A GUIDE FOR REAL ESTATE PRACTITIONERS Land Transfer Tax and the Registration of Conveyances of Land in Ontario This publication is intended as a guide only and is not a substitute for the provisions of the Land Transfer Tax Act and Regulations.
For updates to publications, guides and forms, please refer to the Ministry of Finance, Tax Revenue Division, website at: www.trd.fin.gov.on.ca For further information about the Land Transfer Tax Act or this guide, please call the following numbers or write to the address noted below: Land Transfer Tax General Enquiry Line (Oshawa)... 905-433-6361 8:30am - 5:00pm (ET) Facsimile... 905-436-4507 Tax Fax...1-877-4-TAX-FAX Teletypewriter (TTY)... 1-800-263-7776 Ministry of Finance Motor Fuels and Tobacco Tax Branch Land Transfer Tax Program P.O. Box 625 33 King Street West Oshawa ON L1H 8H9 Ce aide-memoire est disponible en français Vous pouvez obtenir un exemplaire de ce guide en appelant le 1-800-668-5821
TABLE OF CONTENTS Introduction...1 Section 1 2 3 4 5 6 7 8 9 10 Ministry of Finance Pre-Approvals...2 Undertakings...13 Trusts...16 Transfers Involving Corporations...18 Leases...25 Final Orders of Foreclosure...32 Land Exchanges...34 Nominal Transactions...39 Single Family Residence Apportionment...48 Refunds of Land Transfer Tax for First Time Buyers of Newly Constructed Homes...50 11 Frequently Asked Questions...52 Index...60
INTRODUCTION This guide has been prepared as a resource for legal and real estate professionals involved in the conveyancing of land in Ontario. It is assumed that users of this handbook have a working knowledge of conveyancing and electronic registration. It is hoped that this resource will result in the proper completion of the Land Transfer Tax Affidavit (Affidavit), fewer delays, and a more efficient registration of conveyances. For the proper completion of the Affidavit, this guide sets out acceptable statements and addresses issues and common problems. In light of the ongoing implementation of remote electronic registration (E-Reg), issues and processes that relate specifically to E-Reg have been included in this guide. The affidavit examples in this guide are as they appear in Teraview version 5.1. Issues and questions that relate to unregistered dispositions of beneficial interests in land under Section 3 of the Land Transfer Tax Act (Act) are not addressed in this publication. For information about unregistered dispositions of land in Ontario, please refer to Guidenote 1 or call the Land Taxes Section of the Ontario Ministry of Finance (MOF) in Oshawa. This publication contains general information and is provided for convenience and guidance. It is not a substitute for the provisions of the Act or regulations. Should there be a discrepancy between this document, the Act and its regulations, the provisions of the Act and regulations apply. For updates to publications, guides and forms, please refer to the MOF, Tax Revenue Division, website at: www.trd.fin.gov.on.ca For further information about the Land Transfer Tax Act or this guide, please call the following numbers or write to the address noted below: Land Transfer Tax General Enquiry Line (Oshawa)... 905-433-6361 8:30am - 5:00pm (ET) Facsimile... 905-436-4507 Tax Fax...1-877-4-TAX-FAX Teletypewriter (TTY)... 1-800-263-7776 Ministry of Finance Motor Fuels and Tobacco Tax Branch Land Transfer Tax Program P.O. Box 625 33 King Street West Oshawa ON L1H 8H9 Ce aide-memoire est disponible en français Vous pouvez obtenir un exemplaire de ce guide en appelant le 1-800-668-5821 1
1 MINISTRY OF FINANCE PRE-APPROVAL Transactions Requiring Ministry of Finance Pre-Approval Conveyances from Individuals to a Family Business Corporation Conveyances of a combination of surface rights and mineral rights Lessees acquiring the freehold of a leasehold interest Reduction of the consideration on acquisition of lands to replace lands taken under statutory authority Transfers from individual(s) to family business corporations pursuant to Regulation 697, R.R.O. 1990 In order to claim the exemption provided by section 3 of Regulation 697, R.R.O.1990 and to have deeds endorsed prior to registration, the taxpayer must provide the MOF with an Initial Family Business Affidavit and undertaking. The undertaking includes an obligation to provide the MOF with an additional affidavit within nine months following the fiscal year end of the corporation after the date of registration or disposition as well as relevant financial statements to verify that all conditions of the exemption have been met. The Initial Family Business Affidavit is available on the MOF website identified as Form LT 100 and the follow-up affidavit is identified as Form LT 101. The required undertaking forms part of the Initial Affidavit. Transfer of a combination of surface rights and mineral rights pursuant to Regulation 703, R.R.O. 1990 Where the value of the consideration for a conveyance includes amounts paid for the acquisition of a combination of surface rights and mineral rights, Regulation 703, R.R.O.1990 exempts from tax any consideration attributable to the acquisition of mineral rights. The deeds must be reviewed by the MOF in order to ensure that a reasonable allocation has been made towards the consideration declared for the mineral rights and the surface rights. Tax will be collected and the deeds endorsed by the MOF based on the taxable consideration determined by the taxpayer pursuant to the provisions of the regulation. The taxpayer or his representative should be prepared to sign an undertaking to pay any additional tax and interest should the Ministry determine that the taxable value of the consideration for the surface rights has been under-stated. Transfer of the freehold interest in land to the person already in possession of the leasehold as provided by subsection 1(3) of the Act Where a taxpayer has paid tax on registration of his acquisition of a leasehold interest and subsequently acquires the freehold interest in the same lands, he may apply to the MOF to reduce the taxable value of the consideration on the acquisition of the freehold by the amount of consideration on which tax was paid to acquire the leasehold. Tax will be collected, and the deeds endorsed by MOF, based on the taxable consideration determined under the provisions of subsection 1(3) of the Act. 2
1 MINISTRY OF FINANCE PRE-APPROVAL Transfers of lands acquired to replace lands that were taken under statutory authority pursuant to subsection 1(2) of the Act Where a taxpayer has purchased land to replace lands that were taken by expropriation or the threat of expropriation, application may be made to the MOF to reduce the value of the consideration on the acquisition of replacement lands by the amount paid by the expropriating authority for the expropriated lands. Tax will be collected and the deeds endorsed by the MOF based on the reduced value of the consideration. If tax has been paid on the full purchase price at the Land Registry Office, application may be made to the MOF for a refund. Tax Bulletin LTT 4-2000, Land Taken Under Statutory Authority, sets out further information regarding this subject. Electronic Registration: In order to claim an exemption or reduction of the taxable value of consideration, the draft of the electronic document, along with supporting documentation must be submitted to the Ministry of Finance for pre-approval and endorsement. One of the following statements may be selected after Ministry of Finance approval has been received: Exemptions Tab: Statement 9089 - Tax has been paid directly to the Ministry of Finance and documents endorsed accordingly as confirmed by receipt no. NUMBER (evidence needs to be submitted) OR Statement 9090 - Ministry of Finance has endorsed documents as follows: No Land Transfer Tax Payable (evidence needs to be submitted) The draft document bearing Ministry of Finance endorsement is the evidence which needs to be provided to the Land Registry Office before certification of title. 3
1 MINISTRY OF FINANCE PRE-APPROVAL Exempt Transactions That May Be Accepted for Registration Without Ministry of Finance Pre-Approval Easements to oil and gas pipeline companies Family Farm Corporations Mineral rights Conveyances pursuant to transfer orders under the Electricity Act, 1998 Hospital transfer orders Inter-spousal / same-sex partner transfers Certain transfers of easements to oil or gas pipeline companies pursuant to Regulation 695, R.R.O. 1990 Only certain transfers of easements and rights of way are eligible for this exemption. The Affidavit must be completed to confirm that a transfer of easement or right of way to an oil or gas pipeline company is being registered. Electronic Registration: Exemptions Tab: Statement 9071 - This conveyance qualifies for an exemption from tax under Regulation 695 RRO 1990 for certain transfers of easements to an oil or gas pipeline company Transfers to family farm corporations pursuant to section 2 of Regulation 697, R.R.O. 1990 This exemption claim must be supported with the Form 3 Family Farm Affidavit together with the statement on the Affidavit confirming that the exemption under the regulation is being claimed. 4
1 MINISTRY OF FINANCE PRE-APPROVAL Electronic Registration: Exemptions Tab: Statement 9078 - This conveyance is to a family farm corporation and is exempt from tax pursuant to Regulation 697 RRO 1990 and per the following statements: AND Statement 9079 - a) I am the (describe office) DESCRIBE OFFICE of (name the transferee corporation) NAME the transferee corporation of the described conveyance whose head office is located at ADDRESS and I have personal knowledge of the fact hereinafter deposed to. AND Statement 9080 - b) Prior to the conveyance, (insert names of appropriate individuals) NAMES carried on farming on the land being conveyed during the period(s) TEXT AND Statement 9081 - c) The described conveyance is being made for the principle purpose of enabling the transferee corporation to continue farming on the land being conveyed under the direction of TEXT. AND Statement 9082 - d) Each transferor, each shareholder of the transferee corporation (excluding holders of directors qualifying shares) and each person named in this affidavit is, within the meaning of subsection 1(1) of Regulations 697 of Revised Regulations of Ontario, 1990 a member of the family or same-sex partner of every other transferor, shareholder, person so named. AND Statement 9084 - e) I have read and considered the definitions of family farm corporation, farming and farming assets set out respectively in subsection 1(1) of the Regulations 697 of Revised Regulations of Ontario, 1990. The transferee corporation in respect of whom this affidavit is made is a family farm corporation within the meaning given to that expression in the aforementioned Regulation. Transfers of mineral rights only pursuant to Regulation 703, R.R.O. 1990 Any conveyance involving the transfer of mineral rights only may be presented for registration without MOF pre-approval as the transfer of mineral rights do not attract tax. Anyone claiming this exemption should make sure that no surface rights of any kind are included in the transfer. The Affidavit or electronic statements should be completed as set out in examples 1-1 and 1-2. It should be noted that oil and gas leases are considered to be transfers of mineral rights only. 5
1 MINISTRY OF FINANCE PRE-APPROVAL Example 1-1: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ 100,000.00 (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures...(total of (a) to (e)) $ 100,000.00 $ 100,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration... $ 100,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. The attached conveyance is of mineral rights & the consideration for the conveyance is wholly dependent upon the quantity or value of minerals that are won, taken, etc. & no tax is payable as per Reg. 703, R.R.O. 1990. No only the Electronic Registration: Exemptions Tab: Statement 9075 - This conveyance is of mineral rights only or is the transfer of a surface rights option and is therefore not subject to tax pursuant to Regulation 703 RRO 1990. Example 1-2: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 100,000.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. This conveyance is of mineral rights only or is the transfer of surface rights option and is therefore not subject to tax pursuant to Regulation 703 RRO 1990. 6
1 MINISTRY OF FINANCE PRE-APPROVAL Transfers pursuant to the Electricity Act, 1998 A schedule must be attached to the document setting out that the matter is pursuant to a disposition which has occurred as a result of a transfer order under the Electricity Act, 1998. Any transfer where the transferor has acquired its interest by way of an unregistered disposition pursuant to the Electricity Act, 1998 should have attached to it a schedule which sets out the following: (XYZ Inc. for example) is a person referred to in section 124 of the Electricity Act, 1998 and is a person from which no consent was required in respect of the Transfer Order pursuant to subsection 116(5) of the Electricity Act, 1998. The interest in the lands described in the attached schedule was transferred to the Transferor from Ontario Hydro by or pursuant to a Transfer Order made under the Electricity Act, 1998. The foregoing statements are statements made pursuant to section 124 of the Electricity Act, 1998. Electronic Registration: Not available electronically. Certain transfers between hospitals Under Ontario Regulation 676/98, no tax is payable with respect to a conveyance of land or a disposition of a beneficial interest in land to a hospital approved as a public hospital under the Public Hospitals Act or a hospital established or approved as a community psychiatric hospital under the Community Psychiatric Hospitals Act, (a) (b) if the conveyance or disposition is from another hospital; and if the conveyance or disposition takes place in the course of or as a result of an amalgamation of hospitals, the closure of hospital programs or the transfer of a hospital program to the transferee hospital. 7
1 MINISTRY OF FINANCE PRE-APPROVAL The Affidavit or electronic statements should be completed as set out in examples 1-3 and 1-4. Example 1-3: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ 1,000,000.00 (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures...(total of (a) to (e)) $ 1,000,000.00 $ 1,000,000.00 (g) Value of all chattels... $ NIL (h) Other considerations... $ NIL (i) Total consideration $ 1,000,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. The transfer is to a hospital under the Public Hospitals Act (or the Community Psychiatric Hospitals Act) from another hospital & is the result of an amalgamation of hospitals (or closure of hospital programs or transfer of a hospital program) to the transferee hospital. No 8
1 MINISTRY OF FINANCE PRE-APPROVAL Electronic Registration: Exemptions Tab: Statement 9099 - This conveyance is exempt from tax pursuant to REGULATION 676/98 as the transferee is a hospital approved as public hospital under the Public Hospital Act or a hospital established or approved as a community psychiatric hospital under the Community Psychiatric Hospitals Act and the conveyance is from another hospital and the conveyance is taking place in the course of or as a result of an amalgamation of hospitals, the closure of hospital programs or the transfer of a hospital program to the transferee hospital. Example 1-4: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 1,000,000.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 1,000,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 1,000,000.00 6. Other remarks and explanations, if necessary. 1. This conveyance is exempt from tax pursuant to REGULATION 676/98 as the transferee is a hospital approved as a public hospital under the Public Hospital Act or a hospital established or approved as a community psychiatric hospital under the Community Psychiatric Hospitals Act and the conveyance is from another hospital and the conveyance is taking place in the course of or as a result of an amalgamation of hospitals, the closure of hospital programs or the transfer of a hospital program to the transferee hospital. Transfers between spouses/former spouses and same-sex partners/former same-sex partners pursuant to Regulation 696, R.R.O. 1990 The Regulation allows for the registration of certain transfers between spouses / same-sex partners or former spouses / former same-sex partners without the payment of tax. By definition, spouse or samesex partner means spouse or same-sex partner as defined in section 29 of the Family Law Act. The Affidavit must set out that the parties are spouses or same-sex partners as described in section 29 of the Family Law Act. It is insufficient to merely say the parties are common law spouses. 9
1 MINISTRY OF FINANCE PRE-APPROVAL For clarification, section 29 of the Family Law Act states the following, Spouse means either a man or woman who are married, or have cohabited, continuously for a period of not less than three years, or in a relationship of some permanence, if they are the natural or adoptive parents of a child. Same-sex partner means either of two persons of the same sex who have cohabited, continuously for a period of not less than three years, or in a relationship of some permanence, if they are the natural or adoptive parents of a child. Transfers between spouses/same-sex partners or former spouses/same-sex partners are taxable unless certain conditions are met as set out in Regulation 696, R.R.O. 1990. Tax Bulletin LTT 8-2000, Spouses or Same-Sex Partners and the Land Transfer Tax Act, sets out further information on this subject. For example, where a 50% interest is being transferred electronically between parties who are spouses/same-sex partners or former spouses/same-sex partners and the only consideration is the assumption of a $200,000.00 mortgage, 50% of the balance owing on the mortgage must be declared in 1(b) on the consideration tab and the exemption would then be claimed as set out in example 1-5. Electronic Registration: Consideration Tab: 1(b)(i) = 50% of the balance owing on the mortgage Exemptions Tab: Statement 9085 - This conveyance is exempt from tax pursuant to Regulation 696 RRO 1990 as the transferor is the spouse, same-sex partner or former spouse or same-sex partner of the transferee and: AND Statement 9086 - The only consideration passing is the assumption of any encumbrance registered against the lands. If Statement 9086 is selected, any statements made on the Nominal Tab will result in an error message. 10
1 MINISTRY OF FINANCE PRE-APPROVAL Example 1-5: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 100,000.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. This conveyance is exempt from tax pursuant to Regulation 696 RRO 1990 as the transferee is the spouse, same-sex partner or former spouse or same-sex partner of the transferor and: 2. The only consideration passing is the assumption of any encumbrance against the lands. If the Affidavit or electronic statements indicate cash or other forms of consideration, the transfer must be pursuant to a written separation agreement or order of a court to be exempt from tax. The Affidavit or electronic statements should be completed as set out in examples 1-6 and 1-7. Example 1-6: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ 50,000.00 (b) Mortgages (i) Assumed... $ 100,000.00 (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of lands... $ NIL (f) Value of land, building, fixtures...(total of (a) to (e)) $ 150,000.00 $ 150,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 150,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes No 5. Other remarks and explanations, if necessary. The parties are spouses/same-sex partners as defined under section 29 of the Family Law Act and as per Reg 696, R.R.O. 1990 no tax is payable as the transfer is pursuant to a written separation agreement, etc.. 11
1 MINISTRY OF FINANCE PRE-APPROVAL Electronic Registration: Exemptions Tab: Statement 9085 - This conveyance is exempt from tax pursuant to Regulation 696 RRO 1990 as the transferor is the spouse, same-sex partner or former spouse or same-sex partner of the transferee and: EITHER Statement 9087 - The conveyance is in compliance with the terms of a written agreement pursuant to which the parties have agreed to live separate and apart. OR Statement 9088 - The conveyance is in compliance with the direction of an order or judgement made by a court of competent jurisdiction. Example 1-7: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 50,000.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 100,000.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 150,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 150,000.00 6. Other remarks and explanations, if necessary. 1. This conveyance is exempt from tax pursuant to Regulation 696 RRO 1990 as the transferor is the spouse, same-sex partner or former spouse or same-sex partner of the transferee and: 2. The conveyance is in compliance with the terms of a written agreement pursuant to which the parties have agreed to live separate and apart. 12
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. 13
2 UNDERTAKINGS 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. Electronic Registration: The Ministry of Finance requires that an undertaking, where appropriate, will be provided to the Land Registrar before certification of title. 14
2 UNDERTAKINGS Situations Where A Land Transfer Tax Undertaking Is Required At The Ministry of Finance An Undertaking must be provided to the MOF by either the transferee or the transferee s representative when deeds are presented for endorsement in the following situations: Fair Market Value. As above. Tentative Value of the Consideration. As above. Discretion of the Land Transfer Tax Section. As per subsection 5(4) of the Act. Family Business Exemption. When initially applying for this exemption, the required undertaking is part of Form LT 100 (Initial Family Business Affidavit). 15
3 TRUSTS Trust is not an entity No change in beneficial ownership Change in Legal Title only Supplementary Affidavit must be submitted at time of registration Trust conveyances, where there has been no change in beneficial ownership, are not subject to land transfer tax when presented for registration. However they must be accompanied by a supplementary affidavit which conforms to our guide found in Tax Bulletin LTT 9-2000, Conveyances Involving Trusts. In a situation where there is a change in beneficial interest without the registration of a transfer, the matter must be dealt with through the Ministry of Finance. Situations where a supplementary affidavit may be presented to Land Registry Office without MOF endorsement: A transfer from a trustee of a beneficial owner to the same beneficial owner, A transfer from one trustee to another trustee for the same beneficial owner, and A transfer from a beneficial owner to a trustee for the same beneficial owner. Although the property may be subject to a mortgage, the liability for the mortgage is not part of the value of consideration as no liability is being assumed. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND EITHER Statement 9051 - b) trustee to trustee (evidence required to be submitted) OR Statement 9052 - c) beneficial owner to trustee (evidence required to be submitted) OR Statement 9053 - d) trustee to beneficial owner (evidence required to be submitted) Evidence is a supplementary affidavit conforming to our Guide to the Requirements to Evidence NIL Value of Consideration for Conveyances Involving Trusts set out in Tax Bulletin LTT 9-2000. 16
3 TRUSTS Family Trusts Tax liability is the same as in gift situations Beneficiaries may acquire interest in future but no change in beneficial ownership at registration The issue of trusts gets somewhat complicated when dealing with family trusts. The MOF does not consider a trust to be an entity and looks through the trust to the beneficiaries. In the case of a transfer, for example, from a parent to a family trust, where the beneficiaries are the children, the tax liability is the same as any other transfer in that if the lands are subject to a mortgage, the beneficiaries are considered to be assuming a liability and tax is payable accordingly. If the transfer is from a parent to a trustee of the family trust, where they are claiming that the beneficiaries are to acquire their beneficial interest sometime in the future, a supplementary affidavit, Beneficial owner to trustee, must be submitted along with the deeds as there is no change in beneficial ownership. In the future, whenever a beneficiary acquires its beneficial interest by way of an unregistered transfer, a Return under section 3 of the Act must be filed with the MOF. Electronic Registration: Where no consideration is paid and there are no mortgages on title. Nominal Tab: Statement 9048 - The land is not subject to an encumbrance AND Statement 9049 - Explanation for nominal considerations: AND Statement 9058 - i) gift 17
4 TRANSFERS INVOLVING CORPORATIONS Transfer from Corporation to Shareholder If the transferee on a conveyance is a shareholder of the transferor, the affidavit should be completed to confirm that the value of consideration is equal to the current fair market value of the land. Since there is no exemption for these transfers, tax is payable accordingly. The document may be accepted for registration and tax collected based on the declared value of the consideration with an undertaking given to the Land Registrar. The Affidavit or electronic statements should be completed as set out in examples 4-1 and 4-2. Example 4-1: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ 100,000.00 (f) Value of land, building, fixtures... (total of (a) to (e)) $ 100,000.00 $ 100,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 100,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. The transferee is a shareholder of the transferor. No 18
4 TRANSFERS INVOLVING CORPORATIONS Electronic Registration: Consideration Tab: 1(d) = current fair market value of land Explanations Tab: AND Statement 9022 - b) Consideration (d) - Fair Market Value of land for the following reason: AND Statement 9012 - b) This is a disposition by a corporation to a shareholder Example 4-2: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 100,000.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. b) Consideration (d) - Fair Market Value of the land for the following reason: 2. b) This is a disposition by a corporation to a shareholder 19
4 TRANSFERS INVOLVING CORPORATIONS Transfer to a Corporation in Return for Shares Any transfer of land to a corporation where any part of the consideration consists of the allotment and issuance of the corporation s shares, the value of the consideration is deemed to be equal to the current fair market value of the land. If the transaction is pursuant to an income tax rollover, shares must be issued in return for the transfer. The value of the consideration is, therefore, deemed to be equal to the current fair market value of the land(s) and tax is payable accordingly. The Affidavit or electronic statements should be completed as set out in examples 4-3 and 4-4. Example 4-3: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ 100,000.00 (f) Value of land, building, fixtures... (total of (a) to (e)) $ 100,000.00 $ 100,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 100,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes No 5. Other remarks and explanations, if necessary. Part of the consideration consists of the and issuance of shares of the transferee in return for the transfer. allotment 20
4 TRANSFERS INVOLVING CORPORATIONS Electronic Registration: Consideration Tab: 1(d) = current fair market value of land Explanations Tab: AND Statement 9022 - b) Consideration (d) - Fair Market Value of land for the following reason. AND Statement 9011 - a) Part of the consideration includes the allotment and issuance of shares. Example 4-4: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 100,000.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. b) Consideration (d) - Fair Market Value of the land for the following reason: 2. a) Part of the consideration includes the allotment and issuance of shares 21
4 TRANSFERS INVOLVING CORPORATIONS Actual Consideration If shares do not form part of the consideration and if the transferee is not a shareholder of the transferor, the actual consideration must be set out. Where the land is given as a contribution of capital, tax is payable on any consideration. If consideration is declared to be nil, the lands must appear on the financial records of the transferee corporation at nil cost. If actual consideration is declared to be nil, an explanation is required on the affidavit which must confirm that shares do not form part of the consideration, the lands are not subject to a mortgage, and the transferee is not a shareholder of the transferor. The Affidavit or electronic statements should be completed as set out in examples 4-5 and 4-6. Example 4-5: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ NIL $ (g) Value of all chattels... $ (h) Other consideration... $ (i) Total consideration $ NIL NIL NIL NIL 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. The transferee is not issuing shares, assuming a mortgage or paying any consideration directly or indirectly in return for the transfer and is not a shareholder of the transferor. No 22
4 TRANSFERS INVOLVING CORPORATIONS Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9064 - s) other: TEXT (TEXT- The transferee is not issuing shares, assuming a mortgage or paying any consideration directly or indirectly in return for the transfer and is not a shareholder of the transferor. ) Example 4-6: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 0.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 0.00 4. Explanation for nominal considerations: (s) other: The transferee is not issuing shares or assuming a mortgage in return for the transfer and is not a shareholder of the transferor. 23
4 TRANSFERS INVOLVING CORPORATIONS Charitable and/or Non-Share Capital Corporations Non-share capital corporations are most commonly charitable or religious organizations. As there is no exemption for a conveyance to a non share capital corporation, the actual value of consideration must be declared, including the balance owing on any mortgages or other liabilities assumed as part of the arrangement relating to the conveyance and/or the value of any benefit conferred directly or indirectly on the transferor by the transferee. In many cases the charity may issue a tax receipt in return for a transfer of property. Although this would appear to be a benefit conferred by the transferee, it is the MOF s view that the benefit is actually being conferred by Canada Customs and Revenue Agency or any other taxing authority and the amount of the tax receipt would not be included in the value of the consideration. 24
5 LEASES Leases under 50 years Leases under 50 years with an option to purchase Leases over 50 years Extensions and surrenders of leases Leases Under 50 Years Although leases that cannot exceed 50 years are not subject to tax, an Affidavit is required for registration. The value of the consideration is nominal in these cases. The Affidavit or electronic statements should be completed as set out in examples 5-1 and 5-2. Example 5-1: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ NIL $ NIL (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ NIL 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. Lease (surrender, termination or extension) which cannot exceed 50 years, including any renewals or extensions of the term provided for in the lease or in a separate option to lease or other document entered into as part of the arrangement relating to the lease. No 25
5 LEASES Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9064 - s) other: TEXT (TEXT - Lease, the term of which, including any renewals, cannot exceed 50 years and does not contain an option to purchase or assignment of option. Example 5-2: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 0.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 0.00 4. Explanation for nominal considerations: (s) other: Lease, the term of which, including any renewals cannot exceed 50 years and does not contain an option to purchase or assignment of option. 26
5 LEASES Leases Under 50 Years With Option to Purchase If the lease contains an option to purchase, the conveyance of the option is subject to tax. The Affidavit must make reference to it and set out any consideration given for the granting of the option but not the option exercise price. The Affidavit or electronic statements should be completed as set out in examples 5-3 and 5-4. Example 5-3: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ 10,000.00 (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ 10,000.00 $ 10,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 10,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. Lease (surrender, termination or extension) which cannot exceed 50 years with option to purchase. Tax paid on the consideration given for granting of option. No 27
5 LEASES Electronic Registration: Consideration Tab: 1(f) = Amount paid for option Explanations Tab: AND Statement 9023 - c) Consideration (f) - Other valuable consideration subject to land transfer tax: DESCRIPTION OF THE CONSIDERATION (TEXT- Amount shown represents value of consideration for granting of option. ) Example 5-4: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 10,000.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 10,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 10,000.00 6. Other remarks and explanations, if necessary. 1. c) Consideration (f) - Other valuable consideration subject to land transfer tax: Amount shown represents value of consideration for granting of option. 28
5 LEASES Leases Over 50 Years The value of the consideration in a lease, which has a remaining term in excess of 50 years is deemed to be equal to the Fair Market Value of the lands and the Affidavit must read as follows: Lease in excess of 50 years. Any lease which is of indeterminate length, is deemed by the MOF to be for a term which can exceed 50 years. Electronic Registration: Consideration Tab: 1(d) = fair market value Explanations Tab: Statement 9022 - b) Consideration (d) - Fair Market Value of land for the following reason: AND Statement 9013 - c) This is a lease that can exceed 50 years 29
5 LEASES Extensions and Surrenders of Leases Regulation 700, R.R.O. 1990 provides for an adjustment of the consideration in certain situations involving leases. The following documents may be registered without MOF pre-approval: (the registrant may make statements under Regulation 700, R.R.O. 1990) 1. In the case of an extension, or a notice of an extension of a lease or sublease, when the original term of that lease (including any renewals or extensions) can exceed 50 years, the taxable consideration is reduced to the actual consideration passing (or to zero if there is no consideration passing). 2. 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). If an instrument is tendered for registration which is for an extension or surrender of a lease and there is confirmation that there is no consideration being paid for the extension or surrender, the Affidavit should confirm that no consideration was paid. The Affidavit or electronic statements should be completed as set out in examples 5-5 and 5-6. Example 5-5: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ 10,000.00 (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ 10,000.00 $ 10,000.00 (g) Value of all chattels... $ NIL (h) Other considerations... $ NIL (i) Total consideration $ 10,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. As per Regulation 700/R.R.O. 1990, the value of the consideration has been reduced to the actual consideration paid for the surrender (or extension) of the lease, the unexpired term of which can exceed 50 years. No 30
5 LEASES Electronic Registration: Notice of Lease document Explanations Tab: Statement 9073 - The consideration shown has been determined pursuant to the provisions of Regulation 700 RRO 1990 which allows for a reduction in the taxable consideration with respect to the acquisition so certain reversionary rights or the extensions or surrenders of leases where the term of the lease can exceed 50 years. Example 5-6: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 10,000.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 10,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 10,000.00 6. Other remarks and explanations, if necessary. 1. The consideration shown has been determined pursuant to the provisions of Regulation 700 RRO 1990 which allows for a reduction in the taxable consideration with respect to the acquisition so certain reversionary rights or the extensions or surrenders of leases where the term of the lease can exceed 50 years. 31
6 FINAL ORDERS OF FORECLOSURE Final orders of foreclosure and conveyances to a mortgagee in lieu of foreclosure In the case of a final order of foreclosure or conveyance to a mortgagee in lieu of a foreclosure, the value of the consideration is the lesser of: (i) the value of the consideration determined under clause (a) plus the amount owed under the mortgage or charge at the time it is foreclosed or the conveyance is made, including principal, interest and all other costs and expenses other than municipal taxes, secured by the mortgage or charge and owing at the time plus the amount owing similarly calculated under any mortgage or charge that is subsequent in priority to the mortgage or charge in respect of which the final order of foreclosure or the conveyance is made and that is held by the mortgagee or chargee in whose favour the final order of foreclosure or conveyance that is registered is made; or (ii) an amount established to the satisfaction of the Minister to be equal to the fair market value of the land that is subject to the mortgage or charge. Clause (a), referred to in (i) above, states: (a) the gross sale price or the amount expressed in money of any consideration given or to be given for the conveyance by or on behalf of the transferee and the value expressed in money of any liability assumed or undertaken by or on behalf of the transferee as part of the arrangement relating to the conveyance and the value expressed in money of any benefit of whatsoever kind conferred directly or indirectly by the transferee on any person as part of the arrangement relating to the conveyance. Tax Bulletin LTT 5-2000, Final Order of Foreclosures and Quitclaims in lieu of Foreclosures, sets out further information regarding this subject. The following is an example of a conveyance in lieu of foreclosure where the taxpayer has chosen to pay tax based on the current fair market value of the lands which is less than the amounts owing on the mortgages, etc. Assuming the current fair market value is $100,000.00, the Affidavit or electronic statements should be completed as set out in examples 6-1 and 6-2. Example 6-1: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ 100,000.00 $ 100,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 100,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. A conveyance in lieu of foreclosure where the fair market value of the lands is less than the amounts owing on the mortgages and other related costs which equal $... No 32
6 FINAL ORDERS OF FORECLOSURE Electronic Registration: Consideration Tab: 1(d) = current fair market value of property Explanations Tab: Statement 9022 - b) Consideration (d) - Fair Market Value of lands for the following reason: AND Statement 9014 - d) This is a final order of foreclosure. Example 6-2: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 100,000.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. b) Consideration (d) - Fair Market Value of land for the following reason: 2. d) This is a final order of foreclosure. 33
7 LAND EXCHANGES Equal land exchanges Unequal land exchanges Land of nominal value Equal Land Exchanges Land exchanges are subject to Land Transfer Tax and the total value of the consideration is based on the values of the lands involved in the exchanges. A brief description of the lands exchanged must be included in the affidavit. Where the properties are of equal value, the Affidavit in both conveyances will be completed similarly in that each affidavit should set out the same value for property transferred in exchange.... The Affidavit or electronic statements should be completed as set out in examples 7-1 and 7-2. Example 7-1: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ 100,000.00 (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ 100,000.00 $ 100,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 100,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. $100,000.00 property transferred in exchange represents the value of Lot 7 Plan 9, Town of Gwillimbury. No 34
7 LAND EXCHANGES Electronic Registration: Consideration Tab: 1(c) = value of the land exchanged Explanations Tab: AND Statement 9021 - a) Consideration (c) - Property transferred in exchange: DESCRIPTION OF THE PROPERTY TRANSFERRED IN EXCHANGE Example 7-2: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 100,000.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. a) Consideration (c) - Property transferred in exchange: $100,000.00 property transferred in exchange represents the value of Lot 7 Plan 9, Town of Gwillimbury. 35
7 LAND EXCHANGES Unequal Land Exchanges If there is a disparity in the values, cash or mortgage assumption may be a part of the arrangement to make up the difference and these items must, therefore be included in the Affidavit. A brief description of the lands exchanged must also be included in the Affidavit. The taxable value of the consideration should not exceed the value of the property described in the conveyance (each party pays tax on the basis of the value of the property he/she is receiving). Assume that an exchange is taking place where party A is acquiring Lot 6, Plan 9 worth $150,000.00, is paying cash and transferring Lot 7, Plan 9 in the Twp of Gwillimbury worth $100,000.00. Party A would complete the affidavit as set out in example 7-3. Example 7-3: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ 50,000.00 (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ 100,000.00 (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ 150,000.00 $ 150,000.00 (h) Value of all chattels... $ NIL (i) Other consideration... $ NIL (j) Total consideration $ 150,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. $100,000.00 property transferred in exchange represents the value of Lot 7 Plan 9, Town of Gwillimbury. Party B, receiving Lot 7, Plan 9 worth $100,000.00, would complete the affidavit as set out in example 7-4. Example 7-4: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ 100,000.00 (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ 100,000.00 $ 100,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 100,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. $100,000.00 property transferred in exchange represents the value of Lot 6 Plan 9, Town of Gwillimbury. No No 36
7 LAND EXCHANGES Electronic Registration: Consideration Tab: 1(c) = value of the land exchanged Explanations Tab: Statement 9021 - a) Consideration (c) - Property transferred in exchange: DESCRIPTION OF THE PROPERTY TRANSFERRED IN EXCHANGE Same scenario as above. Party A electronic affidavit: Example 7-5: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 50,000.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 100,000.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 150,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 150,000.00 6. Other remarks and explanations, if necessary. 1. a) Consideration (c) - Property transferred in exchange: $100,000.00 property transferred in exchange represents the value of Lot 7 Plan 9, Town of Gwillimbury. Party B electronic affidavit: Example 7-6: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 100,000.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. a) Consideration (c) - Property transferred in exchange: $100,000.00 property transferred in exchange represents the value of Lot 6 Plan 9, Town of Gwillimbury. 37
7 LAND EXCHANGES Land of Nominal Value Where any transfers involving land exchanges are tendered, it is unlikely that the value of the consideration will be nominal. Occasionally however, situations could arise where the value of the lands is nominal. Such examples include exchanges of small strips of land to re-align boundaries or an exchange of rights of way or easements. In these cases the document may be accepted with an explanation that makes it clear that the value of the lands involved in the exchanges are nominal in value. These situations should not be thought of as exempt by statute. The electronic statements should be completed as set out in example 7-7. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9064 - s) other: TEXT (TEXT - Exchange of strips of land to re-align lot boundaries of adjoining lots. ) Example 7-7: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 0.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 0.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 0.00 4. Explanation for nominal considerations: s) other: Exchange of strips of land to re-align lot boundaries of adjoining lots. 38
8 NOMINAL TRANSACTIONS See Tax Bulletin LTT 10-2000, Transactions for Nominal Consideration, for further information on this subject. Gifts of Land Estates Dissolution of Co-tenancy or Partnership Severances Transfers from the Director of the Veteran s Land Act Affidavit by Transferor Municipal Tax Sales Act Gifts of Land A gift of land involves the transfer of land without consideration of any kind and may be made to any person, related or unrelated to the transferor. Since a gift does not include the assumption of any liability or the conferring of any benefit of whatsoever kind on the transferor, the lands must be free and clear of any encumbrances and the transferee must not be assuming any obligations in return for the transfer. The only exception would be an inter-spousal transfer which qualifies for an exemption under Regulation 696, RRO 1990. One misconception is that any transfer to a relative is automatically considered a gift, however if the lands are subject to a mortgage, the transferee is considered to be assuming a liability and tax is payable based on the total of any encumbrances registered on title. If an existing mortgage is to be discharged from the proceeds of a new mortgage or if the funds to discharge an existing mortgage are provided by the transferee, the transferee is considered to have assumed a liability and tax is calculated on the basis of the balance owing on the old mortgage. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations; AND EITHER Statement 9058 - i) gift OR Statement 9060 - k) donation to charity AND Statement 9048 - The land is not subject to an encumbrance 39
8 NOMINAL TRANSACTIONS Estates Transferee must be: the named beneficiary under the terms of the will; or entitled under the Laws of Succession. Transfers involving an estate may be made pursuant to a will or to the laws of succession if there is no will. Where the transfer is pursuant to a will, the affidavit must set out that the transfer is from the estate to the named beneficiary entitled to the asset, under the terms of the will. Where there is no will, the affidavit must set out that the transferee is the sole beneficiary entitled to the asset under the laws of succession or intestacy. The emphasis in all cases is that the transferee is the sole named beneficiary. If the lands are subject to a mortgage, the mortgage does not form part of the consideration. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9050 - a) estate to beneficiary 40
8 NOMINAL TRANSACTIONS When more than one beneficiary is entitled to the lands, any agreement whereby one of the beneficiaries takes the lands in lieu of other assets in the estate, tax is payable on the value of the assets surrendered to the other beneficiaries. Example: Robert and Jennifer are the sole beneficiaries in their mother s estate, which consists of the family home worth $200,000.00 and personal property worth $200,000.00. Under their mother s will, they are each entitled to a ½ interest in all the assets. Since Jennifer wants the family home, she consents to Robert receiving an extra $100,000.00 worth of personal property in exchange for her receiving his ½ interest in the home. Jennifer is exempt from tax on the ½ interest she inherited, but must pay land transfer tax on the ½ interest she received from Robert. The value of the consideration is the value of the assets Jennifer surrendered to Robert in exchange for his interest in the home ($100,000.00, value of the personal property). The Affidavit or electronic statements should be completed as set out in examples 8-1 and 8-2. Example 8-1: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ 100,000.00 (f) Value of land, building, fixtures... (total of (a) to (e)) $ 100,000.00 $ 100,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 100,000.00 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. No tax payable on transfer from estate to beneficiary of ½ interest in land. The value of consideration represents value of other assets in the estate which the transferee has surrendered in return for the transfer of the other ½ interest in the land. No 41
8 NOMINAL TRANSACTIONS Electronic Registration: Consideration Tab: 1(f) = value of the surrendered assets Explanations Tab: Statement 9023 - c) Consideration (f) - Other valuable consideration subject to land transfer tax: DESCRIPTION OF THE CONSIDERATION (TEXT - No tax payable on transfer from estate to beneficiary of ½ interest in land. The value of consideration represents value of other assets in the estate which the transferee has surrendered in return for the transfer of the other ½ interest in the land. ) Example 8-2: 3. The total consideration for this transaction is allocated as follows (a) Monies paid or to be paid in cash 0.00 (b) Mortgages (i) assumed (show principle and interest to be credited against purchase price) 0.00 (ii) Given back to Vendor 0.00 (c) Property transferred in exchange (detail below) 0.00 (d) Fair market value of the land(s) 0.00 (e) Liens, legacies, annuities and maintenance charges to which transfer is subject 0.00 (f) Other valuable consideration subject to land transfer tax (detail below) 100,000.00 (g) Value of land, building, fixtures and goodwill subject to land transfer tax (total of (a) to (f)) 100,000.00 (h) VALUE OF ALL CHATTELS - items of tangible personal property 0.00 (i) Other considerations for transaction not included in (g) or (h) above 0.00 (j) Total consideration 100,000.00 6. Other remarks and explanations, if necessary. 1. (c) Consideration (f) - Other valuable consideration subject to land transfer tax: No tax payable on transfer from estate to beneficiary of ½ interest in land. The value of consideration represents value of other assets in the estate which the transferee has surrendered in return for the transfer of the other ½ interest in the land. 42
8 NOMINAL TRANSACTIONS 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. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9066 - j) partitioning of co-tenancy and the transferee is receiving land equal in value to his original interest in the whole parcel *Do not select Statements 9047 or 9048* 43
8 NOMINAL TRANSACTIONS Severances Where a transfer is registered to effect a severance, there is no tax payable where the transferor and transferee are the same person. The deed may be submitted for registration without payment of tax with an explanation on the affidavit that the transfer is being registered solely for the purpose of giving effect to the severance. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9064 - s) other: TEXT (TEXT- Transferee and transferor are one and the same and registration is to affect severance. ) *Do not select Statements 9047 or 9048* If the transferor and transferee are not the same parties, the transferee may be taking title as a trustee for the transferor. In this case, where there has been no change in beneficial ownership of the lands, a trust affidavit must be prepared according to the guide set out in Tax Bulletin LTT 9-2000, Conveyances Involving Trusts. 44
8 NOMINAL TRANSACTIONS Transfers from Director of the Veterans Land Act These transfers represent the return of lands that were held as security for a loan and as a result, a transfer from the Director of the Veterans Land Act to the veteran does not attract tax. The recommended wording for the Affidavit is as follows: The conveyance is made by the Director of the Veterans Land Act, to a person named in the agreement of sale between the Director and that person in pursuance of the Veterans Land Act and the grantee is a veteran purchasing under the terms of the Veterans Land Act. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9061 - l) by Director, the Veterans Land Act to the veteran in satisfaction of the debt owed by the veteran to the Director. *Do not select Statements 9047 or 9048* If the transferee is other than the veteran, the statement must include the further explanation that the transferee is either the spouse of the veteran or the beneficiary of the veteran s estate, otherwise tax is payable. Electronic Registration: Nominal Tab: Statement 9049 - Explanation for nominal considerations: AND Statement 9064 - s) other: TEXT (TEXT- Transfer by Director, the Veterans Land Act to the spouse or beneficiary of the veteran s estate in satisfaction of the debt owed by the veteran to the Director. *Do not select Statements 9047 or 9048* 45
8 NOMINAL TRANSACTIONS Affidavit by Transferor Subsection 5(2.1) of the Act states that: Despite subsection (2), upon application by a transferor named in a conveyance to the Minister, the Minister or a person authorized by the Minister may consent to the transferor making the affidavit required by subsection (1), and the transferor may make the affidavit if: (a) (b) (c) the transferor is tendering or submitting the conveyance for registration; no tax is payable under this Act in respect of the conveyance; and the transferor satisfies the Minister that the transferor has sufficient information to enable the transferor to make the affidavit. Before an Affidavit by a transferor is accepted, the Land Registry Office must be satisfied that all of the above conditions are met. Where there is any doubt, the matter will be referred to the Ministry of Finance. Electronic Registration: Deponent Tab: The first text field should only be completed by selecting names from the drop down menu. Explanations Tab: Statement 9120 - This conveyance is being tendered for registration by the transferor who has sufficient information to complete these statements. OR Statement 9121- This conveyance is being tendered for registration by an officer of NAME OF CORPORATION (TEXT - insert name of corporation) who is authorized to act for the transferor and who has sufficient information to complete these statements *Failure to complete the Nominal or Exemption Tabs will result in an error message* 46
8 NOMINAL TRANSACTIONS Transfers to Municipalities under the Municipal Act 2001 Where a Notice of Vesting under paragraph 379 (5) (b) of the Municipal Act 2001 is being registered due to arrears in municipal taxes, the Affidavit should be completed to show Nil consideration. The Affidavit should be completed as set out in example 8-3. Example 8-3: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ NIL (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the land... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ NIL $ NIL (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ NIL 4. If the consideration is nominal, is the land subject to any encumbrance? Yes 5. Other remarks and explanations, if necessary. There is no value of the consideration given or to be given by the municipality in respect to the within Notice of Vesting under the Municipal Tax Sales Act and no tax is payable accordingly. No Electronic Registration: Nominal Tab: Notice of Vesting Document tatement 9049 - Explanation for nominal considerations: AND Statement 9064 - s) other: TEXT ( There is no value of the consideration given or to be given by the municipality in respect to the within Notice of Vesting under the Municipal Act and no tax is payable accordingly. ) 47
9 SINGLE FAMILY RESIDENCE APPORTIONMENT Designed for the occupation of a single family as a residence Lands must be used for other than just residential Subsections 2(2) and 2.1(2) of the Act provide for the apportionment of consideration in some conveyances involving a Single Family Residence (SFR). It should be noted that the SFR apportionment can only be invoked where the lands are used for other than just residential purposes. No use is not another use. The transfer of land which has not been used and contains a residence would not be eligible for the apportionment. By definition a SFR is any structure which was designed for the occupation of a single family as a residence. This means that even if the structure is currently uninhabitable, it is still a SFR as long as it was originally designed to be used as a residence. The zoning of the land on which the structure is situate is not a factor in determining whether the structure is a SFR. Where an apportionment is being claimed, the Affidavit must be completed as set out in example 9-1: (In this example, the purchase price is $1,000,000.00, the SFR is valued at $600,000.00, and the remaining lands are used for commercial purposes.) Example 9-1: 2. THE TOTAL CONSIDERATION FOR THIS TRANSACTION IS ALLOCATED AS FOLLOWS: (a) Monies paid... $ 1,000,000.00 (b) Mortgages (i) Assumed... $ NIL (ii) Given back... $ NIL (c) Property transferred in exchange... $ NIL (d) Other consideration subject to tax... $ NIL (e) Fair market value of the lands... $ NIL (f) Value of land, building, fixtures... (total of (a) to (e)) $ 1,000,000.00 $ 1,000,000.00 (g) Value of all chattels... $ NIL (h) Other consideration... $ NIL (i) Total consideration $ 1,000,000.00 3. To be completed where the value of the consideration for the conveyance exceeds $400,000.00 I have read and considered the definition of single family residence set out in subsection 1(1) of the Act. The land conveyed in the above-described conveyance: does not contain a single family residence or contains more than two single family residences. contains at least one and not more than two single family residences contains at least one and not more than two single family residences and the lands are used for other than just residential purposes. The transferee has accordingly apportioned the value of consideration on the basis that the consideration for the single family residence is $ 600,000.00 and the remainder of the lands are used for commercial purposes. 48
9 SINGLE FAMILY RESIDENCE APPORTIONMENT The definition of a SFR does not include a structure that is constructed on agricultural land that is eligible to be classified in the farmlands property class prescribed under the Assessment Act. If the structure is on such land, paragraph 3 of the Affidavit should indicate that the land does not contain a SFR. Electronic Registration: Not available electronically. Adjustment must be claimed at the Ministry of Finance. Calculation of SFR Tax Where an Apportionment is Claimed Using the same hypothetical case of land purchased for $1,000,000.00 with the SFR portion of the land valued at $600,000.00: The land transfer tax payable on the conveyance of land containing no SFR, with a value of the consideration of $1,000,000.00 would be $13,475.00. As the value of the consideration apportioned to the SFR exceeds $400,000.00, there is an additional 0.5% tax on the amount by which the value of the consideration exceeds $400,000.00 (or $200,000.00). The additional tax of 0.5% on $200,000.00 is $1,000.00. The land transfer tax, therefore, amounts to $14,475.00 ($13,475.00 + $1,000.00) on this hypothetical conveyance. 49
10 REFUND OF LAND TRANSFER TAX FOR FIRST TIME BUYERS OF NEWLY CONSTRUCTED HOMES The Land Transfer Tax Refund for First Time Buyers of Newly Constructed Homes may be obtained at the time of registration or application can be made to the MOF within 18 months of the conveyance or disposition. Criteria: Purchaser must be 18 years of age or older; New home must be occupied as principle residence of the first time purchasers no later than 9 months following the date of the conveyance or disposition; Purchaser cannot have owned a home anywhere in the world; Spouse or same-sex partner cannot have owned a home anywhere in the world while they were the spouse or same-sex partner of the first time purchaser; Application must be made within 18 months of the date of the conveyance or disposition; Maximum refund is $2,000 for agreements entered into after March 31, 1999; and Maximum refund is $1,725 for agreements entered into on or prior to March 31, 1999. Electronic Registration: Explanations Tab: NOTE: Clear TEXT field before entering figures. Statement 9027 - Fraction of parties who are new home owners: ALL OR FRACTION (N/D) and the agreement of purchase and sale was entered into on or before March 31, 1999 (evidence needs to be submitted). (TEXT- delete ALL OR FRACTION (N/D) and enter percentage) OR Statement 9028 - Fraction of parties who are new home owners: ALL OR FRACTION (N/D) and the agreement of purchase and sale was entered into on or after April 1, 1999 (evidence needs to be submitted). (TEXT- delete ALL OR FRACTION (N/D) and enter percentage) Land Transfer Tax Refund Affidavit must be presented to the Land Registry Office as evidence needs to be submitted. 50
10 REFUND OF LAND TRANSFER TAX FOR FIRST TIME BUYERS OF NEWLY CONSTRUCTED HOMES Spousal Declaration The most frequently misunderstood requirement for eligibility is that if the first-time purchaser has a spouse or same-sex partner, the spouse or same-sex partner cannot have owned a home while a spouse or same-sex partner of the first-time purchaser. An individual who has not previously owned a home cannot claim to be a first-time purchaser if his or her spouse or same-sex partner owned a home anywhere in the world while being the spouse or same-sex partner of the individual. For example: if the first-time purchaser has a spouse who was a home-owner, but who sold the home prior to becoming the spouse of the refund claimant, the refund claimant may apply for a refund of land transfer tax in proportion to the interest in land he or she is acquiring plus the interest acquired by the spouse or same-sex partner. If, however, the spouse did not sell the home until after becoming the spouse of the first-time purchaser, the first-time purchaser is disqualified from any entitlement to the refund. Documentation Required When Refund is Claimed at the Ministry of Finance After Registration Land Transfer Tax Refund Affidavit Registered instrument Agreement of purchase and sale (including all schedules and amendments) Statement of Adjustments Ontario New Home Warranty Certificate 51
11 FREQUENTLY ASKED QUESTIONS Inter-Spousal / 1. What does spouse or same-sex partner mean for the purposes of the Inter-Family Land Transfer Tax Act? For the purposes of the Land Transfer Tax Act, spouse or same-sex partner is defined in section 29 of the Family Law Act as follows: spouse means either of a man and woman who are married to each other, and in addition includes either of a man and woman who are not married to each other and have cohabited, (a) (b) (a) (b) continuously for a period of not less than three years, or in a relationship of some permanence, if they are the natural or adoptive parents of a child. same-sex partner means either of two persons of the same sex who have cohabited, continuously for a period of not less than three years, or in a relationship of some permanence, if they are the natural or adoptive parents of a child. 2. Is common-law spouse an adequate statement to make on the Affidavit to qualify for a Regulation 696, R.R.O. 1990 exemption between spouses and is it enough to say that the parties are same-sex partners for the same exemption? No. The affidavit must set out that the parties are spouses and/or same-sex partners as defined under section 29 of the Family Law Act and that they qualify for exemption under Regulation 696, R.R.O. 1990. 3. Are minutes of settlement acceptable as a written separation agreement for the purposes of Regulation 696, R.R.O. 1990? Yes. Minutes of settlement are acceptable as a written agreement whereby the parties have agreed to live separate and apart. 4. Father holds title to a property and is transferring a ½ interest to son. No cash is involved but there is a mortgage on the property. What is the land transfer tax calculated on? The son will pay tax based on ½ of the balance owing on the mortgage. 52
11 FREQUENTLY ASKED QUESTIONS Inter-Spousal / 5. If a parent is put on title to a son s property at the insistence of the bank, Inter-Family how can the parent be removed from title without incurring land transfer tax? (continued) If the parent did not acquire a beneficial interest in the property as a result of the transfer, the Ministry will accept the fact that the parent was on title as a trustee for the son and the transfer from the parent back to the son can be accomplished with a trustee to beneficial owner affidavit. 6. Why does the taxpayer have to apply for the family business exemption at the Ministry of Finance as opposed to claiming the exemption at the land registry office at the time of registration? Subsection 3(2) of Regulation 697, R.R.O. 1990 requires the posting of security in the form of a special undertaking and initial family business affidavit which is followed-up by the Ministry of Finance within 9 months of the taxation year end following the date of registration. Leases 7. Is the Land Transfer Tax Affidavit required for a surrender/termination of lease or any other documents relating to a lease? All documents which make reference to a specific lease must have an affidavit. 8. Is land transfer tax payable on leases under fifty years with options to purchase? Leases which cannot exceed 50 years are not taxable, however, the granting or assigning of an option to purchase is taxable and any lease which contains such an option must set out in the affidavit the consideration, if any, being paid for the granting or assigning of the option, (but not the option exercise price), and tax is payable accordingly. Refund For First 9. Time Purchasers of Newly Constructed Homes What are the requirements in order to qualify for the refund of land transfer tax for a first time purchaser of a newly constructed home? The requirements are as follows: The purchaser must be at least 18 years old Application for refund must be made within 18 months after the date of conveyance or disposition. 53
11 FREQUENTLY ASKED QUESTIONS Refund For First The purchaser must occupy the home as his or her principle residence Time Purchasers within 9 months of the date of conveyance or disposition. of Newly The purchaser cannot have previously owned a home, or an interest in a Constructed home anywhere in the world. Homes A spouse or same-sex partner of the purchaser cannot have owned a (continued) home, or an interest in a home, anywhere while they were the spouse or same-sex partner of the first time purchaser. The purchaser cannot have received an Ontario Home Ownership Savings Plan (OHOSP) based refund of land transfer tax. To apply for the refund, a Refund Affidavit should be presented to the Registrar and if properly completed, the refund amount will be deducted from the tax ordinarily payable. If, for whatever reason, the tax was paid, application may be made directly to the Ministry of Finance. 10. What if I have paid the land transfer tax at the Registry Office, how do I apply for the refund? Application for refund can be made directly to the Ministry of Finance by submitting a completed Land Transfer Tax Refund Affidavit For First Time Purchasers of Newly Constructed Homes, a copy of the statement of adjustments, a copy of the agreement of purchase and sale (including all schedules), a copy of the new home warranty certificate and a copy of the registered conveyance. 11. If a parent is put on title to a son s property at the insistence of the bank, is the son eligible for the refund as long as all of the other conditions are met? In this situation, it will be necessary to pay land transfer tax at the time of registration and apply for a refund from the Ministry of Finance. If the parent did not acquire a beneficial interest in the property as a result of the transfer, the Ministry will accept the fact that the parent was on title as a trustee for the son and the son would qualify for the newly-constructed home rebate, provided that evidence in the form of a trust agreement is submitted. 54
11 FREQUENTLY ASKED QUESTIONS Refund For First 12. Time Purchasers of Newly Constructed Homes (continued) Where the purchasers are spouses and if one spouse has owned a home but the other spouse is a first time buyer, does the first time buyer receive his/her half of the refund? Where only spouses are involved there are no partial refunds. If the one spouse did not dispose of his/her previous home before becoming the spouse of the purchaser, the refund would not apply as neither party would be considered a first time home purchaser. If the one spouse disposed of his/her previous home before becoming the spouse of the first time home purchaser, the first time home purchaser would be entitled to claim 100% of the refund even if both were named on title. 13. What would be the maximum refund amount where the purchasers are spouses acquiring a 2/3 interest and a third party acquiring a 1/3 interest and the spouses are the only transferees that qualify as first time home buyers? The agreement of purchase and sale was entered into on January 2, 2002. Where the first time buyers are acquiring less than a 100% interest, the refund will be calculated based on their percentage interest. Based on the above situation, the first time home buyers would be eligible for a maximum refund of 2/3 of $2000.00. 14. Is there a time limit to apply for the refund? The purchaser must apply within 18 months of the date of registration or disposition. 15. Is there an occupancy requirement? Yes. The applicant must occupy the home as his/her principal residence within 9 months of the date of the conveyance or disposition. 55
11 FREQUENTLY ASKED QUESTIONS All Other Refunds 16. I have paid too much land transfer tax and now I want to get it back. How do I do that? You may send a letter requesting a refund to the Land Transfer Tax section of the Ministry of Finance, Motor Fuels & Tobacco Tax Branch, P. O. Box 625, 33 King Street West, Oshawa, Ontario L1H 8H5 together with a photocopy of the registered deed, evidence of the tax paid at registration, a copy of the agreement of purchase and sale and an explanation of the reason for the refund request. 17. Are there any time limits to apply for a refund of Land Transfer Tax? First time home buyers of newly constructed homes must apply within 18 months of registration. The refund on any tax paid on registration of a notice or caution where the transfer contemplated in the agreement referred to in the notice or caution did not take place has no time restrictions. All other refund requests must be made within 4 years of the date of payment. Surface/Mineral Rights 18. If a conveyance includes both surface & mineral rights, does it always have to be approved by the Ministry of Finance? Yes. The Minister must confirm that the taxable consideration for surface rights has been reasonably apportioned. Value of the Consideration 19. If the transferee on a foreclosure holds a 2nd and 4th mortgage on the lands transferred, how is the taxable value of consideration calculated? The value of consideration is equal to the lesser of: (a) the fair market value of the land, and (b) the amount owing on all encumbrances and liabilities prior in title than the second mortgage, as well as the amount owing on the second and fourth mortgages. 56
11 FREQUENTLY ASKED QUESTIONS Value of the 20. If the transferor is discharging a mortgage, which is still on title at the Consideration time of the transfer, is there a time frame for registering the discharge? (continued) If the transferor is discharging the mortgage as part of the current transfer, the affidavit must confirm that the transferee is not assuming any costs in connection with the discharge or any other liability, nor is the transferee conferring any benefit on the transferor as part of the arrangement relating to the conveyance. Otherwise there is no time frame for discharging the mortgage by the transferor. 21. If the transferee is acquiring a 33% interest in land subject to a mortgage, does he/she pay LTT on 33% of the balance owing on the mortgage? Yes, as well as on any other consideration paid or to be paid as part of the arrangement relating to the conveyance. 22. How do you calculate tax if the value of the consideration is in American dollars? What is the date used for conversion? All monies must be expressed in Canadian dollars. Therefore, the Land Transfer Tax affidavit must set out the amount of the consideration in Canadian dollars. The date of conversion should be the date that the agreement of purchase and sale is accepted and becomes a binding contract or the date of registration if no agreement has been reduced to writing. 23. Can a value be entered on the affidavit for the purpose of triggering capital gains without requiring payment of Land Transfer Tax? Any declared value of consideration appearing on the affidavit will trigger tax unless an exemption applies. 24. 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. 57
11 FREQUENTLY ASKED QUESTIONS Vesting Orders 25. Is Land Transfer Tax payable on registration of a vesting order? Vesting Orders are transfers and will be treated like any other transfer. That is, the affidavit must set out the nature of the Order and the circumstances that gave rise to it as well as the value of consideration applicable to the Order. 26. Who is the transferor in a Vesting Order? A vesting order usually has a plaintiff and a defendant. Whoever is ordered to transfer the property is the transferor. The court itself is not the transferor as it does not own the lands or have an interest in the lands. Wills & Estates 27. What is the wording required on the affidavit when the transferee is the sole beneficiary of an estate? When the transferee is not the sole beneficiary? If the transferee is the sole beneficiary, the affidavit should set out that the transfer is from the estate to the only the named beneficiary entitled to the lands. If the transferee is not the named beneficiary as set out in the will, the affidavit must set out the value of any consideration paid for the transfer. If the transferee is one of the named beneficiaries, the affidavit must set out the value of any other assets of the estate the transferee may have surrendered to the other named beneficiary in return for the lands. Electronic Registration 28. What does evidence needs to be submitted mean? There are certain transfers for which the Ministry of Finance requires evidence to be submitted to the land registry office prior to certification. Evidence may be the Refund Affidavit on a Refund For the First Time Purchaser of A Newly-Constructed Home, the supplementary affidavit on a trust transfer or the endorsement by the Ministry of Finance to indicate that tax is not payable or has been paid. 29. If my consideration is over $400,000.00 and the property is of mixed use, how do I complete the apportionment of the consideration to avoid payment of the additional tax on single family residences? It is not possible to do the apportionment electronically. The full amount of the tax may be paid and a refund applied for or the tax may be paid beforehand to the Ministry of Finance. 58
11 FREQUENTLY ASKED QUESTIONS Electronic 30. I am registering an inter-spousal transfer and I have selected nominal Registration and the spousal exemption, but I am getting an error message. (continued) If the consideration truly is nominal, you do not need an exemption. Where you are claiming an exemption, the consideration screen needs to be completed. If you intend to register a transfer between spouses, and the only consideration is the assumption of an existing encumbrance, you must reflect the value of the mortgage being assumed in 1(b)(i) of the consideration screen. You would then select 9085 and 9086 from the exemption screen. 31. I have a lease document under 50 years, but I m paying $100,000.00 for an option to purchase. Where do I show the $100,000.00? Assuming that $100,000.00 is the consideration for the granting or assigning of the option and not the option exercise price, complete the consideration screen to show $100,000.00 in 1(f). In explanations select 9023 and enter the following text, Amount shown represents value of consideration for granting of option. 32. Where do I claim the first time buyer of a newly-constructed home refund? You will find the appropriate box to be selected on the Explanations screen at box number 9027 or 9028. 59