Land Transfer Tax Exemptions and Rebates Available in Ontario

Land transfer tax is a major closing cost, so it is worth knowing when it does not apply or can be reduced. The answer depends on who is transferring, what is being paid and how the transfer is structured.

This article lists the main situations in Ontario. The Ministry of Finance has indicated that changes to the Land Transfer Tax Act are proposed, so check the current rules before you rely on any figure here. Toronto also charges its own municipal land transfer tax on top of the provincial tax, with its own rules, and it is not covered here.

How the tax is calculated

Ontario land transfer tax is normally calculated on the value of the consideration, meaning the amount paid for the land, including liabilities the transferee assumes such as a mortgage. The Act defines it broadly as the gross sale price plus any benefit of whatever kind conferred as part of the arrangement.

These are the provincial rates for agreements after November 14, 2016, registered on or after January 1, 2017.

Transfers where little or no tax applies

There is no general exemption for gifts, but if no consideration passes, no tax is payable because the tax is calculated on a nil value. The main exception is a gift of land subject to a mortgage the recipient takes on. Tax is then payable on the amount owing at registration, whatever the relationship.

• Spouses and former spouses: a transfer between them is exempt where the only consideration is assuming a registered mortgage, or where it is made under a written separation agreement or a court order. Spouse here includes married spouses and some unmarried couples, as defined in Family Law Act s. 29.
• Estates: a transfer from a personal representative to a beneficiary in satisfaction of the beneficiary's interest in the estate is not taxable.
• Changing tenure: converting a tenancy in common to a joint tenancy, or the reverse, between the same parties is not a conveyance, so no tax applies.
• Correcting deeds: a deed that only corrects an earlier legal description is not taxable if no consideration passes and tax was properly paid or exempted on the earlier document.
• Partitions: no tax is payable where co-tenants divide land so that each receives land equal in value to their original interest.
• Family farms and family business corporations: Ontario offers exemptions for certain transfers of farmed land between family members, and for certain transfers from an individual to their family business corporation.

Each exemption has conditions, and the details of the farm and corporation exemptions depend on the facts. A lawyer can confirm whether your transfer qualifies.

Refund for first-time homebuyers

Eligible first-time buyers can receive a refund of up to $4,000 for transfers on or after January 1, 2017. The buyer must be at least 18, must never have owned an eligible home anywhere in the world, must occupy the home as a principal residence within nine months, and (for agreements after November 14, 2016) must be a Canadian citizen or permanent resident.

The refund must be claimed within 18 months after registration. If the buyer's spouse owned an eligible home while married to the buyer, neither spouse can claim it. Other refund requests must be made within 4 years of paying the tax.

Extra tax and penalties to know about

• Foreign nationals, foreign corporations and taxable trustees buying residential property also pay the Non-Resident Speculation Tax at 25%.
• Land transfer tax also applies to an unregistered disposition of a beneficial interest in land, due 30 days after the disposition.
• Making false or deceptive statements, such as understating the price, is an offence. The fine is at least the greater of $1,000 or 50% of the tax that should have been paid, and imprisonment of up to two years is possible.
• 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.
• A general anti-avoidance rule lets the tax consequences of an avoidance transaction be set to deny the tax benefit.

What to do next

• Identify who is transferring, what is being paid and whether a mortgage is being assumed
• Check whether one of the exemptions above fits the facts
• Confirm whether your municipality charges its own land transfer tax
• Note the refund deadlines and gather proof of occupancy and prior ownership
• Ask a lawyer to confirm current rates and exemptions before closing

Frequently asked questions