Real Estate Transactions: The Tax Component
LAND TRANSFER TAX (LTT)
When you buy land or an interest in land in Ontario, you pay land transfer tax. Land includes, but is not limited to, buildings, buildings to be constructed, and fixtures (chattels affixed on the real property, such as lights, or HVAC equipment).
Certain exemptions apply, for example, transfers between spouses, trustees-beneficiaries, or farm properties transferred to family members for the purpose of farming. The Sellers do not pay this tax (although the sale may attract capital gains tax for the the seller). The LTT is paid on closing by your lawyer when the deed to the property is registered on your name.
If you buy a property in the City of Toronto, an additional LTT applies in the same amount as the provincial tax resulting in a "double tax" for Toronto real estate. First-time homebuyers get a break by receiving an LTT rebate on closing of up to $4,000 (or $8,000 if the property is located in Toronto).
LTT is based on the consideration paid to acquire the property, which normally means the purchase price but it can also include any amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land, or the value of any property given in exchange.
Calculate the amount of LTT for your property: Ontario Land Transfer Tax Rates 2022 Calculator
HARMONIZED SALES TAX (HST)
Industrial and commercial property purchase transactions attract HST. This tax is either included in the purchase price when the agreement is negotiated or added to the purchase price on closing. The HST may also be deferred by the buyer. Your real estate lawyer will prepare the documents required to do this.
The HST is calculated at the rate of 13%, applies to a builder's sale of a newly constructed or substantially renovated single- or multi-unit residential complex.
A sale of of a previously occupied house is exempt under the HST.
HST also applies, of course, to services associated with the closing process, such as real estate commissions and the lawyer’s legal fees.
NON-RESIDENT SPECULATION TAX (NSRT)
This tax is paid by foreign nationals, corporations, or taxable trustees who buy real estate in the province of Ontario. NSRT is calculated at a rate of 20% of the purchase price, as of March 30, 2022. A foreign corporation is one who is controlled (holding shares of 51% or more) by a foreign national or another foreign corporation.
Exemptions from the NRST are available to a foreign national who:
is confirmed under the Ontario Immigrant Nominee Program (”nominee”) at the time of the purchase that the property will be used as the foreign national’s principal residence;
is conferred the status of “convention refugee” or “personal in need of protection” (a “refugee”) under the Immigration and Refugee Protection Act at the time of the purchase or acquisition; or
has a spouse who is a Canadian citizen, Canadian permanent resident, nominee or refugee and the foreign national purchases a residential home jointly with that spouse
To learn more about applicable taxes on the closing of your home, and other costs, get in touch with our real estate department.