Is It Legal to Avoid Land Transfer Tax in Ontario?

Claiming an exemption or refund you actually qualify for is legal, but hiding the true price is not. Making false or deceptive statements, such as understating the price, is an offence under section 6 of the Land Transfer Tax Act. The fine is at least the greater of $1,000 or 50% of the tax that should have been paid, up to twice that tax, and a court can also impose imprisonment of up to two years.

The tax is calculated on the value of the consideration, which the Act defines broadly as the gross sale price plus any benefit of whatever kind conferred as part of the arrangement. The Act also says land includes fixtures. Where unpaid tax results from fraud or wilful default, the Minister may assess a penalty of the greater of $500 and 25% of the unpaid tax.

The Act also has a general anti-avoidance rule: if a transaction is an avoidance transaction, its tax consequences are set as is reasonable to deny the tax benefit. Whether a particular arrangement, such as how items are listed in a sale, is acceptable depends on the facts, so ask a lawyer before you sign anything.