Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5
[Client]
[Address]
Attention: [Client]
Case Number: 9000350
January 28, 2025
Dear [Client]:
Subject: Application of the Luxury tax on the sale of a subject vehicle
Thank you for your Fax received on [mm/dd/yyyy], concerning the application of the Select Luxury Items Tax Act (the Act) as it pertains to the sale of a subject vehicle under an agreement made in writing before 2022.
Statement of Facts
Based on your letter, the following is our understanding of the facts provided:
1. [Client] is a registered vendor in respect of subject vehicles.
2. On [mm/dd/yyyy], your customer agreed to purchase a [Subject vehicle] (subject vehicle 1). At the time of signing, your customer was unsure of whether to proceed with a cash/finance purchase option or proceed with a lease option.
3. The purchase agreement signed on [mm/dd/yyyy] was formatted as a lease.
4. Your customer now would like to proceed with a purchase and delivery of a subject vehicle matching the same model and trim level of subject vehicle 1.
5. On [mm/dd/yyyy] your customer agreed to purchase a [Subject vehicle] (subject vehicle 2).
Interpretation Requested
You would like the Canada Revenue Agency (CRA) to confirm whether the luxury tax applies to the sale of subject vehicle 2.
Interpretation Given
Based on the facts set out above, the sale of subject vehicle 2 is not eligible for relief from the luxury tax.
Explanation
The luxury tax applies to the sale of subject vehicles priced above the $100,000 price threshold and is payable at the time the sale is completed. In most cases, the vendor of the subject vehicle is liable for the luxury tax on the sale.
The Budget Implementation Act, 2022, No. 1, which implemented the new luxury tax, includes transitional rules to facilitate the transition to the new luxury tax regime. Under the transitional rules, luxury tax relief is available on the sale of a subject vehicle priced over $100,000 if a purchaser and a vendor enter into an agreement in writing before 2022, and the transfer of ownership as well as the delivery of the subject vehicle to the purchaser occurs on or after September 2022, in the course of the vendor’s business of selling subject vehicles.
Based on the facts provided, both vehicles meet the definition of a subject vehicle. Although the customer initially placed an order for the subject vehicle 1 on [mm/dd/yyyy], the customer did not complete the sale. Ultimately, on [mm/dd/yyyy] the customer agreed to purchase subject vehicle 2. Since the new purchase agreement was made in writing after January 1, 2022, luxury tax applies on the sale of the subject vehicle 2.
In accordance with the conditions and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretations provided in this letter, including any additional information, are not a ruling and are not binding on the CRA with respect to any particular situation. Future changes to the Act, regulations, or the CRA's interpretation policy may affect the interpretations or additional information provided in this letter.
I trust the above is satisfactory. If you have any questions or concerns, please contact me at 343-572-4194.
Yours truly,
Alfonso Capretta
Manager
Luxury Tax Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
Legislative Policy and Regulatory Affairs Branch
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