Everything Tax When Buying or Selling a Property – Part I

Tax on Buying or Selling a Property in Ontario – Part I: Land Transfer Tax, HST, and Non-Resident Speculation Tax

Buying property in Ontario means paying tax on top of the purchase price, sometimes significantly more than buyers anticipate. Before the transaction closes, a purchaser in Ontario may be liable for provincial land transfer tax, municipal land transfer tax (in Toronto), HST on certain types of property, and non-resident speculation tax if the buyer is not a Canadian citizen or permanent resident. These taxes apply at different rates and in different circumstances, and understanding them before you make an offer is worth doing.

This article covers the taxes that apply at the time of purchase: land transfer tax, HST, and the non-resident speculation tax. Part II covers property tax, capital gains tax on the sale of a property, and the principal residence exemption.

Land Transfer Tax in Ontario

Ontario’s Provincial Land Transfer Tax (LTT) applies to every purchaser of land in Ontario, whether the property is residential or commercial. It is calculated as a percentage of the purchase price using a graduated rate structure and is payable at the time the transfer is registered. There is no LTT payable by the seller; it is the buyer’s obligation entirely.

The current Ontario LTT rates are:

On a $1,000,000 home, for example, the Ontario LTT would be approximately $16,475.

If the transfer of land is not registered, which occurs where there is a transfer of a beneficial interest in land without a registered title change, the buyer must complete the Return on the Acquisition of a Beneficial Interest in Land and submit it to the Ontario Ministry of Finance with the tax payment within 30 days of the transfer.

Municipal Land Transfer Tax in Toronto

Buyers purchasing property anywhere in the City of Toronto pay a second, parallel land transfer tax the Municipal Land Transfer Tax (MLTT), on top of the provincial LTT. The MLTT rates mirror the provincial LTT structure:

Buying a $1,000,000 property in Toronto means paying approximately $32,950 in combined LTT and MLTT before any other closing costs.

LTT Exemptions

A limited number of transfers are exempt from Ontario LTT, including certain transfers between spouses, certain transfers from an individual to their family business corporation, certain transfers of farmed land between family members, and certain transfers of a life lease from a non-profit organization or charity. The exemptions are narrow and fact-specific.

First-Time Home Buyer Rebates

First-time buyers in Ontario may be eligible for a refund of the provincial LTT of up to $4,000. This rebate effectively eliminates LTT on homes up to approximately $368,000 and provides partial relief above that threshold. The rebate is generally claimed at the time of registration by the buyer’s lawyer and reduces the amount of LTT payable at closing.

First-time buyers purchasing in Toronto may also be eligible for an MLTT rebate of up to $4,475. To qualify for either rebate, the buyer must be a Canadian citizen or permanent resident, must be 18 or older, must never have previously owned a home anywhere in the world, and must occupy the home as their principal residence within nine months of the transfer.

HST on Property Purchases

HST at the Ontario rate of 13% applies to certain property purchases. Whether HST applies and who pays it depends on the type of property.

New Construction and Substantially Renovated Homes

HST applies to the purchase of a newly constructed home or a home that has been substantially renovated. The CRA defines “substantial renovation” as the renovation or replacement of at least 90% of the interior of a building (excluding the foundation, external walls, internal supporting walls, roof, floors, and staircases). Resale homes that do not qualify as substantially renovated are exempt from HST.

Many builders incorporate HST into the advertised purchase price, but some do not. Buyers of newly constructed homes should confirm whether the price quoted includes or excludes HST before entering into an agreement of purchase and sale.

Buyers of newly constructed homes may qualify for a new housing rebate that returns a portion of the HST paid. The federal portion of the rebate is up to 36% of the 5% GST component, to a maximum of $6,300, phasing out for homes priced between $350,000 and $450,000. The Ontario portion of the rebate is up to 75% of the 8% provincial component, to a maximum of $24,000. Eligibility depends on how the property will be used. The CRA’s Guide RC4028 on the GST/HST New Housing Rebate sets out the qualification criteria in detail.

Vacant Land

Where a residential purchase includes a home plus a significant portion of vacant land, the CRA treats the transaction as two separate supplies: the house and the land necessary for its use and enjoyment on one hand and the remaining vacant land on the other. HST applies only to the vacant land portion and only if that land was not used personally by the seller prior to the sale. The test looks at the seller’s prior use of the land, not the buyer’s intended use.

Commercial Properties

Commercial real estate is subject to HST, payable by the purchaser. Where the purchaser is a registered GST/HST registrant, the vendor may not be required to collect the tax; instead, the purchaser self-assesses and remits. Both parties can also make a joint election under the Excise Tax Act to treat the commercial real property transaction as outside the scope of HST entirely, where specific conditions are met. Vendors of commercial property should obtain written confirmation of the purchaser’s GST/HST registration status and verify it on the CRA’s online GST/HST Registry before concluding that no tax needs to be collected. Getting this wrong can be costly; the vendor may be assessed for uncollected tax if the transaction is later challenged.

Vacation Properties and Cottages

HST does not apply to the sale of a personal-use cottage or vacation property. However, if the seller was renting the property for more than 50% of the time during their ownership, the CRA may deem the property to be commercial property, in which case HST may apply. This is a common issue with short-term rental properties.

HST on Closing Services

Buyers and sellers also pay HST on many of the professional services involved in a real estate transaction: legal fees, real estate broker commissions, home inspection fees, and survey costs all attract 13% HST. This is a closing cost that should be factored into budget calculations.

Non-Resident Speculation Tax

Ontario’s Non-Resident Speculation Tax (NRST) applies to residential property purchased by foreign nationals, foreign corporations, and certain trusts with foreign connections. The NRST was introduced in 2017 and has been significantly expanded since both in rate and in geographic scope.

Current NRST Rate: 25%

The NRST rate is currently 25% of the purchase price. The rate has increased substantially since the tax was first introduced:

• April 2017: 15%, applying only to the Greater Golden Horseshoe region
• March 30, 2022: rate increased to 20%; geographic scope expanded to all of Ontario
• October 25, 2022: rate increased to 25%

The NRST applies province-wide to all residential property in Ontario, not just in specific regions. Any article or resource still referencing the 15% rate or the Greater Golden Horseshoe geographic limit is out of date.

Who Pays the NRST

The NRST applies to three categories of buyer. A foreign national is an individual who is not a Canadian citizen and is not a permanent resident of Canada. A foreign corporation is either a corporation incorporated outside Canada or a corporation incorporated in Canada that is controlled by a foreign national or by a foreign corporation. A taxable trustee is a trust where at least one trustee, or at least one beneficiary, is a foreign entity.

Where a transaction has multiple purchasers and only one is a foreign entity, the NRST applies to 100% of the purchase price regardless of the non-resident’s ownership share. All purchasers are jointly and severally liable for the NRST, meaning Canadian citizen co-purchasers are on the hook if the foreign purchaser fails to pay.

What Property the NRST Applies To

The NRST applies to residential property only, specifically property containing at least one and no more than six single-family residences. This includes detached and semi-detached houses, townhouses, condominium units, and duplexes to sixplexes. Commercial property is not subject to the NRST.

NRST Rebates

Certain buyers who would otherwise be subject to the NRST may qualify for a rebate. Nominees under the Ontario Immigrant Nominee Program, protected persons under the Immigration and Refugee Protection Act, and international students and foreign workers who meet specific qualifying criteria may be eligible. The conditions for the rebate are narrow and must be confirmed with a lawyer or tax advisor before closing.

The NRST is payable at the time of registration. Ontario lawyers are required to make a declaration to the Ministry of Finance on each transaction confirming whether the NRST applies.

FAQs:

-Shira Kalfa, BA, JD, Partner and Founder

Shira Kalfa is the founding partner of Kalfa Law Firm. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax Foundation, Women’s Law Association of Ontario, and the Toronto Jewish Law Society. 

© Kalfa Law 2018. Updated September 3, 2026