On November 14, 2016, the Government of Ontario announced a series of changes to the Land Transfer Tax Act as part of the Building Ontario Up for Everyone Act (Budget Measures) (Bill). If passed, the Bill will increase land transfer tax (LTT) rates for certain properties, effective January 1, 2017.
Current LTT rates in Ontario are based on the value paid for the land as follows:
- 0.5 per cent of the value, up to, and including C$55,000
- One per cent of the value above C$55,000, up to, and including C$250,000
- 1.5 per cent of the value above C$250,000
Effective January 1, 2017, the LTT rate on the portion of the value above C$400,000 for purchases of “all other types of property” will increase from 1.5 per cent to two per cent. The province has clarified that “all other types of property” includes, for example, commercial, industrial, multi-residential and agricultural properties.
The proposed LTT increase will have a significant impact on the costs of acquisition of commercial real estate in Ontario.
Purchasers who entered into agreements of purchase and sale on or before November 14, 2016, will not be subject to the increased LTT rates, even if the closing of the transaction occurs on or after January 1, 2017. Those who have entered into an agreement after November 14, 2016 will need to close the transaction before January 1, 2017 to avoid the increased LTT rates.
The City of Toronto imposes its own additional LTT on real estate in the city at slightly different rates, but has not yet indicated whether it will also increase its LTT rates.