Make sure you know the proper process for gifting or transferring ownership of a car in Ontario before going ahead with your decision.
Who Can I Gift a Car to in Ontario?
When you transfer ownership of a vehicle to an eligible family member in Ontario, the recipient may be exempt from paying Retail Sales Tax (RST) if the transfer qualifies as a family gift. However, if the relative is a cousin, nephew, uncle, aunt or other relative outside of the following list, you will have to pay this tax at the time you transfer your car. Family members eligible for the RST exemption include:
- Spouse (including a common-law spouse)
- Parent or step-parent
- Grandparent or step-grandparent
- Son or step-son
- Daughter or step-daughter
- Grandson or step-grandson
- Granddaughter or step-granddaughter
- Son-in-law
- Daughter-in-law
- Father-in-law
- Mother-in-law
- Sibling
- Half-siblings (siblings with a common parent)
- Adopted siblings (siblings with a common parent through adoption)
The Process of Gifting a Car to a Family Member
Most vehicle gifts in Ontario occur between close family members because this allows the transfer to qualify for the Retail Sales Tax exemption. In the following process, we teach you to step by step what you should do and what documents you need.
What Documents are Necessary to Transfer the Ownership of a Car Ontario to a Family Member?
This is a checklist containing the forms and documents you’ll need to bring with you to a ServiceOntario location when you’re gifting a car to a family member:
- Driver’s license
- Proof of a car insurance policy in the recipient’s name
- Completed sworn statement for family gift form (signed by both you and new owner in front of a lawyer or notary public)
- The transfer portion of your Vehicle Ownership Permit
- Safety Standards Certificate (or spousal declaration form)
- Completed plate transfer declaration
Now let’s take a look at the step-by-step process.
Make Sure The Car Loan Debt Is Paid
Ensure the vehicle has no outstanding lien or financing. A vehicle with an active lien cannot usually be transferred until the debt is cleared.
Get a Sworn Statement for a Family Gift Form and Sign it
During the gifting process, both the driver and the recipient of the vehicle must sign a Sworn Statement for a Family Gift Form in front of an attorney or notary public. Signing this document certifies the Ontario government that the recipient of the vehicle is an eligible family member and that the car is a gift. You can obtain a copy of the “Sworn Statement for a Family Gift Form” at your local ServiceOntario or their website here.
Make Sure You Have Your Vehicle Ownership Permit
Both parties must complete and sign a ‘Sworn Statement for a Family Gift of a Used Motor Vehicle’ in front of a commissioner of oaths, lawyer, or notary public.
You can get this document from ServiceOntario, and it is proof that you are the registered vehicle owner. Make sure you have this document before going to your local ServiceOntario to transfer the vehicle, most people keep it in the glove box or center console in their car.
You need this permit to legally transfer ownership of your car to a family member.
Get A Safety Standards Certificate Or A Spousal Declaration Form
A safety standards certificate confirms that your vehicle met the minimum safety standards.
You can register the vehicle without a Safety Standards Certificate, but you cannot plate or drive it until a valid certificate is provided. This requirement is waived for spouse-to-spouse transfers with a spousal declaration.
To get a certificate, your vehicle must pass an inspection by the Ministry of Transportation. You do not need a safety standards inspection and certificate if you are transferring the vehicle to your spouse.
Buying Car Insurance for a Gifted Car
As we already know, driving in Ontario or any other Canadian province without insurance is illegal. Therefore, when you give your car to a family member, you must ensure that the new owner purchases car insurance. The recipient must have valid auto insurance before registering the vehicle in their name at ServiceOntario.
If it is the first car you receive, we recommended that you consider having comprehensive coverage, this will give you greater coverage if you do get into an accident. Car insurance rates for young or new drivers are usually very expensive so make sure you compare the rates of several insurance providers.
Transfer Or Purchase A Licence Plate
Licence plates can only be transferred between spouses, parents and children. Otherwise, the recipient must obtain their own plates. If it is someone different, the new owner must buy a new license plate.
What Taxes Should You Pay When You Receive a Gifted Car?
If you get a used car as a gift and you are not an eligible family member, as mentioned above. You will need to pay the RST for this vehicle at the time you transfer it to ServiceOntario. Remember that if you are a family member exempt from paying this tax, you must present one of the following documents as proof.
- A completed Sworn Statement for the Transfer of a Used Motor Vehicle in the Province of Ontario
- Separation agreement
- Divorce agreement
- Other similar court documents
Key Advice from MyChoice
- Confirm the family relationship before starting the transfer. If the recipient is not on Ontario’s approved family list, Retail Sales Tax will apply.
- Make sure the car loan is fully paid off. Vehicles with an active lien usually cannot be transferred to a new owner.
- Consider comparing insurance rates before registering the vehicle, especially for young or new drivers who often face higher premiums.