Canada has now formalized its intention to impose a “luxury tax” on new “personal” aircraft, and it will be applied to virtually every brand new aircraft sold in the country when it comes into effect. Justin Trudeau’s Liberal administration included the tax in its budget presented earlier this week and, as written, will add tens of thousands of dollars to the cost of even the most basic general aviation aircraft. The government has set the luxury limit on planes at $ 100,000, and there are few new planes available at this price, which is currently around $ 80,000. It is calculated at less than 10 percent of the total value of an aircraft or 20 percent of the value of more than $ 100,000. For a $ 600,000 Cessna 172 that would be $ 60,000 plus up to $ 7,800 in sales and federal and state sales tax.
Canadian aviation companies have opposed the tax, claiming the luxury threshold is way too low and the application of the tax is muddy. The government is exempting passenger planes of 40 seats or more and smaller planes that are used commercially. This, according to the Canadian Business Aviation Association, is in conflict with the country’s tax laws, which do not differentiate commercial and private aircraft based on size. There is also confusion about whether imported used aircraft are taxed as new. The government has promised more details on introducing the tax before it becomes law.