Registration Under the Select Luxury Items Tax Act

Luxury Tax Notice LTN1

July 2022

The purpose of this notice is to provide information to persons that are required to register under the Select Luxury Items Tax Act. Persons required to register include manufacturers, wholesalers, retailers and importers of certain vehicles or aircraft priced above $100,000 or vessels priced above $250,000.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Select Luxury Items Tax Act. The information in this publication does not replace the law found in the Act.

If this information does not completely address your particular situation, call 1‑866‑330‑3304.

Table of Contents

Overview

The Government of Canada has introduced a luxury tax on the sale or importation of certain vehicles and aircraft priced above $100,000 and certain vessels priced above $250,000 (the relevant price thresholds).

On August 10, 2021, the Department of Finance Canada (Finance Canada) published a background paper on the design of the proposed luxury tax for public consultation. On March 11, 2022, Finance Canada also released draft legislative proposals for stakeholder input. The proposed Select Luxury Items Tax Act was included in Bill C-19, Budget Implementation Act, 2022, No. 1, which received royal assent on June 23, 2022.

The luxury tax will come into effect on September 1, 2022.

Scope of the luxury tax

Certain persons are required to register with the Canada Revenue Agency (CRA) as registered vendors under the Act. Such persons include manufacturers, wholesalers, retailers and importers of vehicles, aircraft or vessels that are within the scope of the tax regime and that are priced above the relevant price thresholds.

A vehicle, aircraft or vessel falls within the scope of the luxury tax regime if it meets the definition of subject vehicle, subject aircraft or subject vessel, as set out in subsection 2(1). Such vehicles, aircraft and vessels are broadly referred to as subject items. Vehicles, aircraft or vessels that do not meet these definitions are not subject to the luxury tax.

Definition of subject vehicle

Under subsection 2(1), subject vehicle means a motor vehicle with a date of manufacture after 2018 that meets all of the following conditions:

A motor vehicle that has already been registered with a government before September 2022 is excluded from this definition, provided that possession was also transferred to the user of the vehicle before this date. A motor vehicle that is clearly marked for policing activities, a motor vehicle that is clearly marked and equipped for emergency medical or fire response activities, an ambulance, a hearse and a recreational vehicle meeting certain conditions are also excluded from the definition of subject vehicle.

Definition of subject aircraft

Under subsection 2(1), subject aircraft means an aircraft that is an aeroplane, glider or helicopter with a date of manufacture after 2018 that meets any of the following conditions:

An aircraft that has already been registered with a government before September 2022Footnote 1 is excluded from this definition, provided that the user of the aircraft also takes possession of the aircraft before this date. An aircraft that is designed and equipped for military activities and an aircraft that is equipped solely for carrying goods are also excluded. For greater certainty, a subject vehicle is also excluded from the definition of subject aircraft.

Definition of subject vessel

Under subsection 2(1), subject vessel means a vessel with a date of manufacture after 2018 that is designed or adapted for leisure, recreation or sport activities.

A vessel that has already been registered with a government before September 2022Footnote 1 is excluded from this definition, provided that the user of the vessel also takes possession of the vessel before this date. Generally, a floating home, a commercial fishing vessel, a ferry and a cruise ship are also excluded. For greater certainty, a subject vehicle and a subject aircraft are also excluded from the definition of subject vessel.

Registration framework

Under section 50, there are certain circumstances where a person is required to register with the CRA under the luxury tax regime. If required to register, a person must register as a registered vendor of the type of subject item that it sells or imports. Accordingly, there are three types of registration available:

Generally, a registered vendor of a type of subject item will be able to purchase subject items of that type from another registered vendor of that type of subject item without the tax applying at the time the sale is completed. To do so, the registered vendor purchasing the subject item must provide an exemption certificate to the registered vendor selling the subject item, in accordance with section 36.

A registered vendor of a type of subject item will also be able to import subject items of that type without the luxury tax applying at the time of importation.

Being a registered vendor of a type of subject item will allow a person to obtain and hold tax-free inventory of subject items of that type.

The sections below detail the various circumstances that will trigger a requirement to register as a registered vendor of a type of subject item. In most cases, a person will likely be required to register as a registered vendor of only one type of subject item. However, in some cases, a person could be required to register as a registered vendor of more than one type of subject item if more than one of these sets of circumstances applies to the person.

Registered vendor of subject vehicles

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 either:

Registered vendor of subject aircraft

A person is required to register as a registered vendor of subject aircraft if, in the course of a business of selling subject aircraft in Canada, the person either:

Registered vendor of subject vessels

A person is required to register as a registered vendor of subject vessels if, in the course of a business of selling subject vessels in Canada, the person either:

Applying for registration

A person that is required to apply to register as a registered vendor of a type of subject item under the Act must apply to register with the CRA by the earlier of:

To apply for registration, a person must either use Business Registration Online or complete Form L500, Luxury Tax Registration Application, and submit it to the CRA. If a person is applying to be a registered vendor of multiple types of subject items, the person may submit one Form L500 and indicate that it is applying to be a registered vendor of multiple types of subject items. The completed Form L500 may be submitted electronically using the “Submit documents” function in My Business Account or by mail to the appropriate CRA tax centre identified below.

If the person’s head office is located in New Brunswick, Newfoundland and Labrador, Nova Scotia, Nunavut, Ontario, Prince Edward Island or Quebec, the completed Form L500 should be mailed to:

Prince Edward Island Tax Centre
Specialty Business Returns Division
275 Pope Rd
Summerside PE  C1N 6E7

If the person’s head office is located in Alberta, British Columbia, Manitoba, the Northwest Territories, Saskatchewan or the Yukon, the completed Form L500 should be mailed to:

Sudbury Tax Centre
Luxury Tax Program
PO Box 20000 Station A
Sudbury ON  P3A 5C1

Missing and incorrect information may delay the processing of an application for registration. An application may take up to 30 days to process from the time the CRA receives complete and accurate information. The CRA must approve a person’s application for registration for the person to become a registered vendor. Persons that need to be registered should apply early to allow enough time for processing. For questions relating to the registration process or the status of an application for registration, call 1‑877‑432‑5472.

If the CRA approves a person’s application for registration, the CRA will assign a registration number to the person for the purposes of the Act. The CRA will notify the person of the registration number and the effective date of registration. From this date, the person will be allowed to obtain and hold tax-free inventory of the type of subject items for which it is registered.

Cancelling a registration

Under subsection 52(1), the CRA may cancel the registration of a person as a registered vendor of a type of subject item if the CRA determines that the registration is no longer necessary for the purposes of the Act. The CRA will provide the person reasonable written notice of the impending cancellation.

Under subsection 52(2), a person may request that the CRA cancel its registration as a registered vendor of a type of subject item. The person must make the request in writing and indicate the reason for cancellation and the date as of which registration is no longer required. The person can submit the request electronically using the “Submit documents” function in My Business Account or by mail to the appropriate CRA tax centre identified above. If the CRA is satisfied that a cancellation of registration is warranted, the CRA will notify the person of the cancellation and the effective date of cancellation.

Failing to apply for registration when required

If the CRA has reason to believe that a person was required to register as a registered vendor of a type of subject item but failed to do so as and when required, subsection 51(3) provides that the CRA may notify the person in writing that it is proposing to register the person accordingly. The person must then apply for registration or establish to the satisfaction of the CRA that the person is not required to be registered.

If the person does not apply for registration or establish that they are not required to register, the CRA may register the person as a registered vendor of a type of subject item 60 days after the written notification was sent. If the CRA registers the person, the CRA must assign a registration number to the person for the purposes of the Act and notify the person of the registration number and the effective date of registration.

Penalties

If a person is required to be registered for the purposes of the luxury tax but does not apply for registration in accordance with the Act, the person is liable to a penalty of $2,000 under section 109.

If luxury tax is payable by an importer of a subject item and at the time the tax became payable, the importer was required to be registered but has not applied for registration, the importer is liable to a penalty under section 114, in addition to any other penalty. The penalty will be the greater of $1,000 and 50% of the amount of the luxury tax that is payable.

The registration framework allows transactions between registered vendors of the same type of subject item without the luxury tax applying at the time of sale through the use of exemption certificates. However, if a person that is not registered falsely claims to be a registered vendor on an exemption certificate in order to purchase its inventory exempt from the luxury tax, the person will be liable to a penalty under section 110, in addition to any other penalty. The penalty will be the greater of $1,000 and 150% of the luxury tax that would have been payable.

Filing returns

Under subsection 55(1), a person that is registered or required to be registered under the Act must file a return for each reporting period. In most cases, the return may be filed by mail or electronically; however, the CRA could require certain persons to file electronically.

In general, the reporting period of a person that is registered or required to be registered under the Act is a calendar quarter. The return must be filed by the end of the month that follows the end of a reporting period, and any amount owing for the reporting period is also due at that time.

For 2022, there is only one reporting period: September 1, 2022 to December 31, 2022. The filing/payment deadline is January 31, 2023.

Quarterly reporting periods and filing/payment deadlines effective 2023
Reporting period Filing/payment deadline
January 1 to March 31 April 30
April 1 to June 30 July 31
July 1 to September 30 October 31
October 1 to December 31 January 31

Authorization to file separate returns

Under section 73, a person that engages in one or more activities in separate branches or divisions could be authorized by the CRA to have a branch or division file separate returns if both of the following requirements are met:

To request authorization for a branch or division to file separate returns, a person must complete Form L500-2, Application or Revocation of the Authorization to File Separate Luxury Tax Returns for Branches and Divisions, and submit it to the CRA. The CRA will inform the person in writing whether the CRA authorizes separate filings. The authorization will remain in effect until the person files Form L500-2 to request a revocation of the authorization, the person fails to comply with any conditions imposed in respect of the authorization or any provisions of this Act, the CRA is no longer satisfied that the above requirements are being met or the CRA believes that the authorization is no longer needed.

Maintaining records

Under section 88, every person that is required to file returns must keep all records necessary to determine their tax liabilities and obligations for a period of six years from the end of the year to which the records relate. Records must be kept in English or in French and must be maintained in Canada unless the person is authorized by the CRA to maintain records outside Canada. To request authorization to maintain records outside of Canada, a person must complete Form L500-1, Non Resident – Records Kept Outside Canada, and submit it to the CRA.

Further information

For all technical publications related to the Select Luxury Items Tax Act, go to Luxury tax technical information.

For all enquiries on the application of the luxury tax, call 1‑866‑330‑3304.

To request a ruling or interpretation related to the application of the luxury tax, write to:

Excise and Specialty Tax Directorate
Canada Revenue Agency
Place de Ville Tower A 11th floor
320 Queen St
Ottawa ON  K1A 0L5

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