HomeArticlesSupercars Will Get More Expensive After Canada's New Luxury Tax

Supercars Will Get More Expensive After Canada’s New Luxury Tax

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A new luxury goods tax that was passed in Canada will slightly increase the price of six-figure vehicles. For new vehicles that were manufactured after 2018 and cost more than $100,000, the tax took effect on September 1. Boats and aircraft with fewer than 40 seats are also subject to the luxury tax, but the value threshold increases to $250,000.

It’s not a comprehensive tax. Commercial vehicles, motorhomes, and other vehicles weighing more than 8,501 pounds are exempt from the fee (3,856 kilograms). ATVs, snowmobiles, and motorcycles used for recreation are also exempt. Although it will only be assessed once, the tax will be levied against manufacturers and businesses that sell or import the vehicles. 

Canada’s New Luxury Tax

How much are we discussing? Depending on how much the car costs. The system uses two formulas to determine the fee: either 10% of the total cost or 20% of the price’s difference from the $100,000 cutoff. The lower of the two will be used, with the 20% threshold favouring vehicles that are more affordable than $100,000.

Canada's new luxury tax legislation

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Take a $110,000 car as an illustration. 10% of the total value would be $11,000 in taxes. However, there is only a $10,000 gap between the price and the $100,000 cutoff. If you tax that at 20 percent, it will cost you $2,000, which is a lot less than taxing the entire enchilada. Simpler math reveals that $200,000 is the point at which everything balances out. In addition, the entire vehicle tax of 10% is less expensive. Or, you could just purchase a GMC Hummer EV, which would theoretically be exempt from the tax at 9,000 pounds.

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Industry groups in Canada claim the tax may ultimately result in $2.8 million in lost sales over the following five years, according to CTV News. Don’t forget that number affects all industries, not just the auto industry.

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