Canada’s luxury boat industry is bracing for the impact of a proposed luxury tax that legislators plan to implement in 2022. The tax would apply to luxury items such as passenger vehicles and private airplanes, but it is the inclusion of yachts and other luxury vessels that has gained the attention of boat industry professionals as well as consumers.
The tax rate would amount to the lesser of:
- 20 percent of the sale price above $100,000 for vehicles and aircraft; $250,000 for yachts and other luxury boats; or
- 10% of the retail sale price of the luxury vehicle, airplane or boat
Industry leaders have already reported a drop in sales over the likely tax hike. If it does go into effect, the repercussions will have an even wider-reaching effect.
An analysis by public policy experts estimates the tax would decrease luxury boat industry revenues by a minimum of $90 million. Job losses in the industry could exceed 900 employees, including professionals who work in the engineering, design, manufacturing, repair and sale of yachts and other luxury craft.
What boats would be taxed?
Any boat manufactured after 2018 that is designed for luxury, recreation or sport would be subject to the tax. Boats that fall under this description include yachts, houseboats and any sailboat or motorboat outfitted with sleeping quarters. Boats used for fishing and other commercial purposes would not be subject to the additional tax.
The impact on yacht owners
Whether you own a yacht purchased in Canada or are planning on buying one, this luxury tax would present a whole new set of circumstances, including legal considerations, for you to navigate. You may decide to search in a different market, which will require knowledge of that jurisdiction’s laws regarding purchasing, financing and operating luxury watercraft. The proposed tax will not only affect yacht purchasers but will also impact yacht owners whose boats are insured in Canada.
We will keep a close eye on this proposed legislation and be ready to help our clients with any legal complications that arise if and when the tax does go into effect.