If you’re thinking of buying a car from a family member, there are ways you can save money on the transaction. One of these ways is gifting a vehicle. Instead of buying from a family member, they can “gift” you the vehicle and you won’t have to pay certain taxes.
Gifting a vehicle in Manitoba is easy. We’ll go over the laws around gifting a vehicle, requirements to qualify for gifting and other important tips.
What is gifting a vehicle?
When you gift a vehicle to a family member, you are essentially transferring the ownership of your vehicle from your name to their name. You are giving the vehicle—and ownership of the vehicle—to them.
Who can gift a vehicle?
Anyone can gift a vehicle, but gifts received from a qualifying family member are not taxable. If you receive a gifted vehicle, you must provide a note from the previous owner as verification. The note should outline their family relationship to you.
The following count as qualifying family members:
- Spouse/common-law partner
If you receive a gifted vehicle from a sibling, cousin, aunt, uncle or other person that isn’t a qualifying family member, the vehicle is taxable.
How does gifting or receiving a gifted vehicle affect the tax?
If you receive a gifted vehicle from a qualifying family member, you can avoid paying RST (Retail Sales Tax) on the vehicle. The gift is not taxable if your qualifying family member:
- Paid the tax on the gifted vehicle.
- Received the gift under a bequest or a devolution of an estate. If this is the case, Manitoba Public Insurance requires a letter from the estate’s executor that must include the executor’s name and address, the deceased person’s name and former address and a statement outlining the vehicle is being bequeathed or given through devolution of an estate. MPI and Autopac agents require this information to register the vehicle under your name.
- Brought the vehicle into Manitoba as settler’s effects. If the previous owner brought the vehicle into Manitoba when they took permanent residence, RST is not applicable if they resided outside Manitoba for at least six consecutive months, purchased the vehicle at least 30 days before taking up residence in Manitoba and don’t use the vehicle for commercial purposes. The qualifying family member has to provide this documentation at the time of registration.
- Received the vehicle from another qualifying family member at least 12 months earlier and that qualifying family member paid tax on the vehicle.
For more information on these terms, visit the Government of Manitoba.
When is a gifted vehicle taxable?
The main scenario when gifting a vehicle in Manitoba is taxable is if you receive a gift from someone other than a qualifying family member. As outlined above, this includes siblings, cousins, aunts, uncles and others.
The law also prohibits transfers between family members who are not qualified. This means RST must be paid when a gift (or a series of gifts within 12 months) results in a transfer between non-qualifying family members. Let’s outline this a little simpler—say you gift a vehicle to a parent and that parent immediately gifts the vehicle to another one of their children (your sibling). This series of gifts resulted in a transfer between non-qualifying family members (siblings). Simply put, this transaction is considered a gift between siblings, which is taxable.
What other helpful tips should I know before I gift a vehicle?
One of the most important things you should know before gifting a vehicle is that you can only gift a vehicle if you own it outright. This means you can’t have any outstanding car loans or payments on that vehicle. If you want to learn more about car loans in Canada and how to pay yours off, we can help.
Gifting a car is a really nice gesture if you’re in a strong financial position to do so. You can help a qualifying family member out and save them money on taxes. It’s a win-win!
We know not everyone can gift a vehicle, and that’s okay too! If you’re looking for your first car and would like some pointers on how to start your search, check out our blog post. Our credit experts can help you find a vehicle that works for you and your budget.