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 on the sale of a subject vehicle
Thank you for your letter dated [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:
Circumstance #1:
1. The customer signed an “Offer to Purchase” agreement on [mm/dd/yyyy] with [Client]. (dba: [Client]) for the purchase of a 2022 [subject vehicle] (motor vehicle).
2. The customer paid a deposit of $[….]
3. The motor vehicle was expected to be delivered to the customer by the end of 2021.
4. Due to supply chain issues, the production of the motor vehicle was delayed and will now be produced as a 2024 model instead.
Circumstance #2:
1. The customer signed an “Offer to Purchase” agreement on [mm/dd/yyyy] with [Company] (dba: [Company]) for the purchase of a 2022 [subject vehicle] (motor vehicle).
2. The customer paid a deposit of $$[….].
3. On [mm/dd/yyyy], the [Company] was acquired by [Client] (dba: [Client]).
4. The sale of the business was an Asset Purchase Agreement during which [Client] purchased the business assets, customer base, goodwill and took over the existing liabilities, including deposits for cars already on order by customers.
INTERPRETATION REQUESTED
You would like the Canada Revenue Agency (CRA) to confirm whether the luxury tax applies on the sale of the 2024 [subject vehicle] under the above circumstances.
DECISION
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 luxury tax does not apply to the sale of a subject vehicle where a purchaser and a vendor have entered into a written agreement for the sale of the subject vehicle before January 1, 2022, and delivery occurs on or after September 1, 2022.
Based on the facts provided in both circumstances, the customer placed the order for the subject vehicle with the vendor in July 2021, to be delivered once it has been manufactured. The purchase agreement was made in writing.
In circumstance #1, although the model year of the subject vehicle to be delivered will be different than the one originally ordered, the fact remains that the customer and the vendor had entered into a written agreement for sale of the subject vehicle before January 1, 2022, therefore luxury tax does not apply.
In circumstance #2, although the business of the original vendor was acquired, the fact remains that the customer and the original vendor had entered into a written agreement for sale of the subject vehicle before January 1, 2022, with the new vendor assuming responsibility for fulfilling the original agreement, therefore luxury tax does not apply.
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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