On November 14, 2016, the Government of Ontario announced, among other changes affecting the Land Transfer Tax Act, that it will be raising the land transfer tax (LTT) rates, effective January 1, 2017. The new rates are as follows:
- The tax rate on the portion of the value of consideration above CA$2 million for purchases of one or two single-family residences would increase from 2 percent to 2.5 percent. “Single-family residences” include, for example, detached and semi-detached homes, townhomes and condominiums.
- The tax rate on the portion of the value of consideration above CA$400,000 for purchasers of all other types of property would increase from 1.5 percent to 2 percent. “All other types of property” include, for example, commercial, industrial, multi-residential and agricultural properties.
As a transitional measure, purchasers who entered into agreements of purchase and sale on or before November 14, 2016, would not be subject to the increased rates of tax , even if their closing is on or after January 1, 2017.
Given that the residential increase will only affect properties with a purchase price in excess of CA$2 million, the impact of this change will be somewhat more limited. However, the increase of 50 basis points for commercial projects will likely have considerable impact on developers, landlords and other commercial property investors. In light of these new changes, purchasers who do not have the protection of the transitional grandfathering (for example, where a written agreement of purchase and sale had not been concluded by November 14) should consider closing Ontario property transactions before December 31, 2016, in order to avoid the increased rates, where possible.
The City of Toronto, which imposes a parallel LTT, has not yet indicated whether it will be similarly increasing its LTT rate.