Land Transfer Tax Act

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

monetized contingent future obligations were included

The Appellants (collectively, "OPTrust") purchased five adjacent parcels of land pursuant to an agreement of purchase and sale (the “Agreement”) dated February 15, 2008. At the closing of the purchase on March 14, 2010, OPTrust paid $15.9 million in cash, executed vendor take-back mortgages (“VTBs”) with a collective face amount of $26 million and executed a Development Agreement (whose terms had been outlined in the Agreement). The Development Agreement provided for the payment of varying predetermined amounts if various development milestones (the “Milestones”), re 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 paid land transfer tax (“LTT”) at closing based on a purchase price that included the $26 million face amount of the VTBs, and subsequently 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

(f) not engaged where fee owner transferred beneficial ownership then registered title

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 79

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).

Words and Phrases
relating to arrangement

Administrative Policy

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(8)

Cases

Omers Realty Corporation v. Ontario (Finance), 2012 ONCA 400

OMERS and subsidiaries were Crown agencies

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... .

Words and Phrases
Crown agency

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.

Subsection 2(1)

Commentary

The chart below provides a general comparison of the Ontario land transfer tax regime with that of the other nine provinces.

Prov. Legislation Basis of tax or fee Basic rate Exemption
BC Property Transfer Tax Act Fee on registration of a "taxable transaction" (including a disposition of a lease and a name change application in respect of an amalgamation) 1% of first $200,000 of fair market value;

2% on excess

No tax on
  • mortgages
  • leases where remaining term including extensions is under 30 years
  • registration of name change (under s. 191(1) or (3) on Form 17) following conventional Canadian amalgamations (e.g. under BCBCA, CBCA, OBCA)(PTT 012) is exempted under s. 14(4)(u) – it is typical to file Forms 17 and Property Tax Returns (but with no tax) for all fee simple properties following amalgamation
AB Land Titles Act [Land Titles Fees Registration] Prescribed fee on registration of
  • transfers, notifications and leasehold titles
  • mortgages and encumbrances
  • other
Transfers and leasehold interests: $50 plus $1.00 per each $5,000 of property value (with leaseholds valued at 5% of the FMV for each remaining year of term - up to FMV including where there is a filing of a leasehold caveat)

Mortgages: $50 plus $1.00 for each $1,000 of principal amount

Fee for other changes in registered ownership (including notice of amalgamation) is $15)
SK Land Titles Act, 2000 ISC Land Titles Fees Prescribed fee for transfers or other title updates 0% on first $500 of property value,

$25 on excess to $8,400;

0.3% on excess

No fee or tax on filing certificate of amalgamation on title
MB Tax Administration and Miscellaneous Taxes Act, Part III Tax on tender for registration of a transfer 0% on first $30,000 of FMV

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

No tax on:
  • mortgages
  • leases
  • transfers on winding up of wholly owned subsidiary
  • Modest fee for updating name of amalgamated title holder based on certificate of amalgamation filed with Registry
ON Land Transfer Tax Act Tax on
  • tender for registration of a conveyance
  • tender for registration of a notice signifying the existence of an unregistered conveyance
  • unregistered disposition of a beneficial interest in land

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
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) 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)

No tax on:
  • mortgages
  • leases with remaining term including extensions or renewals provided for in the lese or related documents of under 50 years
  • transfer to nominee for nil consideration if no relevant previous beneficial transfers
  • transfers on amalgamations (LTT-3)

Exemptions for unregistered dispositions:

  • de minimis partnership transactions (5% increment per year), but not where transferee is trust or partnership
  • transfer or issuance of mutual fund units
  • transfers between affiliated corporations (if timely deferral application and no subsequent registration in group (s. 3(13.1)))
  • butterfly reorganizations
  • employee relocation plans
TOR See MLTT Rates and Calculation City of Toronto imposes a tax (over and above Ontario tax) on the same base as Ontario 0.5% on first $55,000 of value of consideration;
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

Same as Ontario
QC Act Respecting Duties on Transfers of Immovables Municipalities are obliged to levy their own duties on the transfer of an immovable.
Duties are collected on the registration of a deed of transfer and, more recently, on unregistered transfers.
Calculated on the "basis of imposition:" the greatest of:
  • consideration furnished;
  • price in deed;
  • and market value for municipal tax purposes (i.e., municipal roll value multiplied by designated factor):
    • 0.5% of basis of imposition up to $50,000
    • 1.0% on the next $200,000
    • 1.5% of excess

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.

No tax on
  • mortgages
  • leases with an unexpired term including renewals/extensions mentioned therein of not more than 40 years (s. 1, "transfer")

Exemptions for

  • transfers between closely related (at least 90% common ownership by votes) persons if 2-year hold (ss. 19(d), 19.1, TA, s. 1129.29)
  • similar 90%/2-year test for corporate partner/partnership transfers (see IB 2017-14)
  • transfers on amalgamation (s. 19(c))
  • transfers by an individual to a trust of which the indiviual or related individuals are beneficiaries (s. 20(e)), and similar exeption in reverse direction (s. 20(e.1))
  • transfer by sole individual or trust beneficiary to trust (s. 20(c))
  • other transfers into and out of trusts and partnerships are not exempt, but sales of their units are exempt as are transfers from a trust to a subsidiary trust for the exclusive benefit of the former (s. 20(c))
  • unregistered transfers not reported witin 90 days (s. 6) generate big penalties per TA s. 1129.33.0.3
NB Real Property Transfer Tax Act Tax on tender of a deed for registration 0.50% of greater of consideration for the transfer and the assessed value of the property No tax on
  • mortgages (s. 1-"deed," 6(m)))
  • leases with a term of under 25 years (s. 6(b))
  • registration of declaration of amalgamation

No exemptions for transfers between related corporations

NS Municipal Government Act (more readable pdf) "Deed transfer tax" on a registered or unregistered instrument whereby land is transferred – however, there likely is no triggering mechanism for payment if no registration (s. 101(1)) The rates applied to the sale price (s. 102(2)) are set by each municipality (e.g. 1.5% for Halifax and 1.0% for New Glasgow) but may not exceed 1.5% of the "value of the property" (s. 102(1)). No tax on
  • mortgages
  • leases with unexpired term of 21 years excluding renewals (s. 3(t))
  • No tax on changing the registered name reflecting an amalgamation
PEI Real Property Transfer Tax Act (see also Lands Protection Act) Tax is triggered only on an acquisition by deed (s. 3(1)) 1% of the greater of the consideration for the transfer and assessed value No payment for mortgages given to banks, trust companies and other financial institutions acting in the ordinary course of businessRegistered transfers between wholly-owned corporations are exempted.No tax on registration on title of notice of an amalgamation.
NFLD Registration of Deeds Act, 2009 Prescribed fees on the registration of
  • a conveyance, assignment, or other documents (including a leases)
  • a mortgage, etc.
Conveyance or assignment:
  • $100 plus 0.4%
  • flat $100 for assignment of lease

Mortgage:

  • $100 plus 0.4% of the value of the mortgage in excess of $500
No tax on registration of declaration attesting to amalgamation (other than $100 fee)

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

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.

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.

Forms

Related Provisions

City of Toronto By-Law 1423-2007

§ 760-9. Amount. Every person who tenders for registration a conveyance by which any land is conveyed to or in trust for a transferee shall pay to the Chief Financial Officer, when the conveyance is tendered for registration or before it is tendered for registration:

A. a tax computed at the rate of:

  • (1) one-half of 1 percent of the value of the consideration for the conveyance up to and including $55,000;
  • (2) 1 percent of the value of the consideration which exceeds $55,000 up to and including $400,000;
  • (3) 1.5 percent of the value of the consideration which exceeds $400,000 up to and including $40 million;
  • (4) 1 percent of the value of the consideration which exceeds $40 million;

B. if the value of the consideration for the conveyance exceeds $400,000 and the conveyance is a conveyance of land that contains at least one and not more than two single family residences, an additional tax of:

  • (1) one-half of 1 percent of the amount by which the value of the consideration exceeds $400,000 up to and including $40 million; and
  • (2) 1 percent of the amount by which the value of the consideration exceeds$40 million.

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 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.

Administrative Policy

Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land May 2017

S. 3 tax not triggered until considertion 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.

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)

Clause 3(1)(g)

Administrative Policy

Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land May 2017

cash assignment of purchase agreement

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.

Section 3

Subsection 3(5)

Clause 3(5)(a)

Administrative Policy

Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land May 2017

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.

Clause 3(9)(b)

Administrative Policy

Bulletin LTT 3-2000 “Transfers Involving Corporations” April 2000

LC only

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.

Clause 3(9)(c)

Administrative Policy

Forms

Clause 3(11)(a)

Cases

2143569 Ontario Inc. v. Minister of Revenue, 2014 ONSC 4628

recital of ultimate beneficial owner does not evidence "the" disposition to that owner

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(12)

Administrative Policy

Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land May 2017

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.

Subsection 3(15)

Cases

Dam Investments Inc. v. Ontario (Finance), 2007 ONCA 527

affiliate status based on de jure, not de facto, control

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.

Regulation 70/91 [s. 3 exemptions]

Administrative Policy

Ontario Ministry of Finance "Land Transfer Tax 'De Minimis' Partnership Exemption: Clarifying Amendments for Certain Dispositions" February 2016

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:

  1. One of the following must be satisfied by the person (the individual or corporation) who acquires the beneficial interest in land:
    1. 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
    2. 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.
  2. For limited partnerships, the provisions of the Limited Partnerships Act apply to determine if the person is a partner in a limited partnership.
  3. 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

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... .