Tax & Trade Blog

On September 1, 2022, the Select Luxury Items Tax Act (“SLITA”) officially came into effect. Vendors and importers of subject goods should be registered with the Canada Revenue Agency (“CRA”), paying tax, and keeping track of the information they will need to file their first returns.

While we have written about the luxury tax previously, this blog provides further practical details on the implementation of the luxury tax in light of the CRA’s recently-released administrative guidance.

Tax practitioners are unfortunately well-aware of the sometimes years-long delays when requesting rulings and relief from CRA. What is less understood is the interplay between often overlapping taxpayer relief mechanisms when statutory deadlines are close to expiry, but the desired relief remains ungranted.

The recent Federal Court decision in Ontario Addiction Treatment Centres v. Canada (Attorney General), 2022 FC 393  (CanLII) dealt with this issue, and provides a cautionary tale that registrants should consider filing protective ETA 261  rebate claims within the proper legislative timelines while they otherwise wait for relief, otherwise they may find themselves out of time and with no further options.

As we have blogged about several times in the past, homebuilders are frequently in the gunsights of CRA in hopes of capturing potentially unremitted GST/HST on sales made the course of their commercial activity.

A less-explored issue is how CRA sometimes casts too wide a net, and mistakenly assesses unlucky individuals who are not builders, but whose facts may suggest otherwise. The recent case in Wang v. The Queen, 2021 TCC 86 (CanLII) deals with this issue and serves as a cautionary tale for individuals in the unfortunate position of staring down a CRA assessment on the unplanned sale of their new home.

It seems that the only thing hotter than inflation these days is CRA’s auditing and assessments in missing traders, carousel schemes and shams. Affected industries so far include telecom, gold and precious metals, diamonds and precious gems – and even include mom-and-pop start-ups in the home-made muffins industry.   Left unchallenged, these assessments can invariably lead to corporate bankruptcy and insolvency and, more problematically, can involve personal assessments of directors, spouses and children!

After our February blog post, the Department of Finance finally released draft legislation for its “luxury tax” on vehicles, aircraft and vessels (“items”). Assuming it is passed, the Select Luxury Items Tax Act (“SLITA”) is scheduled to come into force on September 1, 2022. Any business selling items to which SLITA applies will have to register with the federal government, pay the luxury tax, and file quarterly returns!