The Taxman Cometh

December 13th, 2019

The Nordhavn community is relatively small, with around 1,000 boats produced over the past 30 years or so, but it is a very strong community.  One way owners stick together is through an owners group and message board.   There is much to learn between owners there and you have to be an owner to get access.

I only mention all of this because there are a number of questions around owning a boat as a Canadian, issues with insurance and more.   Today I spent some time on the phone with Canadian Border Services and it didn’t go as planned.

As the regular readers know, I have plans to visit Nova Scotia and Newfoundland this summer with Home Free, but those plans were presumptive on my bringing the boat for a visit to Canada and then heading back South before things get too cold.   I have never seen Newfoundland, and was quite excited to visit on the water.  It was also presumptive of me bringing Home Free (a UK (Jersey) flagged boat) for a visit and not having to pay taxes on the boat.

Last week I heard the story of another Canadian who bought a boat, had it dropped off in Vancouver (or thereabouts) and was given 72 hours to pay taxes or get it out of the country.   I was certain that, because I have essentially been living on my boat and we don’t own a home in Canada that it would be acceptable for me to bring the boat into the country.   I was not applying appropriate rigor to my interpretation of the rules.  Canadian Border Services uses rigor apparently.

For other owners who are asking these questions I post what I learned today.

1. A boat coming into the country will be taxed at 9.5% plus whatever provincial rate applies.   I tuned out by the time I hit the end of that conversation, but I believe I will be hit with a 9.5% duty and a 15% tax if I bring my boat to Canada, so about 25% of the value of the boat. . .
2. The exceptions appear to be very difficult to obtain.   Yet here are the criteria.
   1. If you are resident outside of Canada for a year, then you can bring personal belongings back into the country . . . there is a $10,000 exemption limit however.
   2. You have to have been outside of the country for at least the prior four months for any of this to apply.
   3. If you have been out for more than five years, I believe the limits are higher, but I wasn’t paying attention there, as it didn’t apply to me.
3. I had read or heard a story, whereby if the boat is your primary residence, it would not be taxed.   The agent I spoke to seemed unaware of any such provision.
4. CBS doesn’t much care about the flag of the boat, they care about where the owner is resident.   Since I can’t say that I am non-resident, I would have to pay Canadian taxes and duties on the boat upon entry into the country with the boat.

Given all of that Home Free is not coming to Canada any time soon.  Bringing the boat to Canada will work out to be the most expensive vacation ever and while I had hoped to spend some time on the boat here in Canada it seems that I will instead spend a year in the US and/or Caribbean and we will simply fly back and forth.

By contrast, I just paid about $200 for an annual cruising permit in the US.   I can repeat that process by simply spending time in another country and then returning to the US.   A similar approach can be used in the EU.

Over time my boat will lose value.   When we were shopping for Home Free we discovered that there is a ‘value cliff’ at 20 years for boats because insurance becomes a more significant problem for some boats.  Perhaps when it gets old enough, I will pay the taxes.

Of course Jinhee will keep working for a while as well, so we won’t truly be able to leave the country for a year and live on the boat solely.   That may make it more difficult to ever bring the boat to Canada.  In similar fashion, there was never any intention to let the boat sit in one place for very long.    I will just keep the boat moving.

References:

CBSA website

Border Information Service (BIS):
Toll free: 1-800-461-9999