What is your plan for managing Canada’s new Luxury Tax on boats?
Dec 14, 2021
I believe that the impact of Canada’s new Luxury Tax on boats may have a general dampening effect on a far wider range of new boat buyers than just those buying above the $250,000 threshold because they will simply see that the government is targeting boat buyers for added taxes. It may be $250,000 today, but it could easily be a different number in the next budget.
Canadians will see this as a targeted, unreasonable and substantial added level of taxation and so, they may elect to spend their discretionary vacation money on other things.
People considering a new boat, but who are just beginning the buying process, will also find the government’s explanation is difficult to understand. If you have not had the pleasure of reading this, it’s available from their website at:
https://www.canada.ca/en/department-finance/programs/consultations/2021/consultation-proposed-luxury-tax.html
To try to outsmart buyers, the Luxury Tax includes limitations on when you could add or upgrade equipment and if aftermarket improvements are added in the first year, and if these take the combined purchase value over the $250,000 threshold, the owner is expected to re-calculate and remit the applicable taxes. There are significant penalties if they don’t pay up.
Adding to the confusion, as I read this, I think the tax will not apply to boats built prior to 2018 so, I’m thinking many larger brokerage boats will get around this. The actual passage states: For the purposes of the Luxury Tax base, a specified boat would include any boat that is designed for leisure, recreation or sport and that has a date of manufacture after 2018. For Luxury Tax purposes, a select specified boat would be any specified boat that has a cabin with sleeping amenities (e.g., a yacht, a houseboat, or any sailboat or motorboat with such a cabin).
Therefore, is your deafeningly loud, million-dollar offshore ocean racer catamaran (with no interior accommodations) exempt from the tax? And, I also interpret this as saying that buying a 2017 54-foot express cruiser will not attract tax, although it’s probably a $750,000 yacht.
My real point is this – our industry would benefit from having a reasoned point of view and collectively, getting our message out to our industry first, and our customers where that’s appropriate, before they form their own negative interpretation of the situation. The boat shows start in a few weeks. Will we:
- Say nothing
- “Sell down” to stay under $250,000
- Quietly add the tax in as we would an expensive option and just let it ride
- Clearly identify the tax
- Aggressively prospect to get pre-2018 brokerage boats to represent
- Other…
Watch for a special Luxury Tax survey from Boating Industry Canada News Week next week. Let’s get the results before the boat show opens.
Andy Adams – Editor
