Understanding and Applying the Property Transfer Tax

The Property Transfer Tax is better described as a land registration tax. It is a tax that applies to conveyances of real estate when they are registered at a Land Title Office. This paper will briefly explain how the tax applies, and will discuss ways to reduce or avoid the tax. Primarily, avoidance of this tax means either ensuring that a transaction falls within one of the exemptions listed in the Property Transfer Tax Act, or structuring the transfer so that it does not have to be registered. There are also some circumstances that offer the potential for reduction or delay of payment.

Property Transfer Tax must be paid in full at the time of registration of the conveyance at the land Title Office. The amount paid at that time is based on fair market value, as declared by the applicant. This declaration is subject to an audit which may result in a demand for further payment at a future date.

Fair market value is defined in the Act in some detail, but essentially means the price that would be paid by a willing purchaser to a willing seller in the open market on the date of registration. An open market is where the property is offered for sale so that anyone likely to be interested in purchasing it may make an offer.

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