Ontario and Toronto Land Transfer Tax
You are subject to the Ontario Land Transfer Tax when buying land or interest in land anywhere in Ontario, even if the transaction is registered by the land registry office. The usage of 'land' includes physical land, building, fixtures and goodwill.
Should your estate lie within the City of Toronto, it is then 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 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." This definition is rather broad, as you can see.
What is the 'value of consideration'?
The value of consideration is most of the time the same as the purchasing price, However, in sometimes 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?
The tax needs to be paid when the transfer is registered. You either register the transfer, or you are obliged to submit a Return on the Acquisition of a Beneficial Interest in Land form to the Ministry of Revenue. It is required that the transfer tax is paid within 30 days.
Can I avoid paying transfer tax?
Not really. However there are some ways, such as some transactions between spouses, in family business or for charity purposes which 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?
In case that 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 with some limitations. If the first-time homebuyer should be only one person where there are multiple buyers (e.g. spouse, parents, children), the refund amount is significantly reduced (e.g. to 50% when there are two persons). Inheritance is also considered a way of acquiring a property besides a purchase, so if this is your case, you are not considered a first-time homebuyer.
The property is located in the City of Toronto. Do I have to pay both the Ontario and the Toronto Land Transfer Tax?
Yes. Unfortunately, you do.
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.