Ontario and Toronto Land Transfer Tax
When buying land or interest in land in Ontario, you are subject to the Ontario Land Transfer Tax, even if the transaction is registered by the land registry office. The usage of ‘land’ here is rather broad, including physical land, building, fixtures and goodwill.
If the estate lies within the City of Toronto, it is also subject to Toronto Land Transfer Tax.
Frequently Asked Questions about Land Transfer Tax
I am transferring a building. Do I have to care about land transfer tax?
Yes. ‘Land’ is a very broad term, defined in the Land Transfer Tax Act as ” lands, tenements and hereditaments and any estate, right or interest therein, a structure to be constructed on land as part of an arrangement relating to a conveyance of land, a leasehold interest or estate, the interest of an optionee, the interest of a purchaser under an agreement to sell land, or goodwill attributable to the location of land or to the existence thereon of any building or fixture, and fixtures.”
What is the ‘value of consideration’?
In most cases, the value of consideration is the purchasing price, However, in some cases the transaction is settled by non-monetary means, or it is discounted (i.e. property transfer from a company to its shareholders). In such cases, the fair market price is used for tax purposes. Land lease exceeding 50 years is included as well.
When do I have to pay the tax?
At the time the transfer is registered. If you do not register the transfer, you are obliged to submit a Return on the Acquisition of a Beneficial Interest in Land form to the Ministry of Revenue. You are also required to pay the transfer tax within 30 days.
Can I avoid paying transfer tax?
There aren’t many ways to avoid the tax. However, some transactions between spouses, in family business or for charity purposes are excluded.
I see the tax rate rises as the property value goes up. Can I split the property to take advantage of the lower rate?
No. Splitting the property will not reduce your tax liability.
I only have a vacant lot and a construction contract. What now?
If the construction contract was part of the purchase, the cost of construction is added to the cost of the lot for tax purposes.
I am a first-time homebuyer. Do I have to pay the tax?
First-time homebuyers are eligible to claim a tax refund for up to $2000. However, there are certain limitations. If only one person is a first-time homebuyer where there are multiple buyers (e.g. spouse, parents, children), the refund amount is reduced (e.g. to 50% when there are two persons). You are also not considered a first-time homebuyer if you have acquired any previous property by any means besides a purchase, including by inheritance.
The property is located in the City of Toronto. Do I have to pay both the Ontario and the Toronto Land Transfer Tax?
Does the first-time homebuyer rebate also apply for the transfer taxes?
Yes, you can apply for a Toronto Land Transfer Tax rebate for up to $3,725.
Are there other property related taxes to consider?
Yes, there is also the Greater Toronto Area Property Tax.