Trudeau’s proposed luxury tax…

[Jet Jockey]

Canada Revises Proposed Aircraft Luxury Tax

After intense lobbying efforts by the Canadian Business Aviation Association, the Canadian Owners and Pilots Association, and the business aviation community, the federal government has stepped back from its previous position that could have seen virtually all private aircraft purchased in Canada taxed as luxury “personal” aircraft.

New draft legislation published last week proposes that tax relief is to be expanded to take into account “qualifying flights that are conducted in the course of a business with a reasonable expectation of profit.” Comments on the revised proposal are due by April 11.

“The CBAA team is currently reviewing the proposed legislation,” said the association. “This is a huge win for our entire sector: operators, manufacturers, and suppliers, and the jobs they represent.”

In last year’s federal budget, the government of Canada proposed a tax on the sale of new luxury cars and private/corporate aircraft with a retail sale price exceeding $100,000 and new boats over $250,000. The tax would be calculated at the lesser of 20 percent of the value above these price thresholds or 10 percent of the full value of the luxury vehicle, aircraft, or vessel.

Under the current proposal, the tax law is set to come into effect on Sept. 1, 2022.

[TrilliumFlt]

I guess that sets the value of my airplane at $99K plus "other considerations".

[WellThatAgedWell]

Never mind luxury tax (which is also bullshit)

The libs want to tax our personal residence. Find a home you like and never sell!

They have also said they want to take private property away from those who are not using the property the way the government decides it needs to be used. All of this is the liberal plan to help make homes affordable for the middle class.

I don't think we need more taxes, we need less spending. Good luck with that now that the NDP and Libs are forming a coalition to find more ways to waste your tax dollars.

[mmm..bacon]

So profitable businesses, who can use their aeroplanes for business purposes - while writing off the cost of said aeroplanes against their taxes - get a free pass, while Joe Citizen, who has neither the luxury of write-offs, nor access to the accounting wizardry to make it so, gets to pay the tax.
Perverse...

[AirFrame]

I guess that sets the value of my airplane at $99K plus "other considerations".

"Avionics Sold Separately"

[Inverted2]

There will be ways around it. If the plane is $150k, a receipt for 99k + and an envelope of cash. Someone else said you could sell it as “a parts project” as in unworthy, and do it that way. There’s lots of ways. Or you could register a business and go that route. You just have to be creative.

[CJ3PILOT]

But I think this tax is only for airplanes 3 years or newer.So if you buy a airplane that was made in 2018 no luxury tax only GST.

[Prodriver]

That 2018 thing is truly stupid, so the biggest country on the Planet, one cannot buy a new Aircraft with out getting his ass taxed off? Makes zero sense, so Canadians don't get the benefits of the newest safety tech, like auto land, glass cockpits, new autopilots, etc. Man these liberal @#$! heads are dumb.

[pelmet]

What if you keep your aircraft at a airport in America and just use it down there.

[photofly]

Does the 2018 thing roll forwards year on year? Or In 2092 are people still going to be looking for 75 year old airplanes because anything 74 years or younger is a luxury?

[AirFrame]

Or you could register a business and go that route.

Interesting... So you could register a business, buy the airplane with the business, and because it's a business buying it there's no luxury tax. That works. And as a bonus, the next person to buy it doesn't pay PST/GST on the plane either, because you just transfer ownership of the business...

[photofly]

It has to be a business operating for profit, so it’s going to need income. And the income needs to come from people not associated with the business, so you can’t be your own business’s only or main customer. In other words, it needs to be a genuine charter operation.

The CRA isn’t as dumb as you think.

[digits_]

Does anyone have a link to the actual regulations? All I find when googling is news articles and avcanada posts.

[rookiepilot]

Man these liberal @#$! heads are dumb.

I get trolled every time I say that.

[photofly]

Here are the original proposals.
https://www.canada.ca/en/department-fin ... s-tax.html

Complicated. Probably cost about as much to implement as they will raise.

[digits_]

It has to be a business operating for profit, so it’s going to need income. And the income needs to come from people not associated with the business, so you can’t be your own business’s only or main customer. In other words, it needs to be a genuine charter operation.

The CRA isn’t as dumb as you think.

Maybe. The link you mentioned above also said:

For deliveries in Canada, in most situations, the registered person that delivers the select good to the non-registered person would be responsible for paying the Luxury Tax and for the filing of a periodic Luxury Tax return. The liability to pay the Luxury Tax would rest with the registered person.

Makes me wonder how that would go, and how extensive the checks of the registered owner need to be.

If the registered owner sells to a shell company, he doesn't need to charge the tax. Then somehow the CRA decides the shell company isn't a genuine charter operation. Who needs to pay the tax? Based on the above, the seller would have the responsibility to pay the tax.

[photofly]

I think you're misunderstanding. "registered person" means a person (natural person or company) that deals in the select goods and must therefore be registered under this scheme. That would be the aircraft dealership. It doesn't mean the registered owner of the aircraft. Given that there will be only a few registered persons in Canada it's easy to audit them and make sure they're remitting the tax, which of course they have to collect, one way or another, by increasing the price when they sell to their customer.

The point of being a registered person is you can deal in the aircraft - import them etc - deferring the tax, with the tax only becoming due when you sell it to an non-registered person - the end user.

If you're not an aircraft dealer and you import an airplane you have to pay the tax right away. No need for audit - it's part of the import process and the goods aren't released until the tax is paid, just like the HST is collected right now.

The tax is only paid once, on each airplane, no matter how many times it's bought and sold. It's not a sales tax, it's a luxury item tax. But even that pushes the price up all the way down the line.

ps. I didn't say the CRA isn't dumb. I just said it's not as dumb as you think....

[digits_]

I think you're misunderstanding. "registered person" means a person (natural person or company) that deals in the select goods and must therefore be registered under this scheme. That would be the aircraft dealership. It doesn't mean the registered owner of the aircraft. Given that there will be only a few registered persons in Canada it's easy to audit them and make sure they're remitting the tax, which of course they have to collect, one way or another, by increasing the price when they sell to their customer.

The point of being a registered person is you can deal in the aircraft - import them etc - deferring the tax, with the tax only becoming due when you sell it to an non-registered person - the end user.

If you're not an aircraft dealer and you import or buy an airplane you have to pay the tax right away. No need for audit - it's part of the import process.

The tax is only paid once, on each airplane, no matter how many times it's bought and sold. It's not a sales tax, it's a luxury item tax. But even that pushes the price up all the way down the line.

I did misunderstand that indeed, thanks for the clarification, but the question remains the same though.

Person P owns a company C and buys a luxury item from the dealer D.
D is responsible for collecting the tax.
P says it's a company expense, and C is paying for the item.
D says 'yup, sounds good'.

4 years later C gets audited, and the CRA says that C isn't a charter company, so he needs to pay luxury tax. C says that D is responsible for that and said he was exempt.

Since D has quite the incentive (make his cusomters happy) to be quick to judge a company is a real company, yet D is also responsible for the tax collection, makes it a bit of a weird situation in case something goes wrong.

Not even necessarily intentional. What if P tried to get a charter company going but didn't have many customers so ended up flying the plane just for himself the majority of the time. I can see a lot of discussions about this tax in the future.

[photofly]

It's not very different from HST. You can import an aircraft and pay only GST (which you can reclaim, in any case) if you have a business registration. If the CRA later decides that your HST registration isn't for a genuine purpose (and yes - they do audit - ask me how I know!) then your registration will be cancelled and you will owe all the HST that you improperly reclaimed. If that means your company is insolvent then the creditors can appoint an administrator to sell all your assets to repay the debt they're owed.

If your company is genuine, but fails to make a profit - that's ok. It's not a crime for a business to fail. You'll notice they talk about a register of aircraft on which the luxury tax has been paid. If your charter business fails then then when the plane is sold - to raise money for the creditors, for example, the tax will have to be paid then - unless of course it's sold for another exempt purpose.

As far as someone who ends up flying the plane just for themselves - the CRA is going to be able to force you to show that the substantive majority of flights were for revenue purposes, or else your claim that the plane was for business purposes will be deemed fraudulent, and you'll be liable for the tax and any penalties. They already audit use of private planes to see if a taxable benefit was incurred or not. So - don't fly the plane for yourself (for private travel or recreation) the majority of the time, and if you do find that's what's happening, concede the purpose of the aicraft has now changed, you're not entitled to the tax deferral, and pay the tax you avoided in advance of the CRA deciding that's what you should have done.

I think the recent concession that started this thread - at least what it sounds like - is that now your business can own and fly its own plane as part of the business, without liability for this tax. It couldn't, previously. But 90% of the use of this private plane has to be for the business, just like the long standing rules about which flights incur a tax liability as a taxable benefit, and which don't.

[AirFrame]

It has to be a business operating for profit, so it’s going to need income. And the income needs to come from people not associated with the business, so you can’t be your own business’s only or main customer. In other words, it needs to be a genuine charter operation.

Are you referring specifically to the luxury tax, or to having a plane owned by a business in general?