On October 22, 2007, Toronto City Council approved a Municipal Land Transfer Tax (MLTT), the "Toronto Tax," and we have now received more detailed information as to how this will be implemented. Although this information is primarily directed at assisting lawyers, it is still relevant to anyone who is considering purchasing property in Toronto.
The following is an excerpt from information provided on the Teranet website, an e-service that assists professionals by providing a database of real property information as well as registration services that were formerly available only at Land Registry Offices.
When will the City start charging the MLTT?
The MLTT will be charged on the registration of all conveyances of land in Toronto commencing February 1, 2008 and on the disposition of all beneficial interests commencing on February 1, 2008
How much is the tax?
The MLTT will be charged on a graduated basis depending on the consideration value of the property. The graduated tax rates are as follows:
For property containing at least one, and not more than two, single family residences with a consideration value of:
Up to and including $55,000.00 0.5% plus
$55,000.01 to $400,000.00 1.0% plus
Over $400,000.00 2.0%
For all other property with a consideration value:
Up to and including$55,000.00 0.5% plus
$55,000.01 to $400,000.00 1.0%plus
$400,000.01 to $40,000,000.00 1.5% plus
Over $40,000,000.00 1.0%
A home with a consideration value of $500,000.01 (excluding GST)
0 - $55,000.00 ( 55,000.00 x 0.005) = 275.00
55,000.01 - $400,000.00 (344,999.99 x 0.01) = $ 3,450.00
$400,000.01 - $500,000.00 (99,999.99 x 0.02) = $2,000.00
Total MLTT = $ 5,725.00
Is there a minimum tax amount?
When the total MLTT payable is less than $72 no MLTT will be charged.
Is the City offering any rebate programs for the MLTT?
Yes. The City of Toronto will offer MLTT rebates for grandfathering and forfirst-time home purchasers.
It is important to determine your client's eligibility for a rebate prior to registering the property.
What is a grandfathering rebate?
If the Agreement of Purchase and Sale was entered into on or before December 31, 2007, the purchaser is eligible for a full rebate.
What is a first-time home purchaser rebate?
A rebate, to a maximum of $3,725, will apply to first-time purchasers of both new and existing residential properties. This means that first-time purchasers of residential properties with a consideration value of $400,000 or less will receive the maximum rebate of $3,725. A first-time purchaser of a residential property with a consideration value of $600,000 would pay a land transfer tax of $7,725 (per the scale shown as above) and receive a rebate of $3,725. A first-time purchaser of a residential property with a consideration value of $300,000 would receive a rebate of$2,725.
Who is considered a first-time home purchaser?
The definition of a first-time home purchaser is:
The purchaser is at least 18 years of age;
The purchaser must occupy the home as his/her principal residence no later than nine months after the date of the conveyance or disposition;
The purchaser cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time;
If the purchaser has a spouse, the spouse cannot have owned a home, nor had any ownership interest in a home, anywhere in the world while he/she was the purchaser’s spouse. If this is not the case, no refund is available to either spouse.
How does spousal ownership and inheritance affect eligibility for the first-time purchaser rebate?
In these cases, the City of Toronto adopted the provincial land transfer tax policy. Questions about the inheritance guidelines can be answered by consulting the provincial guidelines.
Are there exemptions to the tax?
Yes, under the City of Toronto Act, 2006, the following statutory exemptions will apply.
Crown and crown agencies
Authorities, boards, commissions, corporations, offices and organizations of persons a majority of whose directors, members or officers are appointed or chosen by or under the authority of the lieutenant governor in council or a member of the Provincial Executive Committee
Universities and colleges of applied arts and technology and post secondary institutions
Nursing homes, homes for the aged and rest homes
Other persons and entities as may be required by the Province/City
Other exemptions include:
All property purchases made by the City of Toronto and its local boards
The Toronto Community Housing Corporation
The Toronto Economic Development Corporation
All conveyances exempt from the Provincial Land Transfer Tax
The Agreement of Purchase and Sale and closing date are both dated before February 1, 2008. Does the MLTT have to be paid?
No.The MLTT comes into effect for properties with closing dates on or after February 1, 2008.
The Agreement of Purchase and Sale was entered into on or before December 31, 2007 and my closing date is on or after February 1, 2008. Does the MLTT have to be paid?
Your client is eligible for a full rebate under the grandfathering provision. The MLTT does not have to be paid, provided you submit all required documentation.
The Agreement of Purchase and Sale was entered into after December 31, 2007 and the closing date is on or after February 1, 2008. Does the purchaser have to pay the MLTT?
Yes. The MLTT comes into effect for properties with closing dates on or after February 1, 2008. However, your client [the purchaser] may qualify for a first-time home purchaser rebate.
Who submits a rebate request – the lawyer or the purchaser of the property?
The real estate lawyer applies for the rebate on behalf of the purchaser.
My client [the purchaser] is buying a business. Does this tax still apply? If so, are they entitled to the rebate if they have never owned a property before?
The MLTT applies to all properties. The first-time home purchaser rebate applies to residential property. It does not apply to commercial, industrial or multi-residential properties. However, there is more than one type of rebate. The “grandfathering rebate” may apply if the date of the Agreement of Purchase and Sale is on or before December 31, 2007.
Why does my client [the purchaser] have to pay up front and then request the rebate? Isn't there any other way to do it?
In most cases rebates will be deducted at source. We are currently making arrangements to have all rebates automatically deducted at the time of electronic transfer. While the software is being updated to do that, the administration of the tax in a few cases must be handled manually. However, the majority of rebates are being deducted at source starting on February 1, 2008.