When will the luxury tax take affect? September 1, 2022.

What vehicles apply for luxury tax? New vehicles priced or valued above the $100,00 price threshold.

How much is the luxury tax? The lesser of: taxable amount multiplied by 10% or the amount that results from subtracting $100,000 from the taxable amount and multiplying the difference by 20%.

Example– A subject vehicle is sold for $150,000: The taxable amount is $150,000. The luxury tax will be the lesser of:

A) $15,00 ($150,000 x 10%)

B) $10,000 [($150,000 – $100,000) x 20%]

The luxury tax payable is $10,000

What if I purchased the subject vehicle before September 1, 2022? The luxury tax will not be applied.

Who pays the luxury tax? The luxury tax is to be paid by the buyer, once the sale is complete.

How do you report/ file returns for the luxury tax? You are required to fill out Form B501, Luxury Tax and Information Return for Non-Registrants for each reporting period.

For more information on the luxury tax, please call your sales consultant at Sherwood Motorcars today!

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Effective September 1, 2022, the Department of Finance has implemented a luxury tax on subject vehicles above $100,000. The luxury tax is included in Bill C-19, Budget Implementation Act, No. 1.

Subsection 2 (1), Subject Vehicle means:

It is designed and adapted primarily to carry individuals on highways and streets

Seating capacity of no more than 10

Gross vehicle weight less than 3,856 Kg or less

Manufacture date after 2018

Designed to travel with four or more wheels on the ground


In a brief overview; the luxury tax will be applied on sales and importations of a subject vehicle priced or valued above $100,000. The luxury tax can also be applied if a person registers, leases out or have an improvement made to a subject vehicle of at least $5,000.

Subsection 8 (1), an improvement means:

-Tangible personal property that is installed in/on or affixed to the subject vehicle

-A service that modifies the subject vehicle and is physically performed on the subject vehicle


The luxury tax is calculated using the taxable amount of the subject vehicle, in accordance with section 34.

Subject vehicles are calculated as the lesser of: 

A) The taxable amount multiplied by 10%

B) The amount that results from subtracting $100,000 from the taxable amount and multiplying the difference by 20%.

Taxable Amount

Subsection 18 (4), taxable amount of the sale of a subject vehicle is the sum of the following:

  • The value of the consideration for the sale of the subject vehicle
  • The value of the consideration for any improvements made by the vendor to the subject vehicle in connection the sale that is not included in the above


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    • Ambulance
    • Hearse
    • Motor vehicle marked for policing activities
    • Motor vehicle marked for and equipped for emergency medical or fire response activities
    • Motor vehicle registered before September 2022, provided that possession was also transferred to the user of the vehicle before this date
    • A recreational vehicle designed or adapted to provide temporary residential accommodations and equipped with at least four of the following:
      1. Cooking facilities
      2. Refrigerator or ice box
      3. Self contained toilet
      4. Heating or air conditioning system that can function independently of the vehicle engine
      5. A potable water supply system that includes a sink and faucet
      6. A 110-V to 125-V electric power supply, or a liquified petroleum gas supply, that can function independently of a vehicle engine

Excluded Improvements:

  • Any repair, cleaning or maintenance service
  • Replacing tangible personal property that is damaged, defective or non- functioning
  • Improvements relating to child safety seating or restraint systems
  • Improvements relating to trailer or camper
  • Any Improvement that equips or adapts for its use in transporting an individual using a wheelchair
  • Any improvement that equips or adapts the subject vehicle with an auxiliary driving control for an individual with a disability

Information is directly from the Canada Revenue Agency website. Information is subject to change based on regulation and policies. 

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