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Federal Budget 2025: Sales and Excise Measures

Underused Housing Tax (UHT)

Budget 2025 proposed to eliminate the UHT (which first took effect on January 1, 2022) as of the 2025 calendar year. No UHT would be payable and no UHT returns would be required in respect of the 2025 and subsequent calendar years. Filing requirements, penalties and interest in respect of prior periods would not be removed.

Luxury Tax on Aircraft and Vessels

Budget 2025 proposed to end the luxury tax on subject aircraft and subject vessels. All instances of the tax would cease to be payable after November 4, 2025. Registered vendors in respect of these items would be required to file a final return. The tax would remain applicable to vehicles (such as cars and SUVs) with a value above $100,000.

Carousel GST/HST Frauds

Carousel schemes use a series of real or fraudulent transactions where at least one person collects GST/HST in respect of a supply of property or services but does not remit the amounts to the government.

Budget 2025 proposed changes to help prevent these schemes by introducing a new reverse charge mechanism (RCM) beginning with certain supplies in the telecommunications sector (such as providers of voice-over internet protocol, VoIP, services).

Under the proposed new rules, suppliers would not be required to collect the GST/HST payable on the supply. Instead, recipients would be required to self-assess and report the tax payable in their GST/HST return. If entitled, the recipient could claim an input tax credit (ITC) in the same return provided that they accounted for the GST/HST payable. This system appears to be intended to prevent the collection of GST/HST by parties that may not remit the funds to CRA.

The government will continue to monitor and assess the presence of carousel fraud in order to determine whether other supplies should also be subject to an RCM in the future.

Feedback on these proposals can be submitted by email to Consultation-Legislation@fin.gc.ca by January 12, 2026.

Manual Osteopathic Services

Budget 2025 proposed to clarify that osteopathic services rendered by individuals who are not osteopathic physicians are taxable under the GST/HST regime. This measure would apply to supplies made after June 5, 2025. However, it would not apply to a supply of osteopathic services made from June 6, 2025 to November 4, 2025 if the supplier did not charge, collect or remit any amount as or on account of tax in respect of the supply.

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