Once your real estate transaction is finalized, you might encounter an unforeseen invoice for property transfer tax, commonly known as the welcome tax.
Curious about what this tax involves, how it's computed, or if exemptions apply? Here’s everything you need to know about it.
What is the welcome tax?
The welcome tax in Quebec, also known as the property transfer tax, is mandated by municipalities whenever property changes hands within their jurisdiction.
This can happen through sales, donations, or other types of transfers.
The tax amount is determined as a percentage of the property's purchase price and is calculated using a bracketed system that varies according to the specific municipality.
When to pay the welcome tax?
In Quebec, the property transfer tax is typically due for payment within 3 to 6 months after the real estate transaction is finalized at the notary's office. Once the invoice is received, property owners typically have a 30-day period to settle the payment with the municipality.
How are property transfer taxes calculated in 2024?
In 2024, property transfer taxes in Quebec are calculated based on the property's tax base, determined by one of three methods:
- The sale price in the contract (excluding taxes).
- The consideration amount in the deed of sale.
- The assessed value of the property multiplied by a comparative factor.
Among these methods, the highest amount becomes the tax base. Once the tax base is established, provincial law applies a tax rate that varies across specific brackets based on your property's value. This rate determines the amount of property transfer tax you are required to pay.
For most of Quebec
For most Quebec municipalities (excluding Montreal and Quebec City), the welcome tax rate is structured as follows:
- 0.5% of the first $58,900 of the property’s value.
- 1% on the amount exceeding $58,900 but not surpassing $294,600.
- 1.5% on any portion above $294,600.
Some municipalities have the option to impose a higher rate on amounts exceeding $500,000 if they pass a by-law to that effect. However, this increased rate cannot exceed 3%, except for Montreal, which has its own separate rules.
For the city of Montreal
In Montreal, the welcome tax rates are structured as follows:
- 0.5% of the first $58,900 of the property’s value.
- 1% on the amount exceeding $58,900 but not surpassing $294,600.
- 1.5% on the amount exceeding $294,600 but not surpassing $552,300.
- 2% of the amount exceeding $552,300 but not surpassing $1,104,700.
- 2.5% of the amount exceeding $1,104,700 but not surpassing $2,136,500.
- 3.5% of the amount exceeding $2,136,500 but not surpassing $3,113,000.
- 4% of any amount exceeding $3,113,000.
For Quebec City
In Quebec City, the welcome tax rates are structured as follows:
- 0.5% of the first $58,900 of the property’s value.
- 1% on the amount exceeding $58,900 but not surpassing $294,600.
- 1.5% on the amount exceeding $294,600 but not surpassing $500,000.
- 2% of the amount exceeding $500,300 but not surpassing $1,000,000.
- 2.5% of the amount exceeding $1,000,000 but not surpassing $2,000,000.
- 3% of any amount exceeding $2,000,000.
Source : OACIQ
Please be aware that regulations regarding the calculation of transfer duties are subject to change. It is advisable to consult with your notary or municipality to confirm the applicable rates at the time of your property purchase.
Who pays the fees?
The responsibility for paying transfer duties always falls on the buyer of the property. This obligation applies regardless of whether the buyer has previously owned property in the same municipality or nearby. Previous real estate transactions within the municipality are not considered when assessing this tax.
Therefore, even if someone is moving within the same neighbourhood or municipality, they are still required to pay the welcome tax, with few exceptions. Let’s see what they are.
What are the exemptions?
While previous property ownership within the same municipal territory does not exempt one from paying transfer tax, there are specific circumstances under which exemptions are possible. These exemptions primarily apply to property transfers between family members.
Transfers between spouses
Transfers between spouses who are married or in a civil union are exempt from transfer duties in Quebec. Similarly, de facto spouses can also qualify for exemption if they have lived together for at least 12 months prior to the transfer.
In cases of separation or divorce, specific criteria govern exemption eligibility. For divorces, transfers conducted before the divorce are exempt from transfer duties, whereas transfers that occur after the divorce requires payment of tax.
For de facto spouses, an exemption applies if the transfer occurs within 12 months following the end of their cohabitation.
Intergenerational transfers
In Quebec, an exemption from paying the welcome tax is available for transfers between direct generations, specifically between parents and children or vice versa. This exemption is designed to facilitate intergenerational property transfers within families. However, it's important to note that this exemption does not extend to transfers between siblings.
Transfers valued at less than $5,000
Under Quebec law, transfer duties may be waived if the value of the property being transferred is less than $5,000. This exemption can be relevant, for example, when transferring a small piece of land to a neighbour in cases of encroachment.
For detailed information on exemptions from the welcome tax, it's recommended to seek guidance from your notary.
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