Land Transfer Tax
Since January 1, 1992, every Quebec municipality must collect duties on the transfer of any property on its territory in compliance with the Act respecting Duties on Real Estate Transfers.
The land transfer tax is commonly referred as the “Welcome tax”, or in Montreal as the “Taxe Bienvenue”, a misnomer that has crept into common language use in Quebec. Minister Bienvenue made recommendations leading to the collection of transfer duties by Quebec municipalities.
The transfer tax is a tax that must be paid to the municipality by any new buyer of an immovable (land and / or building) located on its territory. The right to a transfer tax applies when purchasing or building a new home (with the purchase of building and land or land only). There are also other types of real estate transactions, for which the tax is claimed, such as a very long-term lease. Where there is more than one buyer, they are joint and severally liable for payment of the transfer duties. The duties on the transfers of immovables are imposed at the time of purchase and are payable in one installment. The amount is calculated without the G.S.T. and Q.S.T.
The tax in Quebec is computed on the highest consideration paid, the consideration agreed for, or the fair market value of the property. This tax is payable upon the registration in the Quebec Land Registry of the transfer of the property. The notary closing the sale between the buyer and seller registers the sale.
The transfer tax paid by the buyer is calculated based on the greater of the following amounts:
- Price paid for the acquisition of the property (purchase price);
- Amount of compensation included in the deed of transfer (for example, the total sale price minus the furniture);
- The value entered in the valuation roll multiplied by a factor to reflect the actual market value of the property.
Certain transfers of property are exempt. For example, real property purchases by government agencies (governments, school boards, etc.), purchases of farms and woodlands in operation are exempt from transfer tax. Transfers of property between relatives are also exempt from transfer tax.
The buyer does not pay duties on transfers of real estate in the following cases:
- Tax base is less than $ 5 000;
- it is a transfer between parents or
- lineal ascendant or descendant (son, daughter, father, mother);
- between spouses (see definitions);
- between stepfather or stepmother and son or daughter;
between stepfather and stepmother and son-or daughter-in;
- Transfer of property to his company by a shareholder holding more than 90% of the shares in the company or vice versa.
A buyer may be exempt from paying the duties on transfers in certain cases as set out in the Act respecting duties on transfers of immovables. The notary must write a note in the deed of sale (or deed of transfer) enabling the buyer to benefit from an exemption from paying the duties on transfers, in accordance with the legislation.
Main reasons justifying an exemption:
- Transfer to an ascendant or descendant in the direct line (sale from father to son; from grandmother to granddaughter).
- Transfer between spouses, whether they are married or civil union spouses, as defined by Act respecting duties on transfers of immovables. Same-sex spouses are included in this provision of the law.
- Where the transferor is a natural person and the transferee is a legal person with 90% of its issued shares with full voting rights are owned by the transferor.
Several other situations justifying exemption are provided for by law.
Here is an example of how the transfer tax is calculated.Welcome Tax – Taxe Bienvenue