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Understanding Land Transfer Tax in Ontario

Understanding Land Transfer Tax in Ontario

Individuals buying land or an interest in land in Ontario are required to pay Ontario’s land transfer tax. Land includes any buildings, buildings to be constructed, and fixtures (such as light fixtures, built-in appliances and cabinetry).

Who pays the tax?

In acquiring a property or land, one is required to pay land transfer taxes to the province when the transaction closes. Land transfer tax is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land.

In some cases, land transfer tax is based on the fair market value of the land, for example, where:

  •         the transfer of a lease with a remaining term that can exceed 50 years;
  •         the transfer of land is from a corporation to one of its shareholders; or
  •         the transfer of land is to a corporation, if shares of the corporation are issued.

Other land taxes

Local municipalities also typically charge a tax on residential and business properties. It is recommended that one contact their local municipality. If the property is located in an unorganized territory (an area without municipal organization) of Ontario, property tax is collected through the provincial land tax program administered by the Provincial Land Tax Office in Thunder Bay.

Land transfer tax rates

The tax rates calculated on the value of the consideration are:

  •         0.5% up to and including $55,000
  •         1% above $55,000 up to and including $250,000
  •         1.5% above $250,000
  •         2% above $400,000 where the land contains one or two single family residences.

 

The land transfer tax rate is the same for residents and non-residents of Canada.

Calculating the tax amount

The table below is a guide to help calculate land transfer tax:

  •         Residential property: land that contains one or two single family residences
  •         VC: Value of the consideration for the conveyance or disposition
  •         LTT: Land transfer tax payable

 

For the Value of the ConsiderationFormula
up to and including $55,000LTT = VC × 0.005
above $55,000 and up to $250,000LTT = (VC × 0.01) – $275
above $250,000, for property other than residentialLTT = (VC × 0.015) – $1,525
above $250,000 up to $400,000, for residential propertyLTT = (VC × 0.015) – $1,525
for residential property above $400,000LTT = (VC × 0.02) – $3,525

Vacant lot with a construction contract

Where a construction contract is entered into as part of the arrangement relating to the purchase of a vacant lot or lots, the value of the consideration is calculated on the:

  • total cost of the lot, plus
  • cost of construction contract

When to pay the tax

Ontario’s land transfer tax is payable when the transfer is registered. If the transfer is not registered within 30 days of closing, one must submit a Return on the Acquisition of a Beneficial Interest in Land form to the Ministry of Finance, along with the payment of tax within 30 days after the closing date.

Time limits

There is no time restriction where a refund is requested for land transfer tax paid on registration of a notice or caution where the transfer contemplated in the agreement referred to in the notice or caution did not take place. First time homebuyers refund requests must be made within 18 months after the date of the transfer. All other refund requests must be made within 4 years after the date of payment of the tax.

For the most up-to-date and in-depth information available, please refer to : www.fin.gov.on.ca

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