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What You Need to Know About Land Transfer Tax


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Perhaps you have been thinking about buying a new home and even have your eye on the one that you would like to buy. Before finalizing the process, take the time to know of the need to pay the land transfer tax. 

The term land transfer tax refers to a tax at the municipal or provincial level that is applied when someone buys a new home. In most cases, land transfer tax is presented in calculations as a percentage of the monetary value of the house. Thus, this can tend to be rather high in cost due to some properties being priced on a higher scale. 

When people are excited about buying a new home, especially those who are new to the real estate industry, they frequently forget that they also need to pay the land transfer tax. If you do not meet the qualifications in regard to obtaining a rebate, then this tax is required to be paid immediately upon the purchase of your new home. 

Who is responsible for paying the land transfer tax?

The sole responsibility of the payment for the land transfer tax upon the purchase of a new home in Canada lies solely with the home buyer. This means that the property owner, the real estate agent, or the mortgage lender do not pay any portion of the land transfer tax. 

As the buyer, you must pay this tax in the province in which you buy your new home. If you live in one province and are moving to a new one, you do not pay the land transfer tax to the province where you formerly lived. You pay it only to the province where the property is located. 

If you are buying a home in the provinces of Saskatchewan or Alberta, you will get a break by not having to pay the land transfer tax, since these two provinces do not require it. 

On the other hand, some parts of Canada, like Toronto, have a land transfer tax both at the provincial as well as municipal levels. While this is a rare case where the home buyer needs to pay the land transfer tax both at the municipal and provincial levels, you need to do your due diligence to be well informed about it when buying property. You will be prepared ahead of time by knowing that you need to come up with the money to pay for this expense.

How is the land transfer tax computed?

In most cases, the land transfer tax is based on the cost of the home, along with the amount that is left owed on the mortgage or any debt that is combined with the transaction of buying the home. 

If you buy a home in the provinces of Quebec, Ontario, Manitoba, British Columbia, New Brunswick, Nova Scotia, or Prince Edward Island, it will be necessary for you to pay the expense of the land transfer tax. Sometimes this is also referred to as the property transfer tax. 

While the remaining territories, along with the remaining provinces of Canada, do not mandate the payment of the land transfer tax from home buyers, they do have a registration fee that must be paid when you buy a new home. The good news is that the registration fee is usually much cheaper compared to the land transfer tax in other provinces.

New house

There is no set fee for the land transfer tax for homes in the provinces of Canada. This means that the amount will vary depending on where you plan to buy your home.

If you buy a new property within the province of Nova Scotia, then it is the municipality that determines the rate of the land transfer tax, although it is still regarded as a provincial land transfer tax fee. 

While the municipalities in Nova Scotia are the ones that decide what the rate will be for this type of tax, it does not indicate that there is the application of both a municipal land transfer tax and a provincial land transfer tax. There is only the application of a provincial land transfer tax in the province of Nova Scotia, as each municipality is given the authority to determine the amount of such a tax. 

The situation is different, however, if you decide to buy a new home in the province of Ontario, specifically in the city of Toronto. There, you will have to pay both the municipal land transfer tax and the provincial land transfer tax. 

It is possible, however, for someone to buy a home in another part of Ontario where there will be no need to pay a municipal land transfer tax. This is because not all cities in Ontario charge a municipal land transfer tax to home buyers like Toronto does.

How much do different provinces in Canada charge as land transfer taxes?

For you to understand better about land transfer taxes in Canada, we will discuss the rates that you can expect to pay in various provinces if you decide to buy a home costing, say, $200,000. 

If you buy a home in British Columbia for $200,000, you can expect to pay a land transfer tax in the amount of $2000. In the province of Manitoba, it can cost you $1650. It is lower in the province of New Brunswick, where you have to pay $1000 for the land transfer tax. 

In the province of Newfoundland and Labrador, the cost of the land transfer tax is $898. However, this province also charges a fee in the same amount for the registration of the home mortgage. In Nova Scotia, the cost will be anywhere from 0 to as much as $3000, since some municipalities do not bother to charge a provincial land transfer tax. 

Meanwhile, the province of Ontario charges $1725 for the land transfer tax. If the home you want is in Toronto, the city will also add the municipal land transfer tax in the same amount. When you buy a home in the province of Prince Edward Island, you will need to pay a land transfer tax of $2000. The cost of this type of tax in the province of Quebec is $1750.

Again, not all provinces and territories have a land transfer tax. However, they do charge a fee when you register your home mortgage. The registration fees are notably less expensive than the cost of the land transfer tax in other provinces. 

In the province of Alberta, for example, the mortgage registration will cost you $90. In the Northwest Territories, it will cost you $300. The cost is the same, $300, in the province of Nunavut. In Saskatchewan, the fee for registering your home mortgage is $600. Then, finally, in The Yukon, you would have to pay $73 for the registration.

Author Bio

Mohamed Konate

Mohamed Konate is a personal finance expert, blogger, and marketing consultant based out of Toronto. He is a former financial services professional who worked for many years at major Canadian financial institutions where he managed the marketing strategy around various financial products ranging from credit cards to lines of credit. Mohamed is passionate about personal finance and holds a Bachelor in Business Administration from the University of Quebec (Montreal) and a Master in International Business from the University of Sherbrooke (Quebec).He is also the author of the Canadian Credit Card Guidebook. Read his full author bio