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]
Attention: [Client]
Managing Director
Case Number: 9000308
May 29, 2024
Dear [Client]:
Subject: Luxury Tax Payable on sales of subject vessels
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 subject vessels.
STATEMENT OF FACTS
Based on your letter, the following is our understanding of the facts provided:
1. [Client] is in the business of building and selling subject vessels in [location].
2. [Client] is a registered vendor under the Act.
3. [Client] sells to customers in Canada and the United States.
4. Owners looking to sell their vessel may engage [Client] to act as a broker, whereby [Client] provides marketing services and facilitates sales on their behalf. At no time during the engagement does [Client] assume ownership of the vessel.
5. [Client] sold vessel [#....], a subject vessel, to [3rd party] (the purchaser).
6. The contract for the construction and sale of the subject vessel was made in [mm/yyyy].
7. The subject vessel was delivered to the purchaser and registered with Transport Canada in [mm/yyyy].
8. Luxury tax did not apply on the sale of vessel [#....].
INTERPRETATION REQUESTED
Case 1
You would like the Canada Revenue Agency (CRA) to confirm whether the luxury tax would apply on the resale of vessel [#....].
Case 2
You would like the Canada Revenue Agency (CRA) to confirm whether the reporting and remittance of the luxury tax payable on sales of subject vessels brokered by [Client] is the responsibility of the owner of the subject vessel.
INTERPRETATION GIVEN
The luxury tax applies to vessels that meet the definition of “subject vessels” under the Act and that are priced above the $250,000 price threshold. Based on the facts set out above, we provide the following rulings:
Case 1
Under the transitional rules, the luxury tax does not apply to the sale of a subject vessel priced above the price threshold where a purchaser entered into a written agreement for the purchase of the subject vessel before 2022. If this transitional rule applies to a particular subject vessel, luxury tax would not be payable on the subject vessel on any future transactions.
We understand that [Client] and the purchaser entered into a written agreement for the purchase of vessel [#....] in [mm/yyyy]. Since the agreement was made before 2022, luxury tax does not apply on the purchase of the vessel, nor will it apply on any future sale of the vessel.
Case 2
Under the Act, a vendor sells a subject item to a purchaser if the vendor transfers ownership of the subject item to the purchaser by way of sale under an agreement and the subject item is delivered or made available in Canada in relation to the agreement.
We understand that during a sale of an owner’s vessel brokered by [Client] it is the owner of the vessel that transfers ownership of the vessel to a purchaser under an agreement and delivers or makes available the vessel in Canada in relation to the agreement[Client] is simply supplying services in relation to the sale. The owner of the vessel, therefore, is the vendor.
Under the Act, the vendor of the subject vessel is generally the person who is liable for the luxury tax on the sale of a subject vessel priced above the price threshold. Any luxury tax payable on the sale is the owner’s responsibility. As a non-registrant, the owner can report the luxury tax using for B501, Luxury Tax and Information Return for Non-Registrants.
The interpretations given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the Act, regulations, or the CRA’s interpretative policy could affect the interpretations or the additional information provided herein. For further information see the publication “Requesting an Excise and Specialty Tax Ruling or Interpretation”.
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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