Land Transfer Tax and Land Transfer Tax Rebate
Whenever you are confronted with the willingness to purchase a land or land interest in Ontario, you have to pay tax on the land transfer. It is payable on every transfer of the land proposed to be registered and the entire unregistered disposal of the land beneficial interest unless it is exempted under the tax regulations act. The subsection 1(1) of the act defines the land as the buildings, fixtures, the structures to be under construction and any interest charged upon the three.
Those individuals who buy a home for the first time are qualified to be offered a refund of all or some bit of the tax. In order to successfully claim a tax refund, one has to be above 18 years of age because it is the minimum age qualification for one to claim the ownership or interest related to the home anywhere around the world. A previous owner of a home means that you’re not eligible for the homebuyer’s refund of the first-time land transfer tax. The methods involved in securing a home, for example, through gift, inheritance or purchase is not relevant.
The tax allocated on land transfer is calculated on the considered value as stated in the sub-section 1(1) of the land regulation. This includes the buying price, conferred benefits, assumed liabilities, the upgrade cost and the soft cost. To some extent, the value considered is assumed to be the land fair market value such as the leases that comes alongside terms which exceed fifty years and other transfers between shareholders and the corporations.
It is important to note that provincial tax on the land transfer is applicable for all the Ontario properties. Toronto properties are also entitled to additional transfer tax which is only applicable to them on top of provincial tax transfer.
Who pays the Land Transfer Tax?
The buyers of properties in Ontario have to submit tax on land transfer whenever they purchase a property, but sellers are exempted from land transfer tax paid. Therefore, when the deed for the new home is put on your name, your lawyer has to arrange for the tax to be paid on land transfer.
Calculating Land Transfer Tax
Vacant Lot Construction Contract
In a situation where the construction contract is included as a section of the arrangement which relates to the buying of vacant lots, then the consideration value is tabulated on:
Value Considered in Foreign Currency
Every coin must be expressed in terms of Canadian dollars. The transfer of the land tax statement should be allowed as a measure of the value. Also, the date for changing the dollar needs to be:
The Tax Rates
Taking effects from 1st January 2017, the tax rates for the land transfer depend on the agreed date of sale and purchase. In case the agreement of sale and purchase is entered after 14th Nov 2016, and it happens that there is an occurrence of registration or disposition, after 1st January 2017, then the tax rates of the value considered will appear as follows:
amounts equal to $55,000: 0.5%
amount ranging between $55,000 to 250,000: 1.0%
amount ranging between $250,000 to $400,000:1.5%
amounts above $400,000:2.0%
the amount above $2,000,000, where land has one or two-family residences: 2.5%
Transitional Rates of Tax
The following rates of tax on land transfer are applicable to all dispositions and registrations which occur before 1st Jan 2017.
This tax is then calculated on the consideration value at the following rates:
amount equal to $55,000: 1.0%
amount ranging between $55,000 to $250,000: 1.0%
amounts above $250,000: 1.5% amounts above $400,000,
where the land has one or two single-family residences: 2.0%
For the dispositions with agreements of sale and purchase that were entered before 14th November 2016, all those rates will be applicable regardless of the disposition or registration.
Example of Land Transfer Tax Calculation
For the land transfer or the placement of a beneficial interest in land in which the consideration is equal to $ 400,000 is calculated as follows.
$55,000 is multiplied by 0.5% = $275
Multiply the exceeding amount that is $55,000 to $250,000 by 1.0% =$1.950
Multiply the exceeding amount that is from $250,000 to $400,000 by 1.5% = $2,250
Therefore the total payable tax on land transfer = $4,475.
Well, there exists a calculator that can be used in the calculation of tax on land transfer in Ontario. This will, therefore, make your calculation of land tax rates easier and more accurate.
Land Transfer Tax Calculator
Documentation Required for Pre-Payment of Land Transfer Tax
Copy of draft Adjustment statement
A cheque for the tax of land transfer
Copy of preparation documents
Copy of purchase and sale agreement with schedules attached
A cover letter demanding for the pre-payment of land transfer tax
Automatic Calculation of Tax on Electronic Registration
Deducing the value of Consideration for New Home Transfers
This report offers clear guidelines that will help towards understanding the method of calculating consideration value when a newly constructed home is purchased. Actually, it is not going to replace the law that is found in related regulations, and the Land Transfer Tax Act.
The Tax Base
The actual value to be considered is the amount that will be declared on the tax statements of the land transfer especially on the land registrations made by electronic, or the Affidavit of the Land Transfer Tax, needed to fill using the land Registrar connected to all conveyances availed for registration. Tax on land transfer is calculated on the considered value defined in subsection 1(1) Act of the land transfer tax.
Factors Considered in Determining the Value of the Consideration
Upgrades and Extras
Those individuals buying new homes come to terms to a base price for purchase and then offer advice to the constructor of any upgrade or extra that they require. The value of these upgrades and extra included as part of the structure are:
Entrances and extra doors
Changes in architectural designs
Roughed in washrooms
Upgraded flooring, doors, cupboards counter, windows and many more
The value of upgrades on the land is also taken care of in the determination of the value of the consideration. Examples of these upgrades are:
For a new home, builders need to install gas, water, hydrometers and so forth. In a situation where the builder adds the installation cost, above and over the purchase price defined on the agreement of sale and purchase, the installations value have to be included during the period of valuable consideration.
Assumed Miscellaneous and Liabilities Costs
The statement of value consideration takes care of any liability value assumed and any benefit of the value considered as part of the arrangement that is more of conveyance. In most cases, the builder assumes liabilities and incurs other miscellaneous costs that are passed to a new home buyer. As the costs are assumed by the new buyer, they form a part of the value to be considered. Examples include: Development charges The Ontario New home warranty fee Architect’s fee A late request for a free upgrade. Development levies increase imposed by the municipality
The General Overview on Tax Refund
The tax on land transfer applies to all transference of the land in Ontario. Those buying a home for the first-time are qualified to be refunded all or some part of the payable tax.
For the sale and purchase agreement that was entered before 14th December 2007, the refund is going to apply only on the purchase of a home that was newly constructed.
For the sale and purchase agreement entered after 13th December 2007, the refund is only applicable to all homes on resale or newly constructed.
The maximum amount one may receive in rebate is $4,000. Any properties over $368,000 in value would only receive a maximum rebate of $4,000
Taxpayer’s qualifiers may secure an immediate refund during the period of registration as follows:
If registration is done on paper, by filing an Affidavit of Ontario Land Transfer Tax refund for the first-time buyers of qualified homes form at the Registry Office of Land
If you’re doing registration electronically, you have to complete appropriate statements under the tab explaining the electronic affidavit of the land tax transfer.
In case the refund is claimed during the period of registration, it may tend to offset the tax on the land transfer that has to be paid. If the refund is not requested during the period of registration, then the tax has to be paid, the form for the claim of refund need to be submitted to the finance ministry. And no interest should be issued on the refund.
First Time Home Buyer Ontario Rebate Amounts
Provincial Land Transfer Tax Rebate (PLTT): Starting January 1, 2017 maximum amount of rebate is $4,000
Municipal Land Transfer Tax Rebate (MLLT): On or after March 1, 2017 First Time Home Buyers who qualify for rebate may receive a maximum rebate of $4,475.00
Electronic Registration made on or after 1st January 2017
A Teraview software used in order to access the electronic land registration system of Ontario may not be able to include the transitional rates of tax. Taking effect after January 1st, 2017, all the electronic registrations will be done at the new tax rates and tax brackets. Following the right process, anyone who could have overpaid the land transfer tax is entitled to a tax refund of the portion of land overpaid. Alternatively, transferees are likely to pre-pay tax at the ministry of finance.
Who qualifies for land Transfer Tax Rebate?
The following are the requirements and the maximum possible rebate eligibility.
One must be above 18 years
You have not had a chance to own a home anywhere around the word
Your spouse does not own home in the course of your marriage
You will have to settle in the house within the first nine months of purchase
A claim must be submitted in the period of 18 months of purchase
The new home should be eligible for warranty
How the Land Transfer Tax Rebate Works
If we take Ontario as an example, the land transfer tax rebate is entitled to offset all other land transfer taxes on homes with a maximum value of $227,500. In this case, we mean that a home with a valuation of $227,500 will be subjected to the taxation of $2,000. But if one qualifies for the Land Transfer Tax Rebate, you are entitled to a total payable tax of zero.
Documents Required for Tax Refunds
Copy of summary for the docket that clearly shows the tax to be paid
Copy of sale and purchase agreement, with schedules fully attached
Copy of adjustments statements
Copy of registered instrument
Cover letter setting that gives the reason for refund and to whom the cheque for refund should be paid to
Consideration value depending on the fair market value and any documentation acting as an evidence of the fair market value for the land.
Property Tax Vs Land Transfer Tax
Often many people confused Land transfer tax with property taxes. When you buy or acquire a significant interest in property that is registered at the Office of the land title, you will be responsible for payment of tax on property transfer. This must not be confused with yearly property taxes.
The difference that is drawn between the tax on land transfer is it is paid just once by every buyer during the period of purchase, unless you are purchasing home for the first time, you're likely to be exempted from some or all following the amount of purchase you made. While the property taxes are usually submitted annually by all the owners. This is used in the maintenance of the of the city and other development necessities.
Purchasing a home is likely to be very expensive since there are several associated closing costs such as the tax on the land transfer. But some of the costs can easily be recovered by filing a claim for the land transfer tax rebate. Therefore, this detailed information should help you with the knowledge regarding ownership of land in Ontario and the possible associated rates of taxation.