, effective September 1, 2022, for automotive vendors that are registered with the Canada Revenue Agency. These regulations would eliminate the requirement for these vendors to complete certain information returns.