Subsection 1(1)
Convey
Administrative Policy
LTT-3 "Transfers Involving Corporations"
Where, by virtue of a statutory amalgamation, the land or lands of two or more companies become vested in the company resulting from the amalgamation, such conveyance of land is not interpreted by the Ministry of Finance as a conveyance of land within the meaning of section 1 of the Act and, as a result, no tax is payable on these transactions. Also, any unregistered transfers of land that result from a statutory amalgamation are not dispositions under section 3 of the Act.
Value of the Consideration
Cases
OPTrust Amaranth 1 Inc. v. Ontario (Finance), 2016 ONSC 3648
The Appellants (collectively, "OPTrust") purchased five adjacent parcels of largely-vacant land pursuant to an agreement of purchase and sale (the “Agreement”) dated February 15, 2008. Pursuant to that agreement, OPTrust paid $15.9 million in cash, executed a Development Agreement (whose terms had been outlined in the Agreement) with the vendors and executed vendor take-back mortgages (“VTBs”) with a collective face amount of $26 million and which related to its obligations to the vendors under the Development Agreement. The Development Agreement provided for the payment of varying predetermined amounts if various development milestones (the “Milestones”), regarding matters such as zoning and prospective leases, were achieved by the vendors within a period extending beyond the time of closing. The Agreement expressed the purchase price as comprising the $15.9 million closing payment portion plus the “Amaranth Property Deferred Amounts”), but stipulated that the VTBs both satisfied, on their delivery, the portion of the purchase price represented by the Amaranth Property Deferred Amounts, but also stated that they were security for such amounts, and (subject to drafting difficulties) that their initial stated principal amounts aggregating $26 million would reduce if and as the deferred amounts were reduced.
None of the work was ever started, so that no obligation on the part of OPTrust to pay under the VTBs was ever triggered. The Development Agreement expired in 2009 and was formally terminated by agreement shortly thereafter, at which time all the VTBs were discharged.
OPTrust had onitially paid land transfer tax (“LTT”) based on a purchase price that included not only the cash component, but also the $26 million face amount of the VTBs and, in September 2009 (after it was clear that none of the Milestones would be met and the resulting cancellation of the Development Agreement) made a claim for a refund of this portion of the LTT.
Gans J found (at paras 27-8):
I was persuaded that at the moment the Agreement and VTBs were tendered for registration, which is the operative moment in time for LTTA purposes, no money was owed under the VTBs.
…[T]he VTBs were given merely to act as ‘placeholders’ for title purposes if and when the Milestones were reached and any payment obligation was thereupon triggered.
However, in finding that OPTrust had no refund entitlement, Gans J further found (at paras 32, 35):
…There was nothing “conditional” or “contingent” about the Development Agreement that is different from any other development agreement where the rights of one party and concomitant obligations of the other are not set out. …
[I]n Daishowa-Marubeni…Nadon J.A. [stated]:
… if the parties to an agreement attribute a value to a future liability, then the Minister is entitled to add this amount to the vendor's proceeds of disposition - whether or not the liability assumed by the purchaser is contingent or absolute.
…[T]he Appellant could have created a different contractual arrangement and availed itself of certain administrative guidelines established by MOF in 2004 which, arguably, might have resulted in a deferral of the payment of land transfer tax….
Toronto-Dominion Bank v. Minister of Revenue of Ontario, [1994] OJ No. 897
A wholly-owned subsidiary ("Realty") of the Toronto-Dominion Bank (the "Bank") was dissolved and in connection with that dissolution, Realty directed that land which it previously had owned in fee simple be conveyed to the Bank which, in turn, directed that legal title be held by Realty as bare trustee. Realty, the Bank and another wholly-owned subsidiary of the Bank ("Penlim") agreed that thereafter the legal interest in the property would be transferred from Realty to Penlim to be held by Penlim as bare trustee for the Bank. The Bank applied to the Court for direction as to whether such transfer of legal title to the Bank would trigger land transfer tax under paragraph (f) of the definition of value of consideration.
Feldman J. found that "a person who owns land in fee simple holds the entire title and is prima facie not a trustee". Accordingly, the analysis of the Minister, that when Realty held the land in fee simple it held both the equitable and legal interest in the land, represented a strained interpretation of the definition, and should not be accepted. The transfer of the legal interest in the land to Penlim would not attract land transfer tax.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Resolving Ambiguity | 85 |
Re 472601 Ontario Ltd. and Minister of Revenue (1987), 59 OR (2d) 25 (HCJ)
The appellant entered into an agreement to purchase real property for a stipulated purchase price of approximately $7.0 million, with the purchase price being stated to include the provision of services by a third party pursuant to a separate services agreement which indicated that the value of such services was approximately $3.3 million. Given that the parties clearly specified that the value of the services was included in the consideration for the sale, such value was included in the "value of the consideration".
Re Assaly and Minister of Revenue (1986), 56 OR (2d) 30 (HCJ)
A corporation owned by the appellant entered into an agreement with him in 1981 to sell vacant land to him for a purchase price of $185,000 with the agreement of purchase and sale being conditional upon the appellant and the corporation entering into a building contract under which the corporation would construct condominium units on the land. The transfer was registered in 1983 after building work had been completed.
Although the gross sale price for the conveyance was $185,000, the building contract constituted "part of the arrangement relating to the conveyance" and by virtue of the building contract arrangement a liability was assumed by the appellant as part of that arrangement. McKinlay J. noted that the Oxford English Dictionary defined "arrangement" as "a structure or combination of things for a purpose". Consequently, the total "value of the consideration" was $2,142,700 (i.e., including such liability).
Administrative Policy
Determining the Value of the Consideration for Transfers of New Homes
Construction of new home is part of the arrangement if the conveyance is dependent on the construction contract
Construction as Part of an Arrangement Relating to a Conveyance
Land is defined as including a structure to be constructed on land as part of an arrangement relating to a conveyance. This is in addition to land and any existing structures and fixtures.
Entering into separate agreements for the purchase of the land and the construction of a new home on it will not reduce the value of the consideration for the transaction if they are all integral to the arrangement relating to the conveyance. A good rule of thumb to determine if this is integral to the arrangement is: "if the purchaser doesn't enter into the agreement to construct the new home, will he or she still get the land?" Where the conveyance of the vacant land is dependent on the construction of the home, then the arrangement is to buy the land and the structure to be constructed; both agreements must be taken into account to determine the true value of the consideration.
Bulletin LTT 10-2000 "Transactions for Nominal Consideration" November 2000
Partitioning of a Co-tenancy
Where a partitioning of land takes place and each or any of the "co-tenants" receives land equal in value to their original interest in the whole parcel, no tax will be payable. This applies where one parcel of land is partitioned, i.e. that the partitioned lands are contiguous. ...
Dissolution of a Partnership
...[P]artnerships are treated as tenancies in common for purposes of the tax. Where a dissolution of a partnership that owns land takes place and each or any of the partners receives land equal in value to their original interest in the whole parcel, no tax will be payable. This applies where one parcel of land is distributed among the partners, i.e. that the distributed lands are contiguous.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Ontario - Land Transfer Tax Act - Subsection 2(1) | 223 |
A Guide for Real Estate Practitioners - Land Transfer Tax and the Registration of Conveyances of Land in Ontario 18 February 2021
Undertaking required where there may be additional consideration or the value of consideration depends on valuation
2 UNDERTAKINGS
The Land Transfer Tax undertaking
- An acknowledgement to provide documentation and information
- An acknowledgement to pay any additional Land Transfer Tax and interest determined to be payable.
An undertaking is an agreement whereby the taxpayer or their representative agrees to provide further documentation and information to the MOF to ensure that the correct value of the consideration was declared and that the correct amount of tax is or has been paid for any conveyance.
The undertaking includes a further agreement to pay any additional land transfer tax and accrued interest which may be payable to the MOF. Interest continues to accrue on any tax exigible.
The undertaking also provides that an amended Affidavit will be provided where the value of the consideration has been determined to be different than that declared at registration.
Undertakings will be accepted from either the transferee or their representative.
Situations where a Land Transfer Tax undertaking is required at the Land Registry Office
- Fair Market Value
- Tentative Value of Consideration
- Land Registrar's Discretion
An Undertaking must be provided to the Land Registry Office by either the transferee or the transferee's representative in the following situations:
- Fair market value. Where the value of the consideration is deemed to be equal to the fair market value of the lands, the MOF must confirm that the value is within an acceptable range.
Examples of situations where fair market value applies:
- Transfers to corporations where part of the consideration consists of the allotment and issuance of a share or shares of the transferee corporation.
- Transfers from corporations to shareholders.
- Leases which can exceed 50 years.
- Some final orders of foreclosure and quit claims in lieu thereof.
- Land exchanges.
- Tentative value of the consideration. Where the agreement between the parties may result in additional consideration to be given pending future events, the MOF will monitor the transaction and ensure additional tax is collected should the future conditions materialize.
- Land Registrar's discretion. If for any reason the Land Registrar is not satisfied with the Affidavit or supplementary affidavits, an undertaking may be required before registration as per subsection 5(4) of the Act.
Construction contract entered into as part of the sale arrangement is added to the value of consideration
11 FREQUENTLY ASKED QUESTIONS …
22. How is land transfer tax calculated on the purchase of a vacant lot which is subject to a construction contract?
Where a construction contract is entered into as part of the arrangement relating to the purchase of a vacant lot or lots, the land transfer tax would be calculated on the total cost of the lot plus the cost of construction.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Ontario - Land Transfer Tax Act - Subsection 2(1) | 161 |
Bulletin LTT 1-2001 Guide to the Application of the Land Transfer Tax Act to Certain Transactions June 2001
Value of consideration for option grant excludes exercise price
The definition of "convey" also includes the "giving of an option upon or with respect to any land". As a result, the notice of an option to purchase land or the assignment of an option is a taxable conveyance when tendered for registration. The value of the consideration is the amount of the consideration paid by the optionee to acquire the option, and not the option exercise price.
Where there is an unregistered disposition of a beneficial interest in land as a result of an option, tax is applicable in accordance with section 3 of the Act. The consideration will be determined in the same manner described in the preceding paragraph. A return must be filed and the tax paid on the consideration paid by the optionee to acquire the option.
Subsection 1(6)
Administrative Policy
Bulletin LTT 6-2000 Leases and the Land Transfer Tax Act June 2000
Documentary requirements/no options
Although leases that cannot exceed 50 years are not subject to tax, an Affidavit of Residence and Value of the Consideration is required for registered conveyances. Paragraph 7 of the affidavit should be completed to show that the conveyance being registered is a lease the term of which, including any extensions or renewals, cannot exceed 50 years and there are no other options, agreements, etc. that increase that term.
Consideration equals the FMV of the land (including building) where remaining lease term can exceed 50 years
Paragraph (c) of the definition of "value of the consideration" in section 1 of the Act sets out the value of consideration of land conveyed by lease not exempt from tax (see 1 above) as follows:
"in the case where a lease of land, a transfer of the interest of a lessee under a lease of land, or a notice of any kind in writing signifying the existence of an unregistered lease of land or of an unregistered transfer of the interest of a lessee under a lease of land is not exempt from tax by virtue of subsection (6), the fair market value, ascertained as at the time of the tender of submission for registration, of the land to which the lease extends or of a smaller portion of such land if only such smaller portion is conveyed."
This definition also applies to the determination of the consideration in the case of an unregistered disposition under section 3 of the Act, that is a lease that is not exempt from tax pursuant to clause 3(1)(f). The fair market value in those cases is to be determined as at the date of disposition. This valuation is subject to the ministry's verification.
Subsection 2(1)
Administrative Policy
Ontario Ministry of Finance Calculating Land Transfer Tax
Rate schedule
If an agreement of purchase and sale is entered into after November 14, 2016, and registration or the disposition occurs on or after January 1, 2017, the tax rates on the value of the consideration are as follows:
- amounts up to and including $55,000: 0.5%
- amounts exceeding $55,000, up to and including $250,000: 1.0%
- amounts exceeding $250,000, up to and including $400,000: 1.5%
- amounts exceeding $400,000: 2.0%
- amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.
MLTT Rates and Calculation
Effective March 1, 2017, the following MLTT rates and rebate will apply:
The MLTT is charged on a graduated basis depending on the value of consideration paid for the property.
Effective for all conveyances and dispositions made on or after March 1, 2017, the following table shows the MLTT at various consideration values for properties containing at least one, and not more than two, single family residences.
Value of Consideration MLTT Rate Up to and including $55,000.00 0.5% $55,000.01 to $250,000.00 1.0% $250,000.01 to $400,000.00 1.5% $400,000.01 to $2,000,000.00 2.00% Over $2,000,000.00 2.5% For all other properties, the MLTT rates at various consideration values are as follows:
Value of Consideration MLTT Rate Up to and including $55,000.00 0.5% $55,000.01 to $250,000.00 1.0% $250,000.01 to $400,000.00 1.5% Over $400,000.00 2.0% Also effective March 1, 2017, the maximum rebate for eligible first-time purchasers will increase from $3,725 to $4,475 under the new structure such that the first $400,000 consideration value is not subject to the tax. The City has also amended the first-time homebuyer rebate program eligibility rules to make them consistent with the current Ontario Land Transfer Tax (LTT) rules by restricting rebate eligibility to Canadian citizens or permanent residents of Canada.
The difference between the City and the Provincial rules is that the City's changes do not include grandparenting provisions to exempt transactions that are initiated prior to March 1, 2017.
For more information regarding amendments to the MLTT rate and rebate structure, please see the February 15, 2017 Council agenda item EX22.2: Capital and Operating Budgets (item # 311), and Bill 123 to amend to the City's Municipal Code Chapter 760, Taxation, Municipal Land Transfer Tax.
Ontario Press Release dated 20 April 2017 “Making Housing More Affordable”
This Press Release discusses the NRST proposal summarized immediately below as well as describing expanded residential rent control measures, and states that Ontario will “empower Toronto and potentially other interested municipalities to introduce a tax on vacant homes to encourage owners to sell or rent unoccupied units.”
Ontario Ministry of Finance “Non-Resident Speculation Tax” 20 April 2017
The principal announced features of the "NRST" are:
- It is a 15% tax that applies effective April 21, 2017 to the value of consideration for the transfer (including a beneficial transfer only) of a residential property in the “Greater Golden Horseshoe” where any of the transferees (e.g., a co-owner) is a foreign entity or taxable trustee.
- In approximate terms, the Greater Golden Horseshoe extends from Simcoe County (e.g., Midland but not Gravenhurst) down to the Niagara Region and Haldimand County on Lake Erie, and from the Waterloo Region to Peterborough and Northumberland Counties.
- A residential property means a real estate property containing up to six family residences (i.e., larger apartment buildings are excluded), and incudes residential condo units (irrespective of the number purchased).
- A foreign entity is a “foreign national” or a “foreign corporation.”
- A "foreign national" is an individual who is not a Canadian citizen or permanent resident as defined in the Immigration and Refugee Protection Act (Canada).
- A “foreign corporation” includes not only corporations incorporated outside Canada but also Canadian-incorporated corporations which are controlled directly or indirectly by a foreign entity as per ITA s. 256 – and also Canadian-incorporated corporations which are not listed on a Canadian stock exchange and which are “controlled…in part” by a foreign national or other foreign corporation.
- A “taxable trustee” is a Canadian citizen, permanent resident or corporation holding title in trust for foreign entity beneficiaries or a foreign entity holding title in trust for anyone.
- The NRST does not apply to a purchase made as trustee for a mutual fund trust (including a REIT or SIFT trust).
- There also are narrowly-cast exemptions re personal use by foreign nationals within the Ontario Immigrant Nominee Program or refugees – as well as limited rebate provisions re foreign nationals who subsequently (within four years) become Canadian citizens or permanent residents, who are full-time Ontario students for the following two years or who legally work full-time in Ontario throughout the following year.
- The legislation, when drafted, will contain anti-avoidance provisions whose scope at this point is unclear.
- Although the Teranet system is not yet set up to collect the NRST, in the meantime all transfers registered after April 20 (and all reporting of beneficial conveyances) must contain a statement acknowledging that consideration has been given to the application of the tax, and the tax must be paid directly to the Ministry of Finance (purportedly even before the legislation is drafted or passed).
There are various uncertainties in the absence of draft legislation or administrative guidance including:
- Would sequencing partnership purchases minimize the tax – for example if a partnership with 100% Canadian partners purchases on Day 1 and on Day 2, a non-resident subscribes for a 1% partnership interest, would this limit the 15% tax to 1% of the property value?
- Are foreign REITs exempted?
- What is meant by the concept of a corporation that is controlled "in part” by a foreign national or corporation? Is this referencing the income tax jurisprudential concept of a control group?
Bulletin LTT 10-2000 "Transactions for Nominal Consideration" November 2000
Testacy and Intestacy:
When a conveyance of land is registered from the personal representative of a deceased person to a transferee who is receiving the property in satisfaction of all or part of his/her beneficial interest in the estate of a deceased person, it is not subject to tax under the Act. The consideration will be set out as "nil" in paragraph 4 of the LTT affidavit, and paragraph 7 must state that the conveyance satisfies these conditions. ...
Partitioning of a Co-tenancy
Where a partitioning of land takes place and each or any of the "co-tenants" receives land equal in value to their original interest in the whole parcel, no tax will be payable. This applies where one parcel of land is partitioned, i.e. that the partitioned lands are contiguous. ...
Dissolution of a Partnership
...[P]artnerships are treated as tenancies in common for purposes of the tax. Where a dissolution of a partnership that owns land takes place and each or any of the partners receives land equal in value to their original interest in the whole parcel, no tax will be payable. This applies where one parcel of land is distributed among the partners, i.e. that the distributed lands are contiguous.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Ontario - Land Transfer Tax Act - Subsection 1(1) - Value of the Consideration | 142 |
A Guide for Real Estate Practitioners - Land Transfer Tax and the Registration of Conveyances of Land in Ontario 18 February 2021
No LTT on mere partition of co-ownership
Dissolution of co‑tenancy or partnership
Where a transfer is tendered that is described as a dissolution of a co‑tenancy or partnership by way of a partitioning, the Affidavit must state:
"The dissolution of a co‑tenancy (or partnership) by way of a partitioning. Lands are contiguous and neither party is increasing or decreasing his original interest in the whole parcel as a result of the partitioning."
A dissolution of a co‑tenancy or partnership usually arises when more than one individual or entity purchases a single lot, obtains a severance, and each party then acquires a transfer of land representing its percentage interest in the original parcel. The same principle applies where lots in a subdivision are purchased by more than one person and then divided up between the individual purchasers according to their respective interests.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Ontario - Land Transfer Tax Act - Subsection 1(1) - Value of the Consideration | 541 |
Forms
Subsection 2(6)
Administrative Policy
Bulletin LTT 6-2000 "Leases and the Land Transfer Tax Act" June 2000
Regulation 700, RRO 1990 provides ...[that] in the case of a surrender or notice of surrender of the rights of a lessee under a lease or a sublease to the person entitled to the reversion of such lease or sublease, when the term of that lease (including any renewals or extensions) can exceed 50 years, the consideration is reduced to the actual consideration passing (or to zero if there is no consideration passing).
Subsection 2(8)
Cases
Omers Realty Corporation v. Ontario (Finance), 2012 ONCA 400
In affirming the finding below that the Ontario Municipal Employees Retirement System (“OMERS”) Board and two of its subsidiaries, which invested in commercial real estate, were Crown agencies, the Court stated (at paras. 4-5, 7):
The motion judge correctly focussed on the Government’s de jure control of the OMERS Board and, in our view, correctly concluded that “at the material time, the OMERS Board was a Crown agency.”
On the second issue [respecting the subsidiaries], ...the motion judge [correctly] concluded:
[T]he statutory scheme exempts Crown agencies, in this case the OMERS Board, from having to pay land transfer tax. The scheme recognized that the OMERS Board could act through subsidiaries and allowed for subsidiaries that held real estate to be wholly-owned. It would be inconsistent with the scheme to find that these subsidiaries were not Crown agencies and, thus, remove the benefit to which the OMERS Board would otherwise be entitled. ...
In addition, when the Government decided to change its policy in this domain, it did so by enacting a law that expressly provided that OMERS was no longer a Crown agency... .
Section 3
Subsection 3(1)
Cases
Upper Valley Dodge Chrysler Ltd. v. Minister of Finance (2003), 67 OR (3d) 196 (Sup Ct J), aff'd (2005), 73 OR (3d) 146 (Sup Ct J Div Ct)
The transfer of land by an individual to a corporation which had been using the land in its car dealership business was an exempt transaction notwithstanding the requirement in s. 3(1) that prior to the transfer the land had been used "predominantly in the operation of an active business which was operated exclusively by an individual". Although prior to the transfer the business was owned by the corporation, that business was operated by the individual due to his effective control of the business. Furthermore, the word "individual" should be interpreted to include a corporation given that there is no relevant statutory definition of this term.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Individual | 47 |
Administrative Policy
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
A similar situation results without the assistance of subsection 3(12) in the case of corporations which amalgamate through statutory amalgamation. In the ministry's view, for land transfer tax purposes, the amalgamated corporation is a continuation of the corporations which have been amalgamated. As a result, the corporations which have been amalgamated, if they were affiliates immediately before and at the time of amalgamation, will always be affiliates following the amalgamation.
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
S. 3 tax not triggered until consideration paid
Completion of a transaction occurs when the value of the consideration called for in the agreement is satisfied. Clause 3 (1)(g) reflects this indicator of completion of an agreement, and in effect suspends section 3 tax being levied on a purchaser or assignee until such time, if ever, as the conditions at 3(1)(g)(i) and (ii) cease to exist. …
For example, A and B execute an agreement in which A agrees to sell and B agrees to buy an interest in land. … The consideration is the assumption of an existing mortgage and payment of cash. Fifteen days following the execution of the agreement B assigns his/her rights in the agreement to C in return for cash… .
B would not be subject to tax under section 3 of the Act. This is due to the fact that the provisions in subclauses 3(1)(g)(i) and (ii), respectively, being the value of the consideration specified in the agreement has not been paid to or for the benefit of the transferor and the liability for the value of the consideration specified in the agreement has not been assumed by or on behalf of the transferee have not been fulfilled.
...Back to Back agreements of purchase and sale
In some instances A will enter into an agreement of purchase and sale of land with B. ... B then enters into an agreement of purchase and sale for the same land with C. The completion date of this agreement is the same as the completion date in the agreement between A and B. ...
Administrative concession
...[A]s an administrative matter, the ministry has stated that, provided the two agreements are completed at the same time or within moments of one another, it will not raise an assessment against B for the tax incurred under section 3 of the Act.
Bulletin LTT 10-2000 Transactions for Nominal Consideration November 2000
Partitioning of a Co-tenancy
Where a partitioning of land takes place and each or any of the "co-tenants" receives land equal in value to their original interest in the whole parcel, no tax will be payable. This applies where one parcel of land is partitioned, i.e. that the partitioned lands are contiguous. ...
Dissolution of a Partnership
...[P]artnerships are treated as tenancies in common for purposes of the tax. Where a dissolution of a partnership that owns land takes place and each or any of the partners receives land equal in value to their original interest in the whole parcel, no tax will be payable. This applies where one parcel of land is distributed among the partners, i.e. that the distributed lands are contiguous.
Bulletin LTT 3-2000 “Transfers Involving Corporations” April 2000
Currently the only forms of security acceptable to the Minister are (a) payment of the tax or (b) letter of credit, for the amount of the tax together with applicable interest for the three year period. The Branch may be contacted to calculate the tax and interest.
Attached to this bulletin is a sample form of the letter of credit required.
Forms
Finance
Ontario Ministry of Finance Proposal 17-MOF010, posted 14 July 2017 “Facilitating the Payment and Administration of the Land Transfer Tax under Section 3 of the Land Transfer Tax Act”
The Ministry has released (with a comments-due date of August 28, 2017) a proposed modification to the s. 3 system for imposition of LTT on beneficial acquisitions by unit trusts and limited partnerships.
Separate person status for MFTs and SIFT LPs
“Group 1” vehicles will themselves be treated as separate LTT taxpayers and, thus, be required to pay LTT on their beneficial acquisitions – and conversely acquisitions or redemptions of interests in Group 1 vehicles will no longer trigger LTT. Group 1 vehicles are:
- SIFT trusts and partnerships as defined for ITA purposes;
- mutual fund trusts the units in which are eligible for the MFT unit exemption (described in the current (70/91) Regulation); and
- pension trusts which are exempt under ITA s. 149(1)(o).
LTT collection obligation for other unit trusts and Ontario LPs
There are two requirements to be a "Group 2" vehicle (which exclude Group 1 vehicles). First, it must be:
- an ITA s. 108 unit trust; or
- a partnership that has filed (or is required to file) a declaration under the Limited Partnerships Act for Ontario (with the Acts of other provinces not being mentioned)
Second, it must have issued units or partnership interests to 50 or more arm's length investors.
Unitholders or partners of "Group 2" vehicles will have the same substantive liability for s. 3 tax as before. Although the Group 2 vehicle itself will continue to be a flow-through for most s. 3 purposes, it will become an LTT collector and be required to collect and remit LTT calculated at the unitholder or partner level - and will be authorized to collect such amounts from them through withholding from distributions. If it collects an insufficient amount, it will be subject to a penalty of at least the amount it failed to collect.
5% de minimis exemption
A Group 1 vehicle may itself access the de minimis exemption qua partner in a partnership.
A Group 2 unitholder or partner who is an individual, corporation or Group 1 vehicle may access the de minimis exemption qua partner in a Group 2 vehicle.
Other trusts and partnerships unaffected
No changes are proposed in the treatment of other ("Group 3") trusts or partnerships. Foreign entities generally will be classified the same as by CRA.
Disclosures by nominees
There will be expanded disclosure requirements by nominees. For example, at the time of title registration, they will be required to disclose the legal names and business registrations numbers of the partnerships or trusts for whom they now hold title.
Clause 3(1)(f)
Administrative Policy
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
Option in lease
Although leases with a term of less than 50 years are not subject to tax, the granting of an option, contained in such a lease, triggers the tax. The tax under section 3 is payable on the granting of an option, when no registration occurs, even if that option is contained in a lease than cannot exceed 50 years.
Clause 3(1)(g)
Administrative Policy
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
A and B execute an agreement in which A agrees to sell and B agrees to buy an interest in land. Completion is scheduled for 60 days following the execution of the agreement. The consideration is the assumption of an existing mortgage and payment of cash. Fifteen days following the execution of the agreement B assigns his/her rights in the agreement to C in return for cash, and C assumes B's position under the agreement. On the scheduled closing date A, on direction, provides a deed of the land to C, who pays the required cash to A and assumes the liabilities. C does not register the deed. ...
C will obtain a beneficial interest in the land by virtue of the assignment of B's interest. At that point, C will...be sheltered by the provisions in subclauses (i) and (ii) in that the cash called for on closing in the agreement will not have been paid, and the assumption of the existing mortgage will not have taken place.
However, when C pays over the cash and assumes the liability as set out in the agreement, the sheltering provided by subclauses (i) and (ii) will cease. At such time, C will be taxable under section 3 of the Act, as the beneficial interest which C has received will then fall within the terms of a disposition of a beneficial interest in land.
| Other locations for this summary | |
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| cash assignment of purchase agreement |
Subsection 3(5)
Clause 3(5)(a)
Administrative Policy
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
Registration within 30 days generally voids s. 3 tax
The Act provides at clause 3(5)(a) that, if there is a disposition of a beneficial interest in land, an instrument evidencing the disposition of the beneficial interest in land is registered within 30 days after the date of the disposition and tax payable under section 2 has been paid, no tax is payable under section 3 of the Act.
The result is that in the majority of cases where registration follows the closing of a transaction and tax is paid at the Land Registry Office, the person acquiring the interest need not be concerned with section 3 of the Act.
Subsection 3(9)
Clause 3(9)(b)
Administrative Policy
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
All tax deferred is required to be secured notwithstanding that there may be several successive deferrals within the same corporate circle.
In the event the undertaking required under subsection 3(9) is partially satisfied, for example, by a tax-paid sale of part of the land to a person who is not an affiliate of the corporation, the Minister will consider reduced security.
Clause 3(9)(c)
Administrative Policy
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
Clause (c) involves cases in which the beneficial interest in the land leaves the corporate circle of affiliated corporations and is acquired by a non-related third party. Provided the tax payable is paid on the acquisition by that third party, the corporation or corporations which had received a deferral may have their undertakings shortened and their deferred tax cancelled.
Forms
Subsection 3(11)
Clause 3(11)(a)
Cases
2143569 Ontario Inc. v. Minister of Revenue, 2014 ONSC 4628
A corporation holding both legal and beneficial ownership of an Ontario property ("Your Host") transferred registered title pursuant to a trust agreement with its parent ("McIntosh Holdings"). A week later (on 12 September 2007), Your Host transferred beneficial ownership to the appellant. The appellant then applied for deferral under ss. 3(9) and (11) of the LTTA. A year later, the City of Niagara Falls registered a development agreement on title, which recited that McIntosh Holdings held title on behalf of the appellant.
In rejecting the position of the Minister that cancellation of the deferred tax was not available by virtue of s. 3(9)(c) and 3(11)(a) because the development agreement was an instrument evidencing the disposition of the beneficial interest, Lofchik J stated (at para. 18):
Evidence of "the" disposition would at the very least have to identify the entity disposing of the property (Your Host) and the entity benefitting from the disposition (2143569 Ontario Ltd.). The recital… does not accomplish this.
Subsection 3(15)
Cases
Dam Investments Inc. v. Ontario (Finance), 2007 ONCA 527
David Mady was the sole shareholder of Dam Investments Inc. (DAM); his father, Charles Mady was the majority shareholder of Mady Family Holdings Ltd. (MFHL), and the companies carried on business together in a joint venture. Charles Mady had de facto control of both companies. DAM sought to access the deferral in s. 3(9) of the LTTA respecting its acquisition of three properties from MFHL. At the time of acquisition, Section 3(14)(c) of the LTTA provided that ss. 1(3) through 1(6) of the Securities Act (Ontario) applied in determining whether one corporation is an affiliate of another. S. 1(3) provided:
A company shall be deemed to be controlled by another person or company or by two or more companies if,
(a) voting securities of the first-mentioned company carrying more than 50 per cent of the votes for the election of directors are held, otherwise than by way of security only, by or for the benefit of the other person or company or by or for the benefit of the other companies; and
(b) the votes carried by such securities are entitled, if exercised, to elect a majority of the board of directors of the first-mentioned company.
In finding that the deferral was not available, Feldman J.A. stated (at para. 16):
The deeming provision in subsection 1(3) of the Securities Act states how "control" is defined for the purposes of the LTTA – on the basis of majority voting rights. It says nothing of de facto control. Had the legislature intended that "control" would include de facto control in addition to de jure control, as defined in subsection 1(3), it would have said so and not made specific reference to subsection 1(3) of the Securities Act which references only de jure control.
Section 12
Subsection 12(10)
Administrative Policy
Objections and appeals — Frequently asked questions, forms and publications
Tax payable even if objected to
…Do I have to pay the amount assessed that is in dispute while the objection is under review?
Yes, payment is required even if you have filed, or intend to file, a Notice of Objection. There are no provisions in the Ontario tax statutes that allow for the suspension of payment of an amount that has been assessed, but is in dispute, pending the outcome of the Notice of Objection or Notice of Appeal process. Additional interest will be assessed on the principal liability if full payment is not received when the assessed amount is due. Taxpayers who successfully object or appeal will be paid interest on any amounts paid on an assessment, from the dates the payments were made. However, the amount refunded, including interest, will first go to reducing other tax liabilities owed to Ontario before any refund is made to you.
Regulation 70/91 [s. 3 exemptions]
Administrative Policy
Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land 6 April 2022
5% exemption applied based on accounting profit percentage
Partner's Interest
For purposes of O. Reg. 70/91 the determination of the interest of a partner in a partnership is a reference to the entitlement to profit. The limit for the exemption is any amount in excess of 5%, so an acquisition of an entitlement to profit up to and including 5% will be exempt.
Entitlement to profit is considered by the ministry to be an entitlement to what, in accounting terms, amounts to net earnings. The entitlement to profit is not to be calculated, for the purpose of application of the Regulation, based on a partner's right to a percentage of assets of the partnership on a winding-up, dissolution, or notional winding-up or dissolution.
Ontario Ministry of Finance, Land Transfer Tax 'De Minimis' Partnership Exemption: Clarifying Amendments for Certain Dispositions 6 April 2022
This publication explains the amendments that have been made to Ontario Regulation 70/91 (Regulation) through the filing of O.Reg 35/16. ...
Summary of revisions to 5% de minimis rule
The amendments clarify that, for dispositions on or after July 19, 1989:
- One of the following must be satisfied by the person (the individual or corporation) who acquires the beneficial interest in land:
- The person was a partner in the partnership immediately before the disposition and that person's entitlement as a partner to a percentage of the profits of the partnership, assuming it had profits to distribute, increased as a result of the disposition, or
- The person became a partner in the partnership as a result of the disposition and became entitled as a partner to a percentage of the profits of the partnership, assuming it had profits to distribute, as a result of the disposition.
- For limited partnerships, the provisions of the Limited Partnerships Act apply to determine if the person is a partner in a limited partnership.
- For further clarity, the amendments state that the Exemption is not available if the partner who acquires the partner's interest in the partnership is a trust (such as a REIT) or another partnership. ...
5% exemption not available on partnership or trust acquisitions
Multi-layered structures
It is possible that a taxpayer (an individual or corporation) may acquire a beneficial interest in land through trusts or partnerships.
The Exemption is not available when a REIT or another type of trust becomes a partner in a partnership that holds land. Similarly, the Exemption is not available when a partnership becomes a partner in another partnership that holds land.
Grandfathering re rulings
If a person has received a written ruling from the Ministry on or before February 18, 2016 that applies to a taxpayer-specific disposition of a beneficial interest in land that is a partner's interest in a partnership, the Ministry will generally consider the ruling to continue to apply to the taxpayer-specific disposition... .
Commentary
The chart below provides a general comparison of the Ontario land transfer tax regime with that of the other nine provinces.
2% on excess
Mortgages: $50 plus $1.00 for each $1,000 of principal amount
$25 on excess to $8,400;
0.3% on excess
0.5% on next $60,000;
1.0 % on next $60,000;
1.5% on next $50,000;
2.0% on excess over $200,000
0.5% on first $55,000 of value of considerations;
1.0% on next $195,000;
1.5% on next over $150,000;
2.0% on excess over $400,000 (so that for consideration ("C") exceeding $400,000 the tax equals 0.02*C - $3,525)
Plus additional 0.5% tax on property with one or two family dwellings to extent the consideration exceeds $2,000,000
Also a 15% tax on direct or indirect non-resident purchases of designated land (generally residential, excluding large (more than 6 units) apartment buildings and including condos) in central Ontario (generally, from Simcoe County down to the Niagara Region and Haldimand County on Lake Erie, and from the Waterloo Region to Peterborough and Northumberland Counties). Effective March 30, 2022, this “Non-Resident Speculation Tax” rate was increased to 20% and applies provincewide.
Exemptions for unregistered dispositions:
See MLTT Rates and Calculation
Toronto Municipal Code, C. 760
1.0% on next $195,000;
1.5% on next $150,000;
2.0% on excess over $400,000;
Plus an additional 0.5% on property with one or two family dwellings to extent the consideration exceeds $400,000
Duties are collected on the registration of a deed of transfer and, more recently, on unregistered transfers.
However, since 2017, municipalities have been authorized to increase the marginal rate for value in excess of $500,000 to 3.0%, and some have done so.
For Montreal properties, the rate is increased to 2% for properties between $500,001 and $1,000,000 and to 2.5% for properties over $1,000,001.
Exemptions for
No exemptions for transfers between related corporations
Mortgage: