What Happened
Canadian Government Ends Controversial Tax on Business Aviation
The Canadian government has repealed its 10% luxury tax on aircraft and boats, a measure that industry groups say had long hindered competitiveness and driven business elsewhere. The change took effect on November 5, 2025, one day after the release of Budget 2025, which confirmed that the Select Luxury Items Tax on aircraft valued above C$100,000 and boats above C$250,000 has been eliminated. The Canadian Business Aviation Association (CBAA) called the decision ‘great news for business aviation,’ noting that the government had recognized the tax as ‘inefficient, costly to administer, and challenging for Canadian industries at a time of ongoing global economic uncertainty.’ The repeal ends a period of friction between Ottawa and the aviation community. Introduced under the Select Luxury Items Tax Act, the levy applied to new aircraft, cars, and boats sold in Canada, with a rate equal to 10% of the purchase price or 20% of the value above the stated threshold, whichever was lower. Industry advocates argued that the policy mischaracterized aircraft used for business purposes as ’luxury items,’ discouraging domestic transactions and hurting job creation. CBAA and other trade groups lobbied for its removal, citing the loss of sales to US and European markets and the administrative complexity of the taxes. Budget 2025 explicitly acknowledges those criticisms. Page 220 of the budget reads: ‘Budget 2025 proposes to eliminate or modify tax measures that have proven to be inefficient, costly to administer, and challenging for Canadian industries at a time of ongoing global economic uncertainty. To provide relief to the aviation and boating industries and increase the overall efficiency of the luxury tax framework, Budget 2025 announces the government’s intention to end the luxury tax on aircraft and vessels as of the day after Budget Day.’ Legal experts say the repeal will simplify aircraft sales and leasing in Canada. Canadian law firm Fasken noted that vendors will no longer need to register or file luxury tax paperwork after this year, and that all remaining related accounts will be automatically closed by early 2028. The change means buyers and sellers can complete transactions more easily and at lower cost, restoring a smoother flow of aircraft purchases within Canada, the law firm said. A separate analysis by McMillan LLP said the change applies to all sales, leases, importations, and improvements of aircraft and vessels as of November 5, 2025, while the tax remains in place for high-value motor vehicles. McMillan noted that the Canada Revenue Agency will continue issuing special import certificates during a short administrative transition period, but that ’the luxury tax should no longer apply in respect of aircraft and vessels.’ Industry observers expect the repeal to boost confidence in Canada’s business aviation market, where transactions have been constrained since the tax came into effect. Before 2022, manufacturers and dealers reported steady sales of light and midsize jets as well as turboprops to Canadian operators, but volumes declined sharply after implementation. The budget documents did not say how much revenue Ottawa might lose by scrapping the tax. But industry groups believe any shortfall will be offset as aircraft sales, maintenance, and charter activity pick up again.