Canada Goes Full Speed Ahead on Aircraft Luxury Tax

Following the Canadian government’s announcement last week that the proposed luxury tax on certain vehicles—including essentially all new general aviation aircraft purchases—will be enacted on September 1, the Canadian Business Aviation Association (CBAA) warned that the law will have "serious implications for business aviation in particular."

The tax applies to new cars and aircraft with a retail price exceeding $100,000 and to boats selling for more than $250,000. The tax would be calculated at the lesser of 20 percent of the value above these price thresholds or 10 percent of the vehicle's full value. These regulations would provide that the tax is applied to "written sales agreements" entered into after Jan. 1, 2022.

The government intends to release draft regulations in the near term that would clarify transitional provisions and that would relieve the tax on sales of certain aircraft for export. "This refinement would mitigate certain cash flow issues raised by Canadian manufacturers and exporters of aircraft," the government's announcement said.