What is this new Luxury Tax?

First of all, this new Luxury Tax on cars is not charged on used vehicles, it is a tax that only affects new vehicles. It applies to vehicles manufactured after 2018, however this only applies for vehicles which have never been registered in Canada, which means used vehicles already registered in Canada will not be charged with Luxury Tax. So if you were looking to purchase a luxury vehicle, take the lightly used route, at AutoAgents we can help you find a newer luxury vehicle with low kilometers at a lower price than purchasing a brand new luxury car that now comes with an extra added fee. Fill out our vehicle consultation so we know what you're looking for and we will search Canada wide to find it for you.

Note that the new Luxury Tax only applies to vehicles with 4 or more wheels and seat no more than 10 passengers. It does not apply to emergency vehicles, hearses, motorcycles, commercial trucks, buses, most RV's, ATV's, snow machines or vehicles weighing more than 3856 kg.

How is Luxury Tax calculated?

Now that we know that Luxury Tax is only charged on new cars, you may be wondering when a vehicle is considered a luxury good and how the tax is calculated. It will only affect new vehicles which retail sale price (before tax) is over $100,000 and the Luxury Tax is calculated on whichever is less between:

• 20% of the value over $100,000. Example: retail sale price is $105,000, Luxury Tax is calculated on 20% of $5000, equaling $1000.

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• 10% of the total retail sale price. Using the same example as before, it would be equal $10,000 which means the lesser value is $1000, this will be the Luxury Tax added. This method of calculating applies for vehicles over $200,000.

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Additional factors that affect the final Luxury Tax value:

Another factor that should be taken into account when determining the value of the vehicle in order to calculate the luxury tax is improvements on the vehicle (this however doesn't include repairs). If the new luxury vehicle you are purchasing has additional improvements equal to or greater than $5000, and they were made within one year after purchase or start of the lease, they will be considered as part of the retail price. Which means this can cause the vehicle to exceed the $100,000 threshold and will be taxed the Luxury Tax.

For example: retail price of the vehicle you are purchasing is $98,000 so it's still under the luxury car considered limit, but it has $5,000 of improvements, it would total $103,000 which would exceed that limit, automatically entering into the luxury tax zone.

Since Luxury Tax is a Federal Tax applied on Luxury goods, it is only applicable for tangible items, only physical improvements or add ons can be taxed. This means any insurance, gap, warranties will not be included in the value calculation.

In terms of trade-ins, Luxury Tax will still apply on the vehicle even if the selling price is below $100,000. Think of it as once luxury, always a luxury.

When does Luxury Tax come into effect?

Luxury Tax will come into effect on September 1, 2022 for any luxury vehicle delivered after this date, if it was purchased after December 31, 2021.

If you're a dealer, wholesaler, importer or manufacturer find here more information on Luxury Tax registration.

Don't worry about any of this though!

At AutoAgents our prices are all inclusive, which means you don't have to worry about any of this, expecting zero surprises or additional fees at the end. Tell us your goals in a vehicle and we do the rest!