Iconic Concierge Winter 2022/23

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DIGGING DEEPHow theFederal Luxury Sales TaxApplies to YouInterview: O. RobrechtJ. Schaab (left) withOlaf RobrechtOn June 23, 2022, the federalgovernment approved legislationon a tax on the sale of luxuryvehicles, aircraft, and boats. OnSeptember 1, 2022, Canada’snew Select Luxury Items Tax Actcame into effect.But what exactly falls under thenew Luxury Sales Tax (LST)? Isit based on the selling price or amanufacturer’s suggested retailprice, and are there exemptions?And what about demos? We havetalked to Jeremy Schaab, RegionalGeneral Manager for DilawriGroup’s Ultra Luxury Portfolio ofVehicles who will walk you throughthe biggest misconceptions thatare out there, answering some ofthe questions we hear the most...But before we let Jeremy diveinto how the LST may affect thepurchase of your next car, here’ssome more general information:The luxury tax will apply to newcars and aircraft with a retail salesprice of over $100,000 and tovessels over $250,000. It will becalculated at the lesser of 20%of the value above a set threshold($100,000 for cars and personalaircraft, and $250,000 for vessels)and 10% of the full value of the itemsubjected to tax.For example...You are going to buy a new carfor $120,000. The luxury tax cannow be either $12,000 (10% ofthe retail price) or $4,000 (20%of the $20,000 spread over thethreshold). As the lesser of thesetwo calculations applies, $4,000 isthe taxation amount to be paid.Now over to you, Jeremy, let’s talkvehicles. Which cars are affectedby the new Luxury Sales Tax?The new tax applies to whatis defined as a “subject item”,exceeding a retail sale of $100,000,before GST/HST. It is calculated onthe total price for the sale of thevehicle, including improvements oradditions (such as a vehicle wrapor remote starter), levies, duties,charges, fees and amounts inrespect of delivery or importation.A subject item (or vehicle),according to the Select Luxury ItemsTax Act, has a date of manufactureafter 2018, has four or morewheels in contact with the ground,and carries individuals on streetsand highways. The seating capacityis 10 or less and the GVWR (grossvehicle weight rating) is 3,856kg orless. This includes coupes, sedans,station wagons, sports cars,passenger vans, minivans, SUVs,and passenger pick-up trucks.Are there vehicles exempt fromthe tax?Recreation vehicles that meetcertain established criteria areexempt, as well as vehicles clearlymarked for policing and militaryactivities, ambulances, hearses andfire trucks. Used vehicles that havebeen previously registered withthe Government of Canada or aprovince and vehicles with a GVWRgreater than 3,856 kilograms arealso exempt.How is the LST applied?Let me give you two examples, onefor a car that is sold for less thanthe $125,000 taxable value, andone for a car that exceeds the$125,000 taxable value:28 ICONIC CONCIERGE
Less than $125,000 (before GST/ HST)Vehicle Price: $110,000 (A)BC PST (10%) = $110,000 x 10% = $11,000 (B)LST, lesser of:a) 10% of $110,000 = $11,000, orb) 20% of $10,000 (110,000-100,000) = $2,000In this example, the LST is $2,000 (C) and the total price to pay from thecustomer calculates (A + C) x (1 + 5%) + B = $128,600More than $125,000 ( before GST / HST)Vehicle Price: $180,000 (A)BC PST (10%) = $180,000 x 20% = $36,000 (B)LST, lesser of:a) 10% of $180,000 = $18,000, orb) 20% of $(180,000 – 100,000) = $16,000In this example, the LST is $16,000 (C) and the total price to pay from thecustomer calculates (A + C) x (1 + 5%) + B = $243,600What about used cars?Good news! If you are buying a pre-owned car over $100,000, the LST doesn’tapply.What about demo models?This depends if the Demo (over the $100,000 threshold) is plated or not.The luxury tax applies to vehicles that have previously not been registered.What about a trade-in?There is no reduction for a trade-in. The luxury tax is calculated on the grossselling price of the vehicle. The trade-in will reduce the GST / HST calculation,though.Does the luxury tax apply to a lease?For leases, the LST is applied on full capitalized cost, not lease payment. If we usethe above example ($180,000 vehicle price) as the lease deal (with no trade-in ordeposit), it calculates as follows:Vehicle Price: $180,000 (A)GST Luxury Tax, lesser of:a) 10% of 180,000 = $18,000, orb) 20% of $(180,000 – 100,000) = $16,000GST Luxury Tax is $16,000 (C)Capitalized Cost: A + C = $196,000Thank you, Jeremy!For more information, please visit any of the Dilawri BC stores.Don’t make her waitThis article should be seen as broad guidance only.xcitemecanada.comxcitecanada.ca
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Iconic Concierge Winter 2022/23

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