Taxes in real estate – purchaser’s edition

You have bought residential or commercial real estate. Over the course of the deal you realize that there are references to many different types of tax. You are told some taxes do not apply, some do and others do, but only partly. That can be confusing. Below, is a breakdown of certain types of tax that arise in a real estate purchase.

(a) Harmonized Sales Tax (“HST”). Typically,

i. HST will apply to commercial properties. From a cash-flow perspective, the Purchaser will undertake to self-assess the HST payable on their tax return, rather than making the HST payment directly to the vendor on closing; and

ii. HST will be exempt on most used residential properties. New build residential properties are subject to HST, but rebates are in place for home-owners and investors, subject to certain requirements.

(b) Land Transfer Tax (“LTT”). The amount of LTT owing is relative to the purchase price. There are certain rebates on LTT and also some exceptions to LTT. A common rebate is for first-time homebuyers up to $4,000.00. A common exception to LTT is a transfer of property between spouses.

(c) Non-Resident Speculative Tax (“NRST”). The NRST is a 15.0% tax on the purchase price payable on certain types of residential property, located in the Greater Golden Horseshoe Region, by individuals who are non-resident, foreign corporations and certain types of trusts.

(d) Property Tax. The property tax for the subject property will be adjusted as of the date of closing. Make sure you review your property taxes and budget for them.