At the time of closing of a purchase transaction or acquire a beneficial interest in land, the buyer needs to pay land transfer tax to the province of Ontario. Unless exempt under the Act, the Land Transfer tax is payable on all unregistered dispositions of beneficial interests in land including every conveyance of land presented for registration. Land includes buildings, lands, structures under construction, fully constructed structures, fixtures and any interest in them. For the purpose of calculating Land Transfer tax, the value of consideration includes the purchase price, all outstanding liabilities, benefits conferred and all cost of upgrades. In few circumstances, the fair market value of the land is the basis for calculation of land transfer tax as outlined below:
- Transfer of lease with balance term exceeding 50 years
- Land transferred from a corporation to its shareholder
- If corporation shares are issued, transferring land to a corporation
Buying Under Assignment
If you are buying the property under assignment, then the land transfer tax is charged on the assignment price or contract price, whichever is higher. Once the consideration is transferred to third party, the true value of the consideration includes the purchase price of the agreement, the consideration for the agreement and the values of all installation and upgrades as confirmed in the agreement. If the notice of the agreement is registered, land transfer tax will be charges on this.
Vacant Lot with Construction Contract
In the event of a vacant lot with a construction contract, the consideration value will include total cost of the lot and the cost of the construction contract.
All land transfer tax statements need to have the value of considerations expressed in Canadian dollars. If the currency needs to be converted to Canadian dollars, the date of the conversion should be the date when the agreement of sale and purchase becomes a binding contract or the date of registration in absence of a written agreement.
Tax rates for land transfer tax are dependent upon the date of agreement of purchase and sale. If the registration or disposition of property occurs later than January 1, 2017, the tax rates on the value of the consideration are outlined below:
- 0.5% for all amounts up to and including $55000
- 1.0% for all amounts more than $55,000 and up to and including $250,000
- 1.5% for all amounts more than $250,000 and up to and including $400,000
- 2.0% for all amounts exceeding $400,000
- 2.5% for all amounts exceeding $2,000,000 where one or two single family residences are contained in the land
Paying the tax
The land transfer tax becomes payable at the time of registration of transfer. In the circumstance when the transfer was not registered within a period of 30 days from closing, there are certain steps to be followed. The tax payment along with the Return on the Acquisition of a Beneficial Interest in Land form needs to be submitted to the Ministry of Finance. Few exceptions exist for certain land transfers between spouses, farmed land amongst family members, life lease from a charity or non-profit company and from a individual to their family business corporation. Payment of land transfer tax can be deferred when transfer notice is not registered on title and the transfer happens between affiliated corporations.
After January 1, 2017, the electronic registrations are being processed as per new tax rates and tax brackets. Transitional tax rates are no longer being accommodated by Teraview, the software which allows access to Ontario’s electronic land registration system.
Municipal land transfer tax
City of Toronto’s land transfer tax becomes payable if the property purchased is in the City of Toronto. Please click here to know more.
Harmonized Sales Tax
Newly constructed homes and renovated homes are subject to the harmonized sales tax (HST). Resale properties are exempt. New home buyers can receive rebate up to the provincial part of the HST.
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On transfers of residential real property in Ontario, Ontario Land Transfer Tax (LTT) is calculated on the purchase price (less a calculation regarding GST, if the property purchased is a newly built home). The Ontario land transfer tax is payable by the purchaser on the purchase price upon registration of a Transfer/Deed of Land in the Ontario Land Registry Office on closing based on the following upward sliding scale:
Example: The Ontario land transfer tax on a property transferred for $200,000 is calculated as $275.00 on the first $ 55,000 (0.5% = $ 275.00), plus $1,450.00 on the next $145,000 (1.0% = $1,450.00), for a total of $1,725.00. CALCULATE YOUR ONTARIO LAND TRANSFER TAX: (based on purchase price of a resale residential home. Please note that this calculation is based on a resale property and not on a newly constructed home which typically includes GST in the price; see the notes below if you are buying from a builder.) NOTE: If you are buying new from the builder, the Ontario Land Transfer Tax is calculated on a price which is net of GST and therefore the Ontario Land Transfer Tax will be slightly less for a new home than for a resale home with the same price. ALSO, if you are a first time purchaser (buying a resale home or a new home from a builder), you may be eligible for a refund of Ontario Land Transfer Tax ordinarily payable. Check out following link for Ontario Land Transfer Tax Refund Programs:
- Land Transfer Tax Refund for Ontario
NOTE: If the property you are buying is in Toronto, South of Steeles between the Western boundary of Etobicoke and the Eastern boundary of Scarborough, you might be required to pay a FURTHER TORONTO LAND TRANSFER TAX. Checkout the following link for Toronto Land Transfer Tax:
- Land Transfer Tax: City of Toronto