Understanding Taxes and Duty

Free trade agreements: The duty rate is also subject to any free trade agreements that apply, such as the Canada-EU Comprehensive Economic and Trade Agreement (CETA). CETA reduces and eliminates duties across all sectors of the economy, including 98% of EU tariff lines for Canadian goods.

Luxury tax: A luxury tax applies to select vessels that have a taxable amount over $250,000. The tax is the lesser of 20% of the value above $250,000 or 10% of the full value of the vessel.

Goods and Services Tax (GST): All imports to Canada are subject to a 5% federal GST. The GST is fully refundable if the importer is a GST-registered entity with the Government of Canada.

Provincial Sales Tax (PST): Each province has its own PST, which can range from 5% to 9.975%.

Harmonized Sales Tax (HST): The HST combines the 5h% federal GST plus the appropriate provincial tax. Typically HST is charged at a rate of (13%HST)

Capital gain tax ( Canada ) 

In Canada, capital gains are taxable. The capital gains tax is the tax you pay on the profit you make from the sale of a capital asset. If you sell your vacation property, the profit you make will be subject to the capital gains tax, At 50% of your profits. If you sell a capital asset for less than you paid for it, you have a capital loss.

Application of the luxury tax

In general, the luxury tax on subject vessels applies to sales or importations of subject vessels priced or valued above the $250,000 price threshold. However, the luxury tax could also apply if a person leases out, uses or has an improvement made to a subject vessel priced or valued above the price threshold. In addition, the luxury tax applies if a person ceases to be a registered vendor of subject vessels and holds any tax-free inventory of subject vessels valued above the price threshold.

The sections below detail the various circumstances that trigger the application of the luxury tax on subject vessels, as well as any exemptions where the tax does not apply.

Selling subject vessels

The luxury tax applies to the sale of subject vessels priced above the $250,000 price threshold and is payable at the time the sale is completed, as set out in subsections 18(1) and (3), subject to certain exceptions. Generally, a sale is considered completed when possession of the subject vessel is transferred to the purchaser or when ownership of the subject vessel is transferred to the purchaser, whichever is earlier.

In most cases, the vendor of the subject vessel is liable for the luxury tax on the sale of a subject vessel priced above the price threshold. However, under subsection 18(2), the purchaser of the subject vessel is liable for the luxury tax in sales transactions where the vendor is any of the following:

  • Her majesty in right of Canada or a province
  • An agent of her majesty in right of Canada or a province
  • An indigenous governing body
  • A foreign representative who is entitled to relief of the GST/HST in respect of the sale

The luxury tax does not apply to the sale of a subject vessel priced above the price threshold where a purchaser and a vendor have entered into a written agreement for the sale of the subject vessel before 2022 in the course of the vendor’s business of selling subject vessels.

IMPORT DUTIES DROP TO ZERO ON BOATS MADE IN EUROPE

The Canada-European Trade Agreement (CETA) was signed on October 30th, 2016 and has entered into force as of September 21st, 2017.Prior to the signing of this free trade agreement with Europe, all boats or yachts originating from Europe were imposed with a duty of 9.5%.  Now, as of September 21st, 2017, this duty has been eliminated.  It is now at zero.This meaning that now all yachts from the Ferretti Group (Riva, Pershing, Ferretti), or Azimut, Princess, Prestige, Beneteau, Jeanneau, Sunseeker and any other brand manufactured in Europe whether new or used will enter into Canada with zero duty applicable.

An important fact to note is that imports have to be made directly from Europe to benefit from the new tariff at zero.To make it simple, European manufactured boats are now exactly as boats manufactured in North America such as Sea ray, Marquis, Cruisers Yachts, Meridian, Fourwinns.  No duty applicable when entering Canada directly from Europe.Please do not hesitate to contact us with any questions on buying or selling, importing or exporting and trade logistics of boats from the United States, Europe or the Caribbean