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The Canada Strong Budget 2025 (Budget 2025), introduced on November 4, 2025 (Budget Day), signals a major shift in tax policy aimed at boosting Canada's competitiveness and easing burdens on strategic industries. For Canada's aviation industry, Budget 2025 provides an opportunity to strengthen its position in the global aerospace market through key proposed amendments to the Select Luxury Items Tax Act (the SLITA).
Elimination of Luxury Tax
A significant proposal under Budget 2025 is the elimination of luxury tax on subject aircraft. Under the SLITA, which came into effect on September 1, 2022, certain "subject aircraft" valued over $100,000 are generally subject to a 10–20% luxury tax. If the proposed Notice of Ways and Means Motion to amend the SLITA (the Motion) is passed, luxury tax on the sale, import, lease, and improvement of subject aircraft will be scrapped, effective the day after Budget Day.
Simplified Compliance
The federal government is also proposing to cut red tape for the existing luxury tax regime. Proposed changes to the SLITA include:
- Eliminating registration requirements for vendors of subject aircraft after Budget Day.
- Eliminating most return filing requirements for registered vendors of subject aircraft for reporting periods after December 2025.
- Automatic cancellation of existing vendor registrations on February 1, 2028.
If the Motion is passed, registered vendors would be required to file one final return for the reporting period including Budget Day. For subsequent reporting periods, until January 31, 2028, registered vendors may voluntarily choose to maintain registration in order to claim eligible rebates; however, there will no longer be a requirement for vendors to do so.
Bottom Line
For purchasers and lessees of subject aircraft, these proposed changes translate to fewer administrative hurdles, lower acquisition costs, and improved liquidity. Vendors will benefit from reduced reporting obligations while still retaining rebate opportunities during the transition period. By eliminating luxury tax on subject aircraft, the federal government is clearing the runway for growth, innovation, and competitiveness, making Canada a more attractive market for aircraft manufacturers, vendors, and purchasers alike.
The authors gratefully acknowledge the contributions of articling student Chioma Oriuwa.
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