Land Transfer Tax in Ontario

For anyone looking to buy a land in Ontario, there is an additional cost that must be considered when hammering out the specifics of a deal. The Ontario land transfer tax is a sum that must be paid by the purchasing party of any land in the province. For the purpose of the tax, land refers to: buildings, buildings to be constructed, fixtures such as lights, built-in appliances, cabinetry, and of course land itself. The tax is applicable on all land, regardless of whether the transfer of the land is registered with an Ontario land registry office.

The Ontario land transfer tax is not a flat fee, and is usually based on the amount paid, in addition to any remaining amounts of mortgages or debt assumed in the deal to purchase the land. There are exceptions to this, as the tax can also be based on the fair market value of the land in the following circumstances:

  • A lease exceeding 50 years
  • A shareholder receiving land from a corporation
  • A corporation receiving land, when shares of the corporation are issued

The Ontario land transfer tax must be paid when the transfer of land is registered, and if unregistered there is a specific set of documents that must be completed and submitted to the Ministry of Finance within 30 days. The only exception to this payment schedule is when land is transferred between affiliate corporations, in which case a deferral may be possible.

For first-time home-buyers worried that the added cost of the Ontario land transfer tax could price certain properties out of their budget, the worry may be premature. A tax rebate exists for first time home buyers, as long as the sale was closed after December 13, 2007. The maximum amount a refund may be issued for is $2,000, and applicants for the rebate must satisfy a few criteria to be eligible:

  • Minimum eligible age is 18
  • The home in question must be occupied within 9 months of the transfer date as the principle residence
  • The applicant can never have owned a home, or any interest in a home anywhere in the world prior to their purchase in Ontario (this criteria also applies to the spouse of an applicant)
  • The application for an Ontario land transfer tax rebate must be filed within 18 months of the transfer date

The Ontario land tax is a relevant piece of information for anyone looking to purchase land in the province, and a reminder to buyers everywhere that there are often additional costs to property transfers no matter where they are purchased. At the same time though, the first-time home buyer rebate also illustrates the point that most additional taxes and fees have loopholes or exceptions that many may qualify for. In order to get the best deal on any transaction, it is important to conduct thorough and meticulous research of the purchasing environment before the hunt begins.

 

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