Do You Pay Taxes On A Gifted Vehicle In Ontario?

Rakibul Hasan

Chief Editor of - Autos Donation

Rakibul Hasan, the CEO and founder of Autosdonation, is an automotive specialist with over a decade of industry experience. With a distinct mastery in car...Read more

Gifted vehicles can be an excellent way to get a car without having to pay for it. However, many people wonder whether they have to pay taxes on a gifted vehicle in Ontario. The answer is not as straightforward as you might think, as there are several factors that can affect whether you need to pay taxes on a gifted car. In this article, we’ll take a closer look at the rules and regulations surrounding gifted vehicles in Ontario, so you can feel confident that you’re following the law.

Do You Pay Taxes on a Gifted Vehicle in Ontario?

Receiving a gifted vehicle is a generous and exciting experience. However, as with any other vehicle transaction, it’s important to understand the relevant taxes and fees that come with it. In this article, we’ll take a closer look at whether you have to pay taxes on a gifted vehicle in Ontario.

What is a Gifted Vehicle?

A gifted vehicle, as its name suggests, is a vehicle that is given to someone as a gift, without any monetary exchange. It’s a common practice among family members or close friends who want to help out or show appreciation. In Ontario, a gifted vehicle is considered a “non-arm’s length transaction” because there is no consideration exchanged between the parties involved.

However, just because there is no money exchanged doesn’t mean that there aren’t any taxes or fees associated with a gifted vehicle. Let’s take a closer look at the taxes and fees you may have to pay when receiving a gifted vehicle in Ontario.

What Taxes and Fees Do You Have to Pay?

When receiving a gifted vehicle in Ontario, there are two main taxes and fees that you may have to pay: the Ontario Sales Tax and the Transfer Tax.

The Ontario Sales Tax

The Ontario Sales Tax, also known as the Harmonized Sales Tax (HST), is a 13% tax that applies to most goods and services in Ontario. However, when it comes to gifted vehicles, you may be exempt from paying the HST if you meet certain criteria. According to the Canada Revenue Agency (CRA), you may be exempt from paying the HST if:

• The gifted vehicle is transferred between spouses, common-law partners, or former spouses or common-law partners;
• The gifted vehicle is transferred between parents and their children or vice versa;
• The gifted vehicle is transferred between grandparents and their grandchildren or vice versa;
• The gifted vehicle is transferred between siblings;
• The gifted vehicle is transferred between an individual and their spouse’s or common-law partner’s parents or grandparents;
• The gifted vehicle is transferred between an individual and their former spouse’s or common-law partner’s parents or grandparents;
• The gifted vehicle is transferred to a qualifying non-profit organization;
• The gifted vehicle is transferred to a registered charity; or
• The gifted vehicle is transferred as part of an inheritance.

If you meet any of these criteria, you may be exempt from paying the HST when receiving a gifted vehicle. However, it’s important to note that you’ll still have to pay the Transfer Tax.

The Transfer Tax

The Transfer Tax is a fee that is paid to the Ontario Ministry of Transportation (MTO) when a vehicle is transferred from one owner to another. The amount of the Transfer Tax depends on the vehicle’s value and ranges from $5 for vehicles valued at less than $1,000 to $75 for vehicles valued at $10,000 or more.

When receiving a gifted vehicle in Ontario, you’ll have to pay the Transfer Tax regardless of whether you’re exempt from paying the HST or not. The amount of the Transfer Tax will depend on the vehicle’s value and will be calculated accordingly.

Conclusion

Receiving a gifted vehicle in Ontario is a generous and exciting experience, but it’s important to understand the relevant taxes and fees associated with it. When receiving a gifted vehicle, you may be exempt from paying the HST if you meet certain criteria, but you’ll still have to pay the Transfer Tax. If you have any questions about the taxes and fees associated with a gifted vehicle, it’s always a good idea to consult with a qualified professional.

Frequently Asked Questions

Do you pay taxes on a gifted vehicle in Ontario?

Yes, you must pay taxes on a gifted vehicle in Ontario. Even if you did not purchase the vehicle, you are still required to pay taxes on it as you will be taking ownership of the vehicle. The taxes you will be required to pay are the same as those for a vehicle that was purchased. These taxes are calculated based on the purchase price or the value of the vehicle.

It is important to note that if the vehicle was gifted to you by a family member, you may be eligible for a family gift tax exemption. This exemption allows you to avoid paying taxes on the first $1,000 of the vehicle’s value. However, if the value of the vehicle is more than $1,000, you will still be required to pay taxes on the remaining value.

How is the tax on a gifted vehicle calculated in Ontario?

The tax on a gifted vehicle in Ontario is calculated based on the purchase price or the value of the vehicle. If the vehicle was purchased within the last 90 days, the purchase price will be used to calculate the tax. If the vehicle was not purchased within the last 90 days, the value of the vehicle will be used to calculate the tax.

The tax rate in Ontario is 13% for vehicles that cost $57,000 or less. For vehicles that cost more than $57,000, there is an additional tax of 8% on the amount over $57,000. For example, if a vehicle costs $70,000, the tax would be calculated as follows: 13% of $57,000 + 8% of $13,000 (the amount over $57,000) = $7,110.

Can you transfer ownership of a gifted vehicle in Ontario?

Yes, you can transfer ownership of a gifted vehicle in Ontario. To do so, you will need to complete the transfer of ownership process with the Ontario Ministry of Transportation. This process requires you to provide proof of ownership, such as the vehicle registration or bill of sale, as well as proof of insurance and a safety standards certificate.

Once the transfer of ownership is complete, the new owner will be responsible for registering the vehicle and obtaining insurance. It is important to note that the new owner will also be responsible for paying any outstanding fees or fines associated with the vehicle, such as parking tickets or toll charges.

Do you need to have a safety standards certificate for a gifted vehicle in Ontario?

Yes, you will need to have a safety standards certificate for a gifted vehicle in Ontario. This certificate is required to transfer ownership of the vehicle and is also required to register the vehicle. The safety standards certificate is issued by a licensed mechanic or inspection station and certifies that the vehicle meets the minimum safety requirements set by the Ontario Ministry of Transportation.

If the vehicle does not pass the safety standards inspection, you will need to have the necessary repairs made before the certificate can be issued. Once the repairs have been made, the vehicle can be re-inspected and a new certificate issued. It is important to note that the cost of the safety standards certificate and any necessary repairs is the responsibility of the new owner.

What happens if you don’t pay taxes on a gifted vehicle in Ontario?

If you don’t pay taxes on a gifted vehicle in Ontario, you may face penalties and fines. The Ontario Ministry of Finance may charge you interest on the amount owing and may also impose a penalty for late payment. In addition, the Ministry of Transportation may not allow you to register the vehicle until the taxes have been paid in full.

If you are found to have deliberately avoided paying taxes on a gifted vehicle, you could face more serious consequences, including legal action and fines. It is important to ensure that you pay the required taxes on any gifted vehicles to avoid these potential penalties and consequences.

Gift Tax Explained – Do You Pay Taxes On Gifted Money?

In Ontario, receiving a gifted vehicle from a family member or friend can be an exciting experience. However, it is essential to understand the tax implications of such a gift. The good news is that in most cases, you will not have to pay taxes on the gifted vehicle.

According to the Ontario Ministry of Finance, a gifted vehicle is not subject to provincial tax. However, you will still need to pay registration fees and insurance costs. Additionally, if the vehicle was gifted to you by someone who is not a close family member, you may be required to pay federal taxes on the fair market value of the vehicle.

In conclusion, receiving a gifted vehicle is an excellent way to acquire a car without having to pay for it. While you may not have to pay taxes on the gifted vehicle, it is important to understand your responsibilities when it comes to registration and insurance. And if the gift comes from a non-family member, make sure to consult with a tax professional to determine if any federal taxes apply.

Rakibul HasanChief Editor of - Autos Donation

Rakibul Hasan, the CEO and founder of Autosdonation, is an automotive specialist with over a decade of industry experience. With a distinct mastery in car donations, sponsorships, and gifting, Rakibul combines his passion for automobiles and generosity to revolutionize the car donation landscape. He established Autosdonation to facilitate the car donation and gifting process, making it more accessible and enjoyable for all involved.

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