Is land transfer tax payable when a family farm passes to the next generation?

Land transfer tax and its equivalents are set by provincial law, and a family farm passing to the next generation is neither automatically taxed nor automatically exempt. Whether tax is payable depends on the province, on how the farm is held and on whether the transfer meets an exemption’s conditions. Income tax on any capital gain is a separate federal question; how succession works for a family farm corporation outlines it.

Ontario

Ontario’s land transfer tax is payable when the transfer is registered. The Ministry of Finance says some people do not pay on certain transfers, and its examples include certain transfers between spouses, certain transfers from an individual to a family business corporation and certain transfers of farmed land between family members. It publishes separate guidance on the family farm exemption, including transfers from an individual to an individual, from an estate’s personal representative to an individual, and between an individual and a family farm corporation. It also states that corporation-to-corporation transfers have no exemption, though a deferral may be available between affiliated corporations.

Quebec

Quebec’s government lists transfers that are exempt from the transfer duty, including transfers between relatives in the direct line, ascending or descending, such as parent and child or grandparent and grandchild, and transfers of property that is part of a registered farm operation. A municipality can still provide for a small compensatory payment on an exempt transfer, and a disclosure notice must be filed if the condition that allowed the exemption stops being met.

British Columbia and elsewhere

British Columbia’s government says a property transfer tax return must be filed, and the tax paid, on property registered at the Land Title Office unless the transfer qualifies for an exemption. Tax is based on fair market value on the day of registration unless an exemption applies. Other provinces and territories have their own rules, so ask the lawyer or notary handling the transfer which exemptions apply and how each is claimed. Confirm the exemption and the filing step before the transfer date.