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 Specialty Tax Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Client]
[Client Address]
Attention: [Client]
Case Number: XXXXXX
November 14, 2023
Dear [Client]:
Subject: Application of the Luxury Tax to a Vehicle Leasing Company
Thank you for your letter dated [mm/dd/yyyy], concerning the application of the Select Luxury Items Tax Act (the Act) to a vehicle leasing company.
STATEMENT OF FACTS
Based on your letter, the following is our understanding of the facts provided:
1. The company in question is in the business of leasing vehicles.
2. Some vehicles purchased for leasing are over the $100,000 price threshold and have not been registered.
3. The company sells a minimum number of vehicles previously leased-back to a vehicle dealership for direct customer resale.
INTERPRETATION REQUESTED
You would like the Canada Revenue Agency (CRA) to confirm whether:
1. The vehicle leasing company is required to be registered.
2. The luxury tax applies to the vehicle leasing company on the purchase of a brand new never registered vehicle purchased from a vehicle dealership.
3. The vehicle leasing company is required to self-assess the luxury tax upon leasing out a brand new never registered vehicle to a leasing customer.
DECISION
A person is required to register as a registered vendor of subject vehicles if, in the course of a business of selling subject vehicles in Canada, the person sells a subject item that has never been registered with the Government of Canada or a province for a price over $100,000.
Based on the facts set out above, the leasing company is not required to be registered since they sell only subject vehicles that have been previously registered with the Government of Canada or a province.
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.
When a vehicle dealership sells a subject vehicle that has never been registered with the Government of Canada or a province to the leasing company for a price over the $100,000 price threshold, the vehicle dealership has to pay and report the luxury tax payable on the sale. The vehicle dealership may include the cost of the luxury tax in the sale price of the subject vehicle to recoup the cost of the tax from the leasing company.
When a registered vendor in respect of subject vehicles leases a subject vehicle they own that has not previously been registered with the Government of Canada or a province and has a value over $100,000, the registered vendor must pay and report the luxury tax payable on the retail value of the subject vehicle.
Since the leasing company is not a registered vendor, the leasing company is not required to self-assess the luxury tax payable when leasing out a subject vehicle. Instead, the registered vendor from whom the leasing company purchases a subject vehicle has to pay and report the luxury tax payable if the subject vehicle has never been registered with the Government of Canada and sold for a price over $100,000. The vehicle dealership may include the cost of the luxury tax in the sale price of the subject vehicle to recoup the cost of the tax from the leasing company.
I trust the above is satisfactory. If you have any questions or concerns, please contact me at 343-572-4194.
Yours truly,
Alfonso Capretta
Acting 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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