In general, if you buy land in Ontario, you must pay land transfer tax, whether or not the transfer is registered at one of Ontario’s Land Registry Offices.
The land transfer tax payable 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. These two amounts together are considered the “consideration” for the land. In some cases, land transfer tax is based on the fair market value of the land, such as when land is transferred from a corporation to one of its shareholders.
The tax rate has not changed since June 1, 1989 and is as follows:
0.5% of the value of the consideration up to and including $55,000,
1% of the value of the consideration which exceeds $55,000 up to an including $250,000, and
1.5% of the value of the consideration which exceeds $250,000, and
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.
A non-resident of Ontario pays land transfer tax at the same rates as a resident.
When Tax is Paid
You must pay the land transfer tax at the time the transfer is registered. If the transfer is not registered, you must submit a “Return on the Acquisition of a Beneficial Interest in Land” form (available at www.ontario.ca) to the Ministry of Finance with a payment of the tax within 30 days. In most cases, you will pay the tax to your lawyer, when you meet with them to sign your closing documents, and they will forward the tax on your behalf.
With the exception of specific exemptions for certain transfers between spouses, and involving family businesses and family farms, or for a nominal amount, all transfers between family members are subject to the same land transfer tax liabilities as transfers between non-family members.
If you are a first-time homebuyer, you may be eligible for a refund of all or part of the tax for newly constructed or resale homes. The maximum amount of refund is $2,000.
To claim a refund, you must meet certain requirements:
be at least 18 years of age;
occupy the home as your principal residence within 9 months of the date of transfer;
cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time (the method of acquiring the home, e.g. purchase, gift or through an inheritance, is not considered);
cannot have previously received an Ontario Home Ownership Savings Plan based refund of land transfer tax;
your spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world, while they were your spouse (if this is the case, no refund is available to either of you);
your application for a refund must be made within 18 months after the date of transfer; and
if the agreement of purchase and sale was entered into before December 14, 2007, the home must be newly constructed.
If you qualify for the first time homebuyer rebate, the amount of the rebate will usually be deducted from the amount of money you need to pay at the time of closing, so that you will not need to submit anything further to the government.