Ontario Commercial Land Transfer Tax: Rates, Calculation, and Exemptions

Ontario commercial land transfer tax runs on a tiered scale that reaches 2.0% on the portion of the purchase price above $400,000, and the same rates apply again as a municipal tax if the property sits inside the City of Toronto. On a $2-million warehouse outside Toronto, the provincial bill is $36,475. Inside Toronto, it doubles to $72,950. Both amounts are payable on closing, and neither includes the 13% HST that applies to most commercial sales.

Provincial Rate Brackets

The tax is imposed under Ontario’s Land Transfer Tax Act on the total value of consideration for the transfer. For non-residential property, the rates are:

0.5% on the value up to $55,000
1.0% on the value from $55,000.01 to $250,000
1.5% on the value from $250,000.01 to $400,000
2.0% on the value above $400,000

These brackets have applied since January 1, 2017, to agreements of purchase and sale entered into after November 14, 2016.¹ “Non-residential” covers essentially any property not primarily used as a home or apartment building, so the same schedule applies to a strip mall, an industrial lot, or an office tower.

How to Calculate the Tax

Because the brackets are marginal, you don’t pay 2.0% on the whole price. Each rate applies only to the slice of value inside its band. Ontario publishes shortcut formulas that give the same result in one step. For commercial property valued above $400,000:

LTT = (Value of Consideration × 0.02) − $3,525¹

Applied to a $2,000,000 property: $2,000,000 × 0.02 = $40,000, minus $3,525, for a provincial tax of $36,475. For lower-value commercial deals, the formulas are:

Up to $55,000: Value × 0.005
$55,000.01 to $250,000: (Value × 0.01) − $275
$250,000.01 to $400,000: (Value × 0.015) − $1,525

Toronto’s Municipal Land Transfer Tax

Commercial property inside the City of Toronto attracts a second land transfer tax collected by the municipality. Its brackets mirror the provincial ones exactly: 0.5% up to $55,000, 1.0% to $250,000, 1.5% to $400,000, and 2.0% above $400,000.² The municipal tax is a separate payment from the provincial one, and both are collected when the deed is registered.

What matters is the boundary of the City of Toronto proper, not the broader Greater Toronto Area. A purchase in Mississauga, Vaughan, or Markham carries only the provincial tax.

What Counts as Value of Consideration

The tax base is not just the cash price. Under the Land Transfer Tax Act, the value of consideration includes the gross sale price, any liability the buyer assumes as part of the deal, and the value of any benefit conferred on any person connected to the arrangement.³

In practice, an existing mortgage the buyer takes over gets added to the price for tax purposes. So does vendor take-back financing, any assumed liens, and any non-cash consideration exchanged as part of the transaction. If you agree to buy a property for $1.5 million and assume a $500,000 mortgage, the value of consideration is $2 million, and the tax is calculated on that figure. Underreporting triggers penalties, so every financial component of the deal has to be captured in the tax documents.

HST on Commercial Purchases

Ontario charges 13% HST on the sale of commercial real property, and on most deals that amount is much larger than the land transfer tax itself.⁴ On a $2-million purchase, HST is $260,000. The reason it does not sink every commercial transaction is the self-assessment mechanism available to GST/HST-registered buyers.

When the purchaser is registered for GST/HST, the vendor does not collect the tax on closing. The buyer reports the tax on their regular GST/HST return and claims an offsetting input tax credit at the same time, so the net cash outlay is typically zero.⁵ The buyer must be using or supplying the property primarily in the course of commercial activities to claim the full credit.

The trap is buyers who are not GST/HST-registered. Even then, the vendor may not collect the tax at closing, and the purchaser is left responsible for reporting and paying the full 13% directly to the CRA. Vendors should verify a purchaser’s registration through the CRA’s online registry before closing; an “RT” business number alone does not confirm that the registration is active.⁶

When and How the Tax Is Paid

Land transfer tax is paid electronically at the moment the deed is registered through Ontario’s Teraview platform. The buyer’s lawyer needs sufficient funds in a designated trust account before initiating registration, because the system processes the payment automatically as part of that step. Once registration completes, Teraview generates a digital receipt that serves as proof of compliance. Keep it with your corporate records. The Ministry of Finance can audit electronic filings later to verify that the value of consideration was reported accurately.

The 30-Day Rule for Unregistered Transfers

Not every commercial deal involves registering a deed immediately. When a beneficial interest in land changes hands without a registered conveyance, which is common in partnership reorganizations and multi-step corporate acquisitions, the buyer has 30 days to register a conveyance and pay the tax under section 2 of the Act. If no registration happens inside that window, the tax is imposed as though the transfer had been registered, and the buyer must file a return and pay.⁷ Missing this deadline exposes the buyer to the 5% late-filing penalty on top of the tax.

Exemptions and Deferrals

Most commercial purchases do not qualify for any relief. A few narrow situations do.

Transfers Between Affiliated Corporations

When one corporation transfers land to an affiliated corporation, the acquiring company can apply to the Minister of Finance to defer the tax. The conditions are strict. The application must be filed within 30 days of the transfer, the two corporations must remain affiliates for at least 36 consecutive months afterward, and the land must stay with the acquiring corporation or one of its affiliates for that same period. The acquiring corporation also has to post security acceptable to the Minister.³

If the 36-month undertaking is met and no conveyance was registered, the Minister returns the security and the tax is permanently cancelled.⁷ If the corporations stop being affiliates before the 36 months are up, or the property is sold outside the corporate group during that period, the deferred tax becomes immediately payable. Unwinding a corporate structure too early collapses the deferral.

Transfers Between Registered Charities

A registered charity that transfers land to another registered charity can qualify for a full exemption if the consideration is nil (other than assumed encumbrances), the transferor paid land transfer tax when it originally acquired the property, and the receiving charity commits to holding the land for the same charitable purpose for at least one year after the transfer.⁸ Both organizations’ registered charity numbers have to be provided at registration.

What Doesn’t Qualify

Ontario also provides limited exemptions for certain transfers of farmed land between family members and certain transfers from an individual to their family business corporation, but these are narrowly drawn and typically do not reach arm’s-length commercial purchases.⁹ The first-time buyer rebate that many people have heard of applies only to residential property. There is no commercial equivalent.

Penalties and Interest

The penalties are blunt. Where the Ministry of Finance concludes a failure to pay was due to fraud or deliberate default, the penalty is the greater of $500 or 25% of the unpaid tax. On a $2-million commercial purchase where tax was avoided outright, that exceeds $9,000 on top of the tax owing.³

Less severe shortfalls carry a 5% penalty. Register a deed but underpay the tax and the penalty is 5% of the difference. Fail to file a return for an unregistered disposition of a beneficial interest and the penalty is 5% of the entire tax payable.³

Interest compounds on top of the penalty. The prescribed rate under Ontario Regulation 310/97 is the average prime rate of Canada’s five major banks plus three percentage points, adjusted quarterly.¹⁰ With prime in the 5–6% range in recent years, that puts the effective rate on unpaid land transfer tax in the neighbourhood of 8–9% annually.

Non-Resident Buyers of Commercial Property

Ontario’s Non-Resident Speculation Tax, which adds 25% to the purchase price of residential property bought by foreign nationals and foreign-controlled corporations, does not apply to purely commercial land. The NRST is limited by its terms to residential property.¹¹ A foreign corporation buying an office building or industrial site pays the same land transfer tax rates as a Canadian purchaser.

The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act, extended through January 1, 2027, also applies only to residential property and does not restrict foreign purchases of commercial land.¹² The risk on mixed-use properties is real: a commercial building with residential units above it can pull the residential portion into both regimes, so classification should be confirmed before closing.

1
Government of Ontario. Calculating Land Transfer Tax
2
City of Toronto. Municipal Land Transfer Tax MLTT Rates and Fees
3
Ontario.ca. Land Transfer Tax Act, R.S.O. 1990, c. L.6
4
Canada Revenue Agency. Charge and Collect the GST/HST
5
Canada Revenue Agency. Real Property and the GST/HST
6
Canada Revenue Agency. Commercial Real Property – Sales and Rentals
7
Government of Ontario. Land Transfer Tax and the Treatment of Unregistered Dispositions of a Beneficial Interest in Land
8
Government of Ontario. Exemption for Certain Transfers of Land Between Registered Charities
9
Government of Ontario. Land Transfer Tax
10
Ontario.ca. O. Reg. 310/97 Rates of Interest
11
Government of Ontario. Non-Resident Speculation Tax
12
Government of Canada. Government Announces Two-Year Extension to Ban on Foreign Ownership of Canadian Housing