Buying a home or land in Canada comes with its own share of complicated regulations and taxes that one has to follow. Whenever a person buys property or land there, then the owner has to pay a land transfer tax. The tax is not just associated with the building but also includes fixtures of any built-in appliances, cabinetry, or any kind of light fixtures. Besides these, a 20% Non-Resident Speculation Tax (NRST) may apply.
Who has to pay the land transfer tax?
Whenever a person acquires a piece of land or any property, that person pays land transfer tax to the province in which the land or property had been bought. This amount is due when the transaction is closed. Normally, the land transfer tax is based on the market value of the land in that province. The land transfer tax amount could be high or less depending on the amount paid for that particular land. In the case of a mortgage, or any debt assumed, the amount could be different in each case.
Criteria of land transfer tax during the purchase of a house?
When a person buys a home in Ontario, Canada for the first time, he or she needs to pay the land transfer tax to the province in order to close the deal. In some cases, people are even eligible to apply for the tax rebate while purchasing a home property for the first time. But for such things, one needs to provide some additional information. Additional information can help the institution better understand the situation of the new homeowner. Since 2017, the Land Transfer Tax Act has inaugurated the evidence-based policy development in Ontario that has changed the way real estate works. People who have purchased at least six and not more than six single-family residences or agricultural lands are required to provide additional information to qualify for a tax rebate.
But can you count on a tax rebate during land transfer? Well, a tax rebate refers to the relief that a person can claim to reduce his income tax burden. It is the kind of taxpayer liability that one doesn’t have to pay. Usually, when an employed person has paid too much tax in the course of the financial year, then he is eligible to claim some of it back as a tax rebate. Tax rebate is not just for salary personnel, it can be applied to self-employed personnel as well, but it needs to be done via the Self-Assessment System. Anyone who is buying a home for the first time is eligible for a refund of all or some parts of the tax.
However, to claim a refund, one must be 18 years old. Unless a person is 18 years of age, he or she cannot own a home anywhere including in Canada. If you are older than 18 and have previous ownership, then you will not qualify for the land transfer tax but if the home is gifted to you or you have inherited it then the procedure could be a little different.