Always up-to-date LTT and NRST Frequently Asked Questions
Last updated Dec. 13/17
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 created this page to provide answers to the questions we are hearing most frequently from Ontario lawyers. Thanks to an ongoing and helpful dialogue with Ministry of Finance officials and other stakeholders, many of those questions have been answered and appear on the Ministry’s FAQ page (NRST and LTT). This page now include new information and 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.
For information on the recent changes that are effective as of December 16, 2017, see this LAWPRO alert.
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 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?
- Where can I find legislation, regulations and bulletins?While some details can be found in Bill 134, An Act to implement 2017 Budget measures ,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. The government has posted the following regulations http://www.ontario.ca/laws/regulation/r17182
- 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.
Legislation interpretation FAQs – See the Ministry’s website resources noted above.
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 a 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. See Penalty provisions FAQs below for more details. [Updated Dec 12/17]
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.
Penalty provision FAQs
When will lawyers be subject to penalties? The LTT and NRST provide various penalties for false or misleading statements in the registration process pertaining to assessing the application and quantum of taxes.
Section 5.0.3 of the Land Transfer Tax Act provides that every person who makes or assist in making a statement in a statement, affidavit or return which at the time and in the light of the circumstances under which it is made, is false or misleading, is liable to a fine of not more than $10,000. The Ministry of Finance indicates that it will exercise its discretion not to enforce section 5.0.3 against a lawyer who makes, or assists in making a statement on behalf of his or her client provided lawyers meet their professional obligation in accordance with the requirements of the Law Society of Upper Canada. Lawyers may wish to review the LSUC Rules of Professional Conduct 3.2-7. (Updated December 12, 2017)
Section 6(1) of the Land Transfer Tax Act provides every person who makes, participates in, assents to or acquiesces in the making of a false or deceptive statement or destroys, alters, mutilates, hides or otherwise disposes of any records or book of account, or makes, assents to or acquiesces in the making of a false of deceptive entries, or assents to or acquiesces in the omission to enter a material particular or wilfully, in any manner, evades or attempts to evade paying taxes or complying with the Act or conspires with any person for such, is liable, in addition to any other penalty provided in the Act, to one or both, (1 a fine of not less than the greater of $1,000 or 50 per cent of the tax otherwise owing and not more the greater of $1,000 or twice the tax otherwise owing or (2) imprisonment for not more than two years. The Ministry of Finance’s above discretion not to enforce against lawyers does not extend to this section. The Ministry has indicated that its interpretation of section 6 is that it creates a mens rea offence, which requires that the Crown prove that the person charged willfully committed the offence (Updated Dec 12/17).
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.
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.
New statement for registration – Mandatory December 30, 2017.
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)? As of December 16, 2017, Teraview (Desktop and web versions) will provide new statements to replace the obligation to account for NRST in statement 9151. The new statements will only be mandatory as of December 30, 2017 when Teraview is updated to collect applicable NRST on registration. The statements (9170, 9171 & 9172) are applicable when NRST is payable on registration and statements (9173, 9174, 9175, 9176, 9177, 9178, 9179, 9180, 9181) are to be used when NRST is not payable on registration. (Updated December 12, 2017). See the LAWPRO alert of December 13, 2017.
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]
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.