Only first time home buyers qualify for land transfer tax refund. The question now is who can be officially regarded as a first time home buyer. The question seems straightforward enough but I assure the answer isn’t.
What is Land Transfer Tax
All transfers of land in Ontario are guided by The Provincial Land Transfer Tax. There is an extra Municipal Land transfer tax on all lands transferred in Toronto. Generally, a charge for Land transfer tax is paid whenever there is a transfer of land ownership, irrespective of if the transfer was registered at one of Ontario’s land registry office. Land in this case refers to all buildings to be constructed, building and fixtures within the building. The cost of the land is usually the main determining factor that determines the amount payable as tax. Other factors include any debt or mortgage brought into negotiation for the land transfer. Click here for further details on Land Transfer tax as well as how it can be calculated.
Who Qualifies for a Frist Time Home Buyers Credit?
Some instances warrant that a buyer may be refunded part or all of the tax paid. Criteria includes: The deal was agreed on or after 13th December 2007 and it applies to all homes, resale or newly constructed. The agreement of sale and purchase was concluded before December 14, 2007, only homes newly constructed can apply for the refund. Submission of applications for refund must be done within 18 months after the purchase was done. Our real estate lawyer can help you in any case.
To claim a refund, the requirements are as follows:
The buyer must not have owned a home or stakes in any home in anywhere in the world prior to this particular home for which he/she is requesting tax refund. The spouse of the buyer must not have acquired any home in any part of the world while being the spouse of the buyer. Anything short of this means both spouses are ineligible. The buyer must be at least 18 years of age.
Every document involved in the application for refund must be submitted within 18 months after the deal was concluded. (Note that an application for the refund can be completed upon the electronic registration of the conveyance).
The buyer must move into said home, not later than 9 months after purchasing the home/land. The buyer must have never received any land transfer tax refund based on Ontario Home Ownership Savings Plan (OHOSP). The home must be newly constructed if the agreement of purchase and sale is entered into before December 14, 2007. First time home buyers and resale homes qualify for funds of the provincial and Toronto Land Transfer Taxes.
Am I a First Time Home Buyer?
Do I qualify for the First Time Home Buyers Refund?
I have come across certain clients who end up surprised to find out they are not eligible for the first Time home Buyers Land Transfer Tax refund. Below are some of the more common questions I usually receive:
1. This is my first time of buying a house and based on the directives of the bank, I am asked to use my parents’ names and they are not first time buyers.
If this is similar to your case, you will have to pay the tax as at when registering and at a later date, you can request for a refund from the ministry.
If the parent did not attain a beneficial interest in the property because of the conveyance:
The ministry will come to terms with the fact that the parent was only used as a trusty for the child and as such, the child becomes eligible for the refund the moment document to prove evidence of the trust is submitted (for example, the bank can issue a signed document stating that the parent’s name was used for the purpose of mortgage documentation and processing).
Another scenario is where a child who is a first time buyer and a parent who is not, decide to put resources together and buy a house with equal stake. The child may claim a refund of 50%, which is accruable to him while the parent who is not a first time buyer may not receive any form of refund.
2. I didn’t buy a building, rather I inherited one from an estate. When I eventually buy mine, will I be eligible for tax refund?
Technically speaking, when you eventually buy your home, it wouldn’t be your first home. Tax refunds are given to only people who have never owned any home in part or full in any part of the world. How you manage to acquire your first home is of little importance. What is considered is the fact that you already have a house.
3. My spouse purchased a home before we became spouses. I am about to buy a home, will I be eligible for this refund?
Your eligibility for a first time home buyers refund will be based on if you can be legally termed as spouses based on the definition of spouses in section 29 of the Family Law Act.
For land transfer tax purposes, “spouse” refers to one who is married to another person or in cases where such person isn’t married, he/she must have lived with another continuously for at least 3 years.
If your relationship isn’t covered by the definition above, then you can claim a refund on the basis of interest acquired in the home.
However, If you are legally considered as “spouses”, and said home was purchased while both of you are involved with each other, then you do not qualify for any refund as a first time home owner.
If a man gets married and sells of his home a day after getting married, For example if a husband owned a property prior to getting married, and sold it the day after he got married, his wife has automatically gained stake in the property and as such is not eligible for any future refund as a first time buyer. This situation doesn’t change even if the home is the name of the husband alone. (See Number 4 if the property was sold prior to becoming spouses).
4. My spouse once owned a property which was sold before we became spouses. I have never owned a property and would like to know if I am eligible for this tax refund.
In this case, you are eligible for a refund even though your spouse is not a first time home buyer; you are. You are entitled to a full refund on tax as long as your spouse sold his/her property before becoming your spouse.
Note that there is a legal definition of spouse and only people who are married or have cohabited for a period of at least 3 years are regarded as spouse in this case. If you have not cohabited for up to 3 years and are not married, you must have lived together continuously for a reasonable period and must have either a biological child or an adopted child.
5. I recently moved to Canada from another country and before coming here, I sold off my home in that country. If I am to purchase a home here, would I be eligible for this tax refund?
The answer is simple. To become eligible, you must have never held any stake in any home in any part of the world. Simply put, you are not eligible.