What is the Luxury Car Tax exactly? It’s an additional tax applied to all higher priced vehicle purchases made in Canada. This is particularly focused on import vehicles, luxury vehicles, and aircraft and high-ticket vessels.
The amount of the increased tax amount will depend on the sticker price of the vehicle you’re buying, what kind of vehicle you’re buying, and whether or not you are a dealer or private purchaser.
How Can the Luxury Car Tax Affect Your Next Vehicle Purchase?
Depending on the type of vehicle you’re buying, the Luxury Car Tax could increase your bill substantially. Some vehicles may be small but come with a BIG price tag. The higher the price of the car, the higher the tax bracket. The Luxury Car Tax is broken down into 3 different tiers.
Tier 1 – For vehicles over $55,000 up to and including $56,999, the increased PST rate is 7% to 10%.
Tier 2 – For vehicles over $57,000 up to and including $124,999, the increased PST rate is 15 %.
Tier 3 – For all vehicles over $125,000, including aircraft and boats and vessels, the increased PST rate is 20%.
When purchasing a new vehicle from a dealership, the GST and PST combined is 12% of the cost of the vehicle. However, if you’re purchasing a higher priced car, you’ll see a total combined tax of up to 25%, depending on what vehicle you’re buying.
When we make a larger purchase of anything in BC, we as consumers definitely feel the price increase after tax. We’ve always been one of the highest provinces in the country for paying tax. What starts out at one price, quickly jumps to a much higher one after the tax gets applied. This is why the Luxury Car Tax hits consumers with higher vehicle purchases so hard.
Does the Canada Luxury Tax Apply to All Vehicles?
No, it doesn’t. There are certain criteria that the federal government has based this tax and how it’s applied on high-ticket vehicle purchases. So, before you make your next purchase, be sure to check if the tax even applies to you. You don’t want an attempt made to tax you on something that you are exempt from.
The following situations do not have the Luxury Tax applied to them: