Land Transfer Tax in Canada: What Buyers Need to Know
When purchasing real estate in Canada, many buyers focus on the price of the home but forget about a major additional cost: land transfer tax. This one-time tax is charged when a property changes ownership and is often due upfront as part of closing costs.
Whether you are buying your first home, investing in rental property, or transferring title to a family member, understanding how land transfer tax works can help you avoid unexpected costs and make smarter decisions.
What Is Land Transfer Tax?
Land transfer tax (the “LTT”) is a provincial tax applied to the purchase or transfer of real estate. It is calculated as a percentage of the property’s fair market value at the time of registration. The rules, rates, and exemptions vary by province, and in some cases, by municipality.
LTT is separate from:
- Land registration fees
- GST/HST (for new builds)
- Capital gains tax (paid on the sale side, not the purchase)
Most provinces charge this tax to the buyer, not the seller.
Which Provinces Charge Land Transfer Tax?
Many provinces levy a property transfer or land transfer tax, though rules, names, and rates vary. Here’s how it works in some of the most populated provinces:
British Columbia
- 1% on the first $200,000
- 2% on the portion between $200,000 and $2,000,000
- 3% on the portion over $2,000,000
- Additional 2% for residential properties over $3 million
- Additional foreign buyer tax in certain regions
Ontario (Land Transfer Tax)
- 0.5% on the first $55,000
- 1% on $55,000 to $250,000
- 1.5% on $250,000 to $400,000
- 2% on $400,000 to $2,000,000
- 2.5% on homes over $2 million
- Toronto has an additional municipal land transfer tax
- First-time home buyer refund available (up to $4,000)
Quebec (Welcome Tax)
- Calculated using tiered rates depending on the municipality
- Paid as a transfer duty (droits de mutation)
Other Provinces
- Alberta and Saskatchewan charge smaller land registration fees, not formal land transfer tax
- Nova Scotia, Manitoba, and others have their own versions of land transfer or registration taxes
Always check the rules for your specific province or territory before closing a deal.
Who Pays the Land Transfer Tax?
The buyer is typically responsible for paying land transfer tax. It is usually due at the time the property is legally registered, not when the purchase agreement is signed.
Failure to pay may result in:
- Registration delays
- Legal complications
- Penalties or interest
This tax is often paid through your lawyer handling the closing process.
How Is Land Transfer Tax Calculated?
The tax is generally calculated based on the fair market value (“FMV”) of the property, not necessarily the purchase price. If you are transferring property without a sale (such as gifting it to a family member), a formal property appraisal may be required to determine the FMV.
Are There Any Exemptions from Land transfer tax?
Yes, certain transactions may be fully or partially exempt from LTT, depending on the province.
Common Exemptions Include:
- First-time home buyers (please note that this exemption differs significantly by province)
- Transfers between spouses (e.g., due to divorce or marriage)
- Family farm or business transfers
- Transfers related to estate planning or death
- Property transfers between related corporations or trusts
To qualify, you usually must meet specific conditions and file additional forms or affidavits with the province.
A tax or real estate lawyer can help assess whether your transaction qualifies for an exemption and handle the paperwork to avoid unnecessary tax.
Property Transfers and CRA Scrutiny
While LTT is administered at the provincial level, property transfers can also trigger attention from the CRA, especially in cases involving:
- Underreported fair market value
- Frequent house flipping
- Transfers to family members below market value
- Changes in beneficial ownership
The CRA may reassess your transaction and impose capital gains tax, attribution rules, or challenge the legitimacy of the transfer, particularly if it appears to be done for tax avoidance.
This is especially important when using bare trusts, corporate titleholders, or non-arm’s length transactions.
How a Tax Lawyer Can Help
Property transfers often involve more than just real estate law, they can have significant tax consequences. A Canadian tax lawyer can:
- Advise on LTT exemptions and eligibility
- Structure property transfers to minimize tax exposure
- Handle disputes with the CRA over fair market value
- Draft and review trust, estate, or corporate transfer documents
- Coordinate with accountants and real estate lawyers to ensure compliance
This is particularly valuable for high-value transactions, family wealth transfers, or real estate investors.
Schedule a Free Consultation with Rosen & Associates Tax Law
If you’re buying, selling, or transferring property in Canada, don’t let surprise tax bills disrupt your plans. At Rosen & Associates Tax Law, we help individuals and businesses navigate the complexities of land transfer tax and avoid costly mistakes.
Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.
Elias Zafiridis