Beginning September 1, 2022 certain aircraft imported into Canada will be subject to Canada's new Select Luxury Items Tax Act. This Act is a revenue generating tool for the government that is directed at affluent Canadians who can afford to purchase these aircraft.

The tax will be payable on subject aircraft, valued at $100,000.00 CAD or more, at the lesser rate of 20% of the value above $100,000.00 CAD OR 10% of the full value of the subject aircraft (inclusive of any duties payable). The tax is also payable on improvements made to subject aircraft as well as leased aircraft.

Under subsection 2(1) of the Act, a subject aircraft means an aircraft that is an airplane, glider, or helicopter with a date of manufacture after 2018 that meets any of the following conditions:

• It is equipped only with one or more pilot seats and cannot have any other seating configuration.
• It is equipped only with one or more pilot seats, or is not equipped with any seats, and cannot have a seating configuration of 40 seats or greater (excluding pilot seats).
• It is equipped with one or more pilot seats and one or more passenger seats and has a seating configuration of 39 seats or fewer (excluding pilot seats).

An aircraft that has already been registered with a government before September 2022, is excluded from this definition, provided that possession was also transferred to the user of the aircraft before this date.

In general, the following aircraft are also considered exempt from the Luxury Tax: 

• Aircraft manufactured before 2018
• Aircraft that is designed and equipped for military activities
• Aircraft that is equipped solely for carrying goods (cargo)
• Aircraft whose purchased contract was signed and completed prior to January 1, 2022
• Certain aircraft for export from Canada

How Is The Tax Calculated?

The tax will be payable at the lesser of 20% of the value above $100,000.00 CAD OR 10% of the full value of the aircraft plus any applicable duties or taxes.

Aircraft valued at $3,000,000 CAD
Duty Free: $0
Value subject to Luxury Tax: $3,000,000
Amount over 100K: $2,900,000

Pay whichever is lesser:

10% of full value
3 million x 10% = 300,000 

OR

20% of value above 100K
2.9 million x 20% = 580,000

Amount of Luxury Tax payable: $300,000 CAD

Duties, taxes and other fees also payable at the time of importation: GST $165,000.00 and any service fees from your service provider. 

After importation you may also have to pay additional fees to register the aircraft in Canada. 

Commercial Importations 

Importers, including manufacturers, wholesalers and retailers, who are in the business of selling subject aircraft in Canada are required to register with the Canada Revenue Agency (CRA) either online or by submitting an L500 application. This allows for the luxury tax payment to be deferred until the sale of the aircraft to the consumer or registration of the aircraft for your own use. Registrants are also required to file quarterly reports informing CRA their luxury tax payable using Form B500, Luxury Tax and Information Return for Registrants. 

Personal And Own Use Importations 

Registration with the CRA is not required. Payment of Luxury Tax is required, unless the written contract for the sale of the aircraft was completed prior to 2022.

Penalties for failing to register when required, claiming to register when not, or non-payment of the luxury tax, depend on the infraction and range from $1,000 to 150% of the luxury tax payable.

Do you need help determining if your imports are subject to this Luxury Tax, or how much you could expect to pay to import an aircraft? Contact our Trade Advisor Services for assistance.