Always up-to-date LTT and NRST Frequently Asked Questions
Last updated June 8/17
The government has posted the following regulations http://www.ontario.ca/laws/regulation/r17182
The FAQs have not been updated to what is stated in the regulations: (Updated June 8, 2017).
To help real estate lawyers take steps to comply with the recent changes to the Land Transfer Tax and the new Non-Resident Speculation Tax (NRST), LAWPRO has assembled a list of answers to the questions we are hearing most frequently from Ontario lawyers. We are maintaining an ongoing and helpful dialogue with Ministry of Finance officials and other stakeholders, and we will update this page on an ongoing basis as we receive new information or clarifications to outstanding questions. To help you identify new information, a last updated date will appear at the top of the page, and recent updates will be highlighted.
While some details can be found in Bill 134, An Act to implement 2017 Budget measures [Updated May19/17], if you are looking for an overview of the LTT and NRST changes, the Bulletin on the Non-Resident Speculation Tax in the Ministry of Finance’s website is a good starting point. The Prescribed Information for the Purposes of Section 5.0.1 Form page on the Ministry’s website has detailed information on the PIPS5 Form. See also this Teraview Newsletter (dated April 13, 2017) for more information on how to login to Teranet eXpress and access the PIPS5 Form.
Risk management advice
LAWPRO encourages Ontario lawyers to carefully review the information released by the Ministry of Finance and Teranet on the changes to the LTT and the new NRST. Lawyers may face some challenges in implementing these changes into the handling of a file, in particular, trying to take all appropriate steps to comply with Bill 134 (see link above) that hasn’t been passed into law yet. As you will see in the frequently asked questions below, there are some scenarios where it is not clear what the legislation will require based on the information released by the Ministry of Finance thus far. Lawyers who find themselves facing questions on what they should do to comply with the LTT and NRST changes are encouraged to seek direction from the Ministry of Finance at the contact noted in the next paragraph.
Where can I find or get information from the Ministry of Finance?
- Who can answer my LTT and NRST questions? The government has directed that lawyers who have questions or are looking for assistance on the LTT and NRST changes should contact:
Ministry of Finance Manager,
33 King Street West,
PO Box 625
Oshawa ON L1H 8H9
Toll-free: 1-866-ONT-TAXS (1-866-668-8297)
Teletypewriter (TTY): 1-800-263-7776
Ministry website: ontario.ca/finance
- How do I know when the Ministry of Finance publishes new information? You can subscribe to receive email alerts from the Ministry here: www.fin.gov.on.ca/en/alerts.html.
FAQs on the now passed transition periods
- When did the LTT and NRST transition periods end? The transition periods for both LTT and NRST changes ended as of close of registration, Friday, May 5, 2017. Any transfers registered on or after May 8, 2017, are required to have relevant LTT and NRST statements in them.
- How do you handle previously signed/approved documents? As transfers registered on or after May 8, 2017, are required to have relevant LTT and NRST statements, you must add this information to previously signed and approved documents that do not have it. Adding this information will cause them to lose their signed status so they will have to be signed again.
- Did the NRST have to be paid during the transition period? While there was no obligation to collect or submit NRST information in the transition period, the NRST must have been paid if applicable.
Legislation interpretation FAQs
- Do any of these changes apply to me – I only handle deals on properties outside the Greater Golden Horseshoe? All Ontario lawyers need to take steps to understand these changes as the LTT changes and gathering of information via the PIPS5 Form apply to transactions across the entire province. The NRST only applies to properties in the Greater Golden Horseshoe (see the map of the Greater Golden Horseshoe in this Ministry of Finance Bulletin).
- What level of due diligence by lawyers is required for the collection of LTT and NRST information? When receiving information from a client, lawyers are typically able to rely on what a client has told them (e.g., the spousal status statement on a transfer – which the LTT Regs make clear is client statement, not a lawyer statement), absent some knowledge or indication that the information provided by the client is not accurate, which would trigger an obligation to ask further questions. Depending on the circumstances and type of information, lawyers may ask for documents to confirm the information provided by a client. With respect to the LTT and NRST, the Ministry of Finance advises that it expects lawyers to review original and independent source documents provided by a client and to retain a photocopy for audit purposes. Examples of original independent source documents that may be used to verify the status or legal circumstances of a client can include a passport, birth certificate, permanent resident card, articles of incorporation, notice of change of directors, and/or certificate of corporate status. The Ministry of Finance is to provide further confirmation on what documentation must be obtained to support NRST filings. Bill 134 provides for a fine of up to $10,000 for anyone who makes or assists in making false or misleading statements when providing the information required for the NRST. See Penalty provisions FAQs below for more details. [Updated May 19/17]
Risk management advice: Lawyers are encouraged to take detailed notes and to obtain appropriate documentation from clients with respect to the information required for the LTT changes and the new NRST. In the case where no documentation is available, lawyers could consider having their client sign an affidavit to satisfy the specific requirement. Some lawyers have indicated they plan to have clients complete the paper version of PIPS5 Form which is itself in affidavit form and can be signed as such by a client.
- How will the audit process work and what are the expectations for documentary verification of the information collected by lawyers? See comments in the previous FAQ. The Ministry’s website states: The Ministry; authority to audit for provincial land transfer tax liability (including for NRST) is set out in section 10 of the Land Transfer Tax Act. It provides a link for further details – http://www.fin.gov.on.ca/en/audit/index.html. [Updated May 31/17].
- What is “agricultural land”? From the page on the PIPS5 Form on the Ministry website, agricultural land is farm lands used for farm purposes by the owner, or used for farm purposes by a tenant of the owner and buildings thereon used for farm purposes, including the residence of the owner or tenant and of the owner’s or tenant’s employees and their families on the farm land.
- The new Land Transfer Tax Act definition of agricultural land refers to farm land. Are lawyers to look to Assessment Act which uses farm land language? Yes, the words parallel the wording of subsection 19(5) of the Assessment Act, so land valued as farm lands under subsection 19(5) of that Act would fall under the definition of agricultural land under O. Reg. 120/17 [Updated May 31/17].
- Is the relevant criterion for agricultural land in the Land Transfer Tax Act the intended use by the transferee or the historic use by the transferor? The land already has to be used for farm purposes in order to qualify as agricultural land. Therefore, to determine whether the land is agricultural land, the transferor’s use of the land up to the date of conveyance or disposition must be examined, and not the transferee’s intended use [Updated May 31/17].
- Is the Form required for vacant land? Yes, if the land is agricultural land it is subject to the Form. The vacant land could also be subject to the Form if a single family residence is to be constructed on the land as part of the arrangement relating to the conveyance [Updated May 31/17].
- What is a “legal name”? Traditionally, land registrations have required that you enter the name(s) of the transferee(s). Under the NRST there is a requirement for a “legal name” to be used. This is not a defined term. As the province issues birth certificates and driver’s licenses which might be in different names for the same person (e.g., Michael on one and Mike on the other), the Ministry of Finance advises that the legal name of an individual is best evidenced by the birth certificate. If a birth certificate is unavailable, then other government ID such as a passport or driver’s license would evidence the legal name. The Ministry of Finance is to provider further direction on this requirement. A corporation’s legal name would be the name according to the records maintained by the Ministry of Government and Consumer Services pursuant to the Corporations Information Act (as opposed to the trade name of the corporation).[Updated May 31/17]
- What if there is a difference between the transferee’s name and legal name? Where an individual is the transferee, such transferee’s name on the registered transfer should be either his or her legal name or the name commonly used by the individual that is sufficient to identify the individual in relation to his or her government identification. Where a corporation is the transferee, the corporation’s legal name must be set out on the registered transfer.[Updated May 31/17]
- For a purchase to which the NRST applies, how is the “value of consideration” determined? The Minsitry of Finance advises the normal LTT rules apply, for example, for new homes see (New Home) Bulletin LTT 1-2006, published June, 2010.
- What does the term controlled in whole or in part by a foreign national or other foreign corporation mean? The concept of controlled is relevant in determining whether a corporation is a foreign corporation. A foreign corporation means a corporation that is one of the following:
1. A corporation that is not incorporated in Canada.
2. A corporation, the shares of which are not listed on a stock exchange in Canada, that is incorporated in Canada and is controlled, directly or indirectly in any manner whatever, within the meaning of section 256 of the Income Tax Act (Canada), by one or more of the following:
i.a foreign national
ii.a corporation that is not incorporated in Canada
iii.a corporation that would, if each share of the corporation’s capital stock that is owned by a foreign national or by a corporation described in paragraph 1 were owned by a particular person, be controlled, directly or indirectly in any manner whatever, within the meaning of section 256 of the Income Tax Act (Canada), by the particular person.[Updated May 31/17]
- Are “non-share capital corporations” such as Condominiums or Co-operatives subject to the NRST? The Ministry of Finance is to provide clarification.
- I am buying a property that has both residential and non-residential land. How do I calculate the apportionment of consideration that is attributable to residential land (subject to NRST) and non-residential land (not subject to NRST)?Bill 134 provides that where part of a property that is subject to NRST is used for other than residential purposes, the Minister may, to the extent that the Minister considers it practicable, determine what amount of the value of the consideration for the conveyance is reasonably attributable to the land used in connection with a single family residence, and the person tendering the conveyance for registration is liable for any additional tax imposed based that consideration amount. [Updated May 19/17]. The Ministry has provided some guidance stating: A reasonable self-assessment is required by taxpayers in apportioning the value of the consideration for the purposes of the NRST. The apportionment would be based on the value of the residential land as compared to the non-residential land, not the square footage of the two. [Updated May 31/17]
Risk management advice: No specific direction on how to calculate this apportionment is provided. LAWPRO suggests lawyers use a method that is reasonable in the circumstances, and that the reasoning and calculations be carefully documented in case the apportionment is questioned after closing. While the section doesn’t address it, query whether a post-closing reapportionment by the Minister could result in a refund if the NRST amount owing is determined to be less than the amount that was paid. [Updated May19/17]
- If an agreement of purchase and sale is entered into before April 21, does an assignment of the agreement on or after April 21 alter the grandfathered status of the purchase transaction? Bill 134 indicates the answer to this question is no. [Updated May 19/17] The Ministry has since clarified stating: If the Agreement of Purchase and Sale is assigned after April 20, 2017, the NRST would apply.[Updated May 31/17]
- Are assignors subject to the NRST? The NRST would not apply to an assignor if the assignor does not acquire a beneficial interest in the land for the purposes of the Land Transfer Tax Act. If the Agreement of Purchase and Sale is assigned after April 20, 2017, the NRST would apply.[Updated May 31/17]
- If an agreement of purchase and sale is entered into on or after April 21 by a foreign entity and subsequently assigned to a Canadian citizen or permanent resident, does NRST have to be paid by the Canadian citizen or permanent resident? The Canadian citizen or permanent resident of Canada who acquired the assignment would not be subject to the NRST, unless he or she is a taxable trustee to which the NRST applies.[Updated May 31/17]
- Do the LTT statements apply to transactions with nominal consideration? The Ministry advised us (in response to a call to the Oshawa Land Taxes Office) that they want information on all prescribed transfers, including those for nominal consideration, for the purpose of statistical analysis and to aid in policy development. [Updated May19/17]
Penalty provision FAQs
- When will lawyers be subject to penalties? The LTT and NRST details requested are the client’s statements of fact for which the lawyer typically relies on information provided by the client. The Ministry of Finance takes the position that a lawyer must have had knowledge that the client lied to be subject to NRST penalties.
Risk management advice: Lawyers should take steps to make sure their clients are aware of the very significant penalties for not providing the required information, or for providing inaccurate information. Section 6 of the LTT Act, provides for one or both of a fine or imprisonment. The fine is a minimum of the greater of $1,000 or 50% of the tax, to a maximum of the greater of $1,000 or twice the tax. Imprisonment could be for a term of up to two years.
- Will the LAWPRO policy cover penalties imposed under the new LTT/NRST regime? Please remember that the LAWPRO Policy does not cover fines or penalties, except to reimburse, after final resolution, certain expenses in the successful defence of certain prescribed penalties under the Income Tax Act and Excise Tax Act. See the LAWPRO Policy for more details.
How to complete the Prescribed Information for Purposes of Section 5.0.1 of the Land Transfer Tax Act Form
- Is it possible that the PIPS5 Form in Teraview eXpress could be configured to allow it to be saved as a draft? This would be very helpful as it would allow law firm staff to enter the information, to allow lawyers to review it for correctness, and to get clients to review and approve it. The Ministry of Finance is considering this and will provide feedback.
Risk management advice: After completing the PIPS5 Form in Teraview eXpress, you have the option to save a copy of the form as a PDF. Lawyers are encouraged to keep a copy of what was submitted, and to review the information provided with the client to ensure it is accurate. Lawyers are also encouraged to have the client sign or initial the copy of the submitted PIPS5 Form to document that the client did indeed review and acknowledge as correct the information in the Form.
- As LTT and NRST information comes from the purchaser’s lawyer, can there be a process change or workaround within Teraview so that the vendor’s lawyer can sign for completeness without getting a LTT confirmation number and NRST receipt number? The Ministry of Finance is considering this and will provide feedback.
- When will the NRST statement become a mandatory part of the transfer form (i.e., when will the system prevent you from submitting it unless one of the required NRST statements is made)? Ministry staff advise this is likely to happen by the fall.
Risk management advice: At the present time the NRST statement is entered manually in section 9151. While one of the NRST statements must be included on all transfers made on or after May 8, 2017, Teraview will not stop you from completing a transfer that does not have the required NRST statement in section 9151. Lawyers are encouraged to take steps to make sure that all transfers have an NRST statement in them.
Where can I find suggestions to input into Statement 9151 to explain why NRST does not apply? Examples of situations where the NRST does not apply would include, but is not limited to:
- the transferee is a Canadian citizen or permanent resident of Canada
- the transferee is a foreign national who is exempt from NRST
- the property is not residential, and
- the property is not in the specified region[Updated May 31/17].
- If the LTT statement on a transfer is that prescribed information is not required, is there still an obligation to provide it? And, is a confirmation number still required in this circumstance? The Ministry of Finance advises that the answers to both these questions are no.
- How do I complete the PIPS5 Form for a property with 2 or more PINs? While some properties contain multiple PINs, at present the Form accepts only a single digit PIN. The Ministry of Finance is to provide clarification. Not, the Ministry has indicated that PINs for parking spaces, storage lockers, rights of way or easements (not exhaustive list) are not to be included.
- Will there be separate PIPS5 Forms and confirmation numbers if there is a flip of the same property on the same day? The Ministry of Finance is to provide clarification.
- In what circumstances is the “paper” PIPS5 Form on the Ministry website to be used? The Ministry of Finance has indicated that if not all the information is known at the time of electronic registration, an exceptional circumstance from the Ministry’s point of view, you should select the statement in the LTT affidavit that the information cannot be provided prior to registration and will be provided in paper form and submitted directly to the Ministry of Finance. A paper version of the PIPS5 has been provided by the Ministry for this purpose and available here.
- If the “provide information later” statement is made, is it the lawyer or client who has responsibility to provide information afterwards? If the Form is not submitted at the time of registration, who has the responsibility to provide the information afterwards? It is the responsibility of the transferee to provide the information; however, the Form can be submitted by any of the individuals required to file a statement or affidavit under subsection 5(2) of the Land Transfer Tax Act [Updated May 31/17].
- How should the PIPS5 Form be completed in order to authorize payment of the NRST by a representative? The authorisation form to be presented by someone appearing in Oshawa on behalf of a client does not contain an authorization specific to NRST. [Updated May 31/17]
- How should Part 1 of the Authorizing or Cancelling a Representative form be completed in order to authorize payment of the NRST by a representative? The box next to the Land Transfer Tax Act should be chosen. [Updated May 31/17]
- Will Part 1 of the Authorizing or Cancelling a Representative form be updated to reflect the appropriate legislation under which the NRST is being paid? No, the NRST is incorporated into the Land Transfer Tax Act, therefore Part 1 of the form does not need to be updated. [Updated May 31/17]
- What are the appropriate account or reference number(s) referred to in Part 1 of the Authorizing or Cancelling a Representative form? This is the account number or reference number assigned by the Ministry of Finance. If the ministry has not provided an account number or reference number to the client who is completing the Authorizing or Cancelling a Representative form, then the field for the account or reference number will remain blank. [Updated May 31/17]
- How should Part 2 of the Authorizing or Cancelling a Representative form be completed so that the Scope of Authorization is limited to the payment of land transfer tax and the NRST? If the client wants the representative to act only with respect to land transfer tax, which includes NRST, the client selects the box Only the matters specified below. Then the client is to select the box Other and write the text Payment of LTT and NRST. [Updated May 31/17]
Payment of NRST FAQs
- Does the NRST have to be paid before legislation creating it is enacted? The Ministry of Finance takes the position that is prudent to pay as the expectation is that it will be enacted and will be retroactive, and clients could be subject to interest and penalties in the event of late payment or non-payment.
Risk management advice: At the present time it looks fairly certain that this legislation will be passed and that the NRST will be implemented. Lawyers should document discussions with clients on the requirement to pay the NRST and the implications for not doing so, especially if a client instructs that the NRST should not be paid before the legislation is passed. And as a reminder, the LTT will need to be paid when you are paying the NRST.
- Will the Ministry of Finance Compliance Branch office in Oshawa accept NRST payment before legislation is passed? Yes, the Oshawa office will accept payments. The Ministry of Finance has stated that receipt numbers will generally be provided for walk-ins on the same day, but that it might take as long as 5 business days. The lawyer, client or an agent may attend in Oshawa to pay the tax. The Ministry is to clarify how they will provide the receipt number for payments sent in by courier or mail.
Risk management advice: To avoid delayed closings, lawyers should assess the extra time needed to make sure the NRST is paid sufficiently early so that a receipt number is received in time to allow the deal to close on schedule.
- Can I pay NRST by couriering funds to Oshawa or do I have to pay in person? The NRST can be paid to the Ministry of Finance in Oshawa by courier, mail or in person. Please refer to the above section. Unfortunately the Ministry has not clarified how they respond if someone pays via mail or courier, in order for individuals to anticipate when and how they will get their receipt number (assuming there is no issue with the proposed payment or documentation submitted)[Updated May 31/17]
- I am purchasing property subject to the municipal land transfer tax. Can I pay all of the required land transfer tax at the Ministry of Finance in Oshawa? The Ministry of Finance in Oshawa does not collect municipal land transfer tax on behalf of the City of Toronto. Both the general provincial land transfer tax and the NRST can be paid to the Ministry of Finance in Oshawa by courier, mail or in person. For further payment details please refer to the above section entitled How to pre-pay the Land Transfer Tax and the NRST to the MOF. (Unfortunately the Ministry has not clarified how they respond if someone pays via mail or courier. The Ministry of Finance has been asked to confirm how it responds to mail or courier payments in order for individuals to anticipate when and how they will get their receipt number (assuming their is no issue with the proposed payment or documentation submitted)[Updated May 31/17].
- Will there be an option to pay the NRST via Teraview? Yes, the Ministry advised that eventually you will be able to pay the NRST via Teraview.
Confidentiality and privilege FAQs
- Is there an obligation to share any of the client information I collect for purposes of the PIPS5 Form with the lender? With the changes to the LTT and the new NRST, lawyers will be collecting extensive information from clients that would not typically have been obtained for a real estate deal in the past. Lawyers are reminded that they are in a joint retainer situation if they are also acting for a lender on a deal, and that any information obtained from the client that would be relevant to the lender’s underwriting and security would have to be shared with the lender.
Risk management advice: Lawyers are encouraged to make sure clients understand that any relevant information obtained from the purchaser-client must be shared with the lender-client.
LAWPRO will update this page on an ongoing basis as we receive clarifications to outstanding questions or new information. Please visit again to get updated information.