What is Land Transfer Tax and how much will it be?
If you are buying a property in Ontario be prepared to pay the Ontario Land Transfer Tax. Land Transfer Tax is collected by the Ontario government on virtually all real estate purchases in Ontario. The formula for calculating the Land Transfer Tax for your purchase can be found below in (b). The Land Transfer Tax is collected at the time the property is transferred from the seller thorugh the buyer. Typically the amount of funds your lawyer will ask you to bring with you to your meeting with him/her prior to your closing date will include the applicable Land Transfer Tax. The lawyer will almost always take care of the actual payment of the Land Transfer Tax.
A recent change to the laws in Ontario have resulted in first time home buyers receiving up to a $2,000.00 credit towards the Land Transfer Tax. This credit is restricted to first time home buyers. Further details about this credit is located in section (c) below. Generally your lawyer will arrange for the credit to be applied automatically on your home purchase so that you do not have to wait for the credit to be processed and returned to you.
(a) Land Transfer Tax
In general, if you buy land or an interest in land in Ontario, you must pay Ontario's land transfer tax, whether or not the transfer is registered at one of Ontario's land registry office. Land includes any buildings, buildings to be constructed, and fixtures (such as light fixtures, built-in appliances and cabinetry).
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:
a lease can exceed 50 years;
land is transferred from a corporation to one of its shareholders; or
land is transferred to a corporation, if shares of the corporation are issued.
(b) Calculation of the Land Transfer Tax
The tax rate has not changed since June 1, 1989. The calculation is as follows:
(a) 0.5% of the value of consideration for the transfer up to and including $55,000,
(b) 1% of the value of the consideration which exceeds $55,000 up to and including $250,000, and
(c) 1.5% of the value of the consideration which exceeds $250,000, and
(d) 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.
(c) First-time Owner
Land Transfer Tax applies to all transfers of land in Ontario. First-time homebuyers may be eligible for a refund of all or part of the tax.
For agreements of purchase and sale entered into before December 14, 2007, the refund only applies on the purchase of a newly constructed home.
For agreements of purchase and sale entered into after December 13, 2007, the refund applies to all homes, whether newly constructed or resale.
Applications for a refund must be made within 18 months after the date of the transfer.
The maximum amount of the refund is $2,000. If the refund is claimed at time of registration, it may offset the land transfer tax ordinarily payable. If not claimed at registration, the refund may be claimed directly from the Ministry of Revenue. No interest is paid on this refund.
To claim a refund, you:
i. must be at least 18 years of age;
ii. must occupy the home as your principal residence within 9 months of after the date of transfer; and
iii. cannot have owned a home, or an interest in a home, anywhere in the world.
iv. In addition:
o your spouse cannot have owned a home, or an interest in a home, anywhere in the world while being your spouse; and
o in the case of a newly constructed home, you must be entitled to a Tarion New Home Warranty.
The above information is from the Ontario Ministry of Revenue.
