Whenever you acquire a land of interest in land of Canada, you are sure to pay the land transfer tax in Canada. Land, defined as but not limited to, refers to a building, a house being constructed, an accessory such as build in appliances, luminaries, kitchen cabinets, etc.
Land transfer tax is the tax that is to be paid on transferring any land presented for the unregistered disposition or registered of beneficiary interest in land. The case is an exception for the cases when the land enjoys special exemption.
Who pays land transfer tax?
When you buy a property of beneficial interest, a house or a land in Canada, upon the completion of the transaction, you should pay the transfer tax dutifully.
It is calculated as the total amount to be paid for the land, apart from the balance or any debt, mortgage or any other loan as a part of the land purchase agreement.
However, it also happens that land transfer tax is, sometimes, based on the current fair market value of the land wherein:
- The remaining term of the lease contract may exceed 50 years
- Land transferred is made by corporate to the shareholder
It is determined by the value of the consideration. The land transfer tax includes the price of sales, any benefits, obligation assumes, incidental costs, the cost of improvement among others. In some of the cases, the value of the consideration is deemed to be the fair market value of the land. For instance, if the land is covered by a lease of more than 50 years or the Land Corporation to the shareholders.
Assignment of land or disposition of beneficial interest in land valued at $ 400,000:
Multiply $ 55,000 per 0.5% (55,000 × 0.005) = $ 275
Multiply by 1% the amount over $ 55,000 up to $ 250,000
(195,000 × 0.01) = $ 1,950
Multiply by 1.5% the amount in excess of $ 250,000 up to $ 400,000 ($ 150,000 × .015) = $ 2,250.
Total = $ 4,475.
Quick calculation formula
Quick Land Transfer Tax Formula
In order to calculate the land transfer tax quickly, use the formula given:
- For disposal or transportation, the value of considered is referred to as VC
- Land transfer tax is designated and abbreviated as DCI
- Single family dwellings are designers and referred to as HU in the Land Transfer Act