A.1 The
budget proposes to introduce a vehicle efficiency incentive (VEI) designed to
promote the purchase of fuel-efficient vehicles in Canada.
The VEI includes:
- A rebate for highly fuel-efficient vehicles;
- A neutral treatment for vehicles of average fuel efficiency; and
- A new excise tax on fuel inefficient vehicles.
The CRA will be administering the new excise tax on fuel inefficient vehicles.
Q.2 What vehicles will the new excise tax apply to?
A.2 The
excise tax will apply to certain new automobiles (including station wagons, vans
and sport utility vehicles) designed primarily to carry passengers. The excise
tax does not apply to pick-up trucks, vans equipped to accommodate ten or more
passengers, ambulances and hearses. Please refer to question 3 to find out which
vehicles are subject to the excise tax.
Q.3 How is the new excise tax calculated?
A.3 The
excise tax is calculated on the basis of the weighted average fuel consumption,
as determined in accordance with information published by Natural Resources
Canada. For purposes of this excise tax, the weighted average is calculated by
combining 55% of the city fuel consumption rating with 45% of the highway fuel
consumption rating. A listing of vehicles and associated fuel-efficiency ratings
can be found on the Natural Resources Canada Web site.
Vehicles that have a weighted average fuel consumption of 13 or more litres per
100 km will be subject to the tax at the following rates:
At least 13 but less than
14 litres per 100 km: $1,000
At last 14, but less than
15 litres per 100 km: $2,000
At least 15 but less than
16 litres per 100 km: $3,000
16 or more litres per 100
km: $4,000
Q.4
Who does the new excise tax apply to?
A.4 The
tax will be payable by the automobile manufacturer or importer at the time the
vehicles are delivered to a purchaser (usually a dealer) or imported. The tax
will not apply to vehicles that are manufactured in Canada and exported for sale
in other countries, or to vehicles that are imported and subsequently exported
prior to being put into service in Canada.
Q.5 When will the new excise tax come into effect?
A.5 The
new excise tax applies to automobiles delivered by a manufacturer after March
19, 2007 and each automobile imported into Canada after that day unless the
automobile had been put into service before March 20, 2007.
This measure does not apply to an automobile for which an agreement in writing
has been entered into before March 20, 2007 between a person in the business of
selling vehicles and a final consumer and for which possession is taken by the
final consumer before October 2007.
Q.6 Where can I get more information about the new excise tax?
A.6 The
CRA is committed to providing taxpayers with up-to-date information. Taxpayers
are encouraged to check our Web site often - all new forms, policies and
guidelines will be posted here as they become available.
In the meantime, please consult the Department of Finance's Budget 2007 documents
for details.
If you would like to speak with someone regarding the Excise Tax
Act please call toll free at 1-866-330-3304.
Q.7 Are used vehicles imported into Canada subject to this new tax?
A.7 If
the vehicle was put into service prior to March 20, 2007 and imported into
Canada on or after March 20, 2007, the tax does not apply.
If the vehicle was put into service on or after March 20, 2007 and imported into
Canada, the tax would apply provided the weighted average fuel consumption
rating of 13 or more litres per 100 km.
An automobile is considered to be put into service at the earliest of:
- the date the automobile is registered with a motor vehicle authority;
- the date it is plated;
- the date on which the automobile's warranty has been put in place; or
- the date the automobile is appropriated by a dealer for their own use.
