Tax & Trade Blog

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NEW BUDGET TWEAKS INDIRECT TAX RULES

BUDGET 2025 HARD TO CELEBRATE BUT PROPOSES SOME GOOD INDIRECT TAX CHANGES

Canada's Budget 2025 was launched on November 4^th with the energy of a lead balloon. Despite the doom and gloom focus on the continuing deficit financing by the Liberal Government – off-loading our current woes on the backs of our children and grandchildren – there were some (largely) positive changes from an Indirect Tax perspective.

The highlights, in our view, are as follows.

Canada’s “Luxury Tax” implemented under the Select Luxury Items Tax Act (“SLITA”) has been a significant development for vendors, importers and buyers of high-priced vehicles, aircraft and vessels.  As we have previously discussed here, the SLITA imposes tax obligations that require careful compliance, including registration and record keeping.

Recently, the CRA released a new guidance document clarifying how third-party rebates impact the calculation of tax owing under the SLITA.  The main message is straightforward but significant – rebates from manufacturers or other third parties do not reduce the taxable value of luxury items and do not lower the amount of tax vendors and importers must pay!

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.