Land Transfer/Registration Levies in Canada

The province of Ontario announced today that it would not be allowing all municipalities in the province to charge a land transfer tax, allowing that privilege only for the City of Toronto. The announcement provides an ideal opportunity to consider provincial land transfer taxes and fees across Canada, as they vary widely.

First, the only province in Canada that devolves the full responsibility for levying land transfer taxes (called deed taxes) to its municipalities is Nova Scotia. Municipalities in NS can set their own rates, so long as they are at or below the cap of 1.5%. Here is a link that outlines the rates across municipalities in NS, and you will see a number of municipalities do levy the maximum rate allowed.

Second, only the City of Toronto in Ontario has been given authority by the province to levy a land transfer tax. Unlike in NS where the municipal transfer tax is fully devolved, in Toronto the transfer tax charged by the City is in addition to the provincial tax.

Third, the form of the tax/fee varies across the provinces. In Alberta, Saskatchewan, and Newfoundland the levies are not land transfer taxes per se, but rather a registration fee/tax. In the case of Alberta, there is a separate fee/tax for registering mortgages. However, these so called fees all take the form of a rate that varies with the value of the property. Since the cost of registering a property does not vary by its value, the variable portion is by definition a tax and not a fee. In the remaining provinces, they are officially referred to as land transfer taxes.

Fourth, the tax rate that is applied to the property value is sometime progressive, but more often than not a flat tax. The rates are progressive in BC, MB, On, and Quebec. Flat land transfer/registration taxes exist in Alberta, Saskatchewan, New Brunswick, Nova Scotia, PEI, and, for the most part, Newfoundland (NFLD exempts the first $500 in property value). The rates vary widely, from $1 per $5,000 of assessed value to 2% of assessed value.

Fifth, most provinces apply the tax to the fair market value of the property, interpreted as the purchase price of the property, but some provinces have a caveat that allows them to use the greater of the purchase price or the assessed value. Of course, fair market value of property varies widely within and across provinces and the higher the value of the property, the greater the tax.

This variation leads to the burden of land transfer/registration taxes differing immensely across the provinces. One of the best ways, I think, to gauge the burden is to look at the fees/taxes due based on the average value of residential properties in the province. I obtained the average value of residential properties from CREA and applied the tax/fee to these averages (I assume that a mortgage was also registered in those provinces that levy a separate fee to register a mortgage). The results are listed below:

Land Transfer/Registration
Province Average Value Fee/Tax Portion of
Assuming Mortgage Value
BC 667,480.00 11,349.60 1.700%
AB 384,381.00 254.00 0.066%
SASK 292,949.00 878.85 0.300%
MB 264,739.00 2,944.78 1.112%
ON 471,654.00 5,549.81 1.177%
Toronto 630,876.00 13,892.33 2.202%
QUE 275,701.00 2,635.52 0.956%
NL 258,459.00 2,263.67 0.876%
NB 161,338.00 806.69 0.500%
NS (Max Rate) 207,657.00 3,114.86 1.500%
PEI 163,236.00 1,632.36 1.000%

 

You can see that among the provinces, the burden of the transfer tax in BC is the highest based on average value; however, overall, the burden is the highest in Toronto due to the presence of the combined provincial-municipal land transfer tax. The provinces with the lowest burden (AB and Sask) are those purporting to have only a registration ‘fee’ and not a transfer tax per se. Despite the varying burden, it is clear that the presence of land transfer taxes do not generally inhibit homeownership.

What is the effect of such high land transfer taxes in Toronto and BC? The CD Howe Institute has studied the effect of the City of Toronto transfer tax and the results were generally not positive. Overall, the transfer tax has constrained mobility, lead to increased administrative costs, and pushed home buyers to buy just outside of the municipal borders. Instead, the report suggests that a higher property tax rate would be better than the transfer tax. That said, as the city is facing a $23 billion infrastructure shortfall, it is unlikely the tax will be lowered or disappear any time soon. In BC, the high burden has led some to suggest that the tax constrains the ability for BC employers to attract and retain skilled workers, despite the provinces lower income taxes. And while the province of BC has indicated that it is willing to tinker with the land transfer tax, it has also indicated that it is unwilling to forgo much of the $1 billion in annual revenue it obtains from the tax. In BC, the cost of home ownership is often semi-jokingly referred to as the sunshine tax; that price one pays to live in a mild climate.

What is, however, clear from looking at these rates is that provincial policy regarding land registration/transfer taxes is not consistent. BC is a definite outlier amongst its peers, but then so too is Alberta. While the previous Alberta government had proposed to increase the land registration levy, the new Notley government will not follow through on that proposal. Given the table above, it would appear that there is room for Alberta to look to the land registration system as a way to obtain much needed revenues; however, with the effect of the oil price collapse already working its way through to the housing market, the timing perhaps is not ideal for such change.

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