Ontario Land Transfer Tax Refund

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As on December 13, 2007, the government of Ontario presented a mini budget that stated that tax refund (maximum $4,000) will be granted to resale home purchasers just like first time buyers of new homes, however the offer should be accepted on or after December 14, 2007.

Case 1: When first time Buyer Purchases from a Builder

Conditions for First Time Buyer of New Homes

  • To be eligible for tax refund, you must be a first-time home buyer and the unit purchased must be a newly constructed home or condominium. The said property must be registered with the Ontario New Home Warranty Program (ONHWP). If the condo has been constructed from an old building or renovated, it is not eligible for the program. Also, the property in question must be the principal residence of the purchaser.
  • It is important that you or your spouse must have attained at least 18 years of age. In the past, you both should not have owned a home (applicable throughout the world) and paid any mortgage for a property. A spouse is defined here as a lawful spouse of more than 3 years or where the couple has an adopted or natural child. If one of the spouses was a homeowner but sold the house before marriage he or she is no longer eligible for claiming a refund. However, the other spouse may claim the entire refund amount even if both have joint ownership of property.

Case 1: When first time Buyer Purchases from a Builder

Non-Spousal Partnership Purchase
If two members of a family purchase a property (example father and son) and one of these partners is first time home buyer and owns a 50% share in the property, that first time home buyer partner can claim a 50% refund under the Ontario Land Transfer Tax refund. Usually, this means about half of $2,000.00.
Maximum Refund
The maximum refund that can be claimed is up to $2,000.00.

Instant Refund

a) As soon as the deal on the real estate purchase is closed, the refund can be claimed instantly. The Ontario Land Transfer Tax amount above the permissible maximum refund amount is required to be paid on closing.

b) If an eligible purchaser does not claim the immediate refund at the time of deal closing, it is required that the obligatory tax payable at that time plus a refund claim must be made to the Ministry of Finance directly. In such a case, the application must be made within 18 months of the property registration. Also, no interest can be claimed on the refund claim amount. You have to submit the following documents if you wish to process the refund claim. Keep these documents handy in case the purchaser’s lawyer is not claiming the refund:

  • A duly completed Ontario Land Transfer Tax Refund Affidavit form
  • Copy of the registered transfer/deed
  • Copy of the agreement of purchase and sale
  • Copy of the Statement of Adjustments at time of deal closing
  • Copy of the New Home Warranty Certificate

Case 2: When a First Time Buyer Purchases a Resale Home

If the agreement of Purchase is signed on or after December 14, 2007, and and the buyer is a first time home purchaser buying a resale home, then under the Ontario Land Transfer Tax, the buyer is eligible to receive a rebate of $2,000.00.

The Land Transfer Tax Act is due for an overhaul. But until then, the following procedure is to be followed by first time buyers of resale homes to claim refund:

1) First time buyers of a resale home have to pay land transfer tax at the time of closing of the deal.

2) After the closing, the buyer has to submit the Land Transfer Tax refund affidavit along with a copy of the Transfer Deed and Agreement of Purchase and Sale. This document can be prepared by the lawyer of first time buyer of the resale property. The client can simply sign it and the lawyer can submit this form.

3) The application for tax refund must be submitted soon after the deal is closed.

4) Remember, there will not be any tax refund until the proposed bill becomes a law.

Eligibility Requirements for new homes is similar to resale homes as well. These are:

  • Purchaser must have attained at least 18 years of age.
  • The property must be used as principal residence within 9 months of deal closing
  • After the couple have entered matrimony, no spouse should have owned any property in the world.

Once the proposed bill becomes a law, the purchaser can immediately claim a refund using electronic affidavit up to a maximum of $2,000.00.

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