What is Land Transfer Tax and How Do I Calculate How Much I Owe?

As the famous saying goes – ‘Nothing is certain except death and taxes.’ When purchasing or selling a real estate property in Canada, you must consider several closing costs, including land transfer tax. In this article, we discuss how it is calculated and when tax exemptions are available.

What exactly is the land transfer tax?

When buying a property in Canada, you must remember to pay the land transfer tax, sometimes referred to as property transfer tax or welcome tax. Simply put, it is a part of the revenue, which is collected and decided by the province or municipality.

Depending on where you live, you will be required to pay a specific number. In some places, it is called the ‘property registration fee’ (Alberta and Saskatchewan) or the ‘welcome tax’ (Quebec). Either way, it is the same concept, just in a different name.

Land transfer taxes are not the same for all the country. How much you must pay depends on the region. Moreover, some municipalities require a much higher fee than other places. The upside – first-time home buyers can usually get a part of the payment refunded.

How do you calculate the fee?

If you are planning on buying a property, it is important to calculate the approximate land transfer tax before. To do that, you need to know the value of your chosen house or apartment. Typically, it is similar to the offered price.

What complicates the matter is the fact each province and municipality decide their own tax rate. On some occasions, both levels of government impact the amount you will have to pay.

Can the seller take care of the land transfer tax?

 Unfortunately, only the buyer is responsible for paying the land transfer tax.

Keep in mind that the fee must be paid as soon as you become the owner of the property. The upside is that you have to pay the land transfer tax once. It is not like the property taxes, which must be paid yearly.

Is it possible to avoid land transfer tax?

Generally – no. If you purchase a property in Canada, you will be required to pay some kind of transfer tax. But – as we mentioned before – as a first-time buyer, you can get a part of it refunded. This depends on the price of the house, as well as the province and municipality. The tax can also be avoided if you are buying a newly built home or  are transferring the property:

• Between spouses
• From an individual to a family business
• From parent to child

The same goes for a farming property. If it is exchanged between family members, you probably won’t have to deal with land transfer tax. Still, it is best to consult an accountant or tax specialist to understand the best way to navigate your situation.

If you have any questions about it, our team at Levy Zavet will happily help. Request a free consultation here.