What to Know About the Welcome Tax in Quebec
Author: Claudia Chauvette, Attorney-at-Law and Agency Executive Officer
What is it?
The "welcome tax," or real estate transfer duty, is a sum of money you must pay when you purchase a property in Quebec. The amount varies depending on the property's value and its location.
The payment of the tax must be made between 3 to 6 months following the notarized deed.
Its Name: A Persistent Myth
The term "welcome tax," though commonly used in Quebec to refer to the real estate transfer duty, is actually a nickname with a disputed origin.
The most widespread myth attributes the creation of this term to Jean Bienvenue, a former Quebec minister under the government of Robert Bourassa. According to this version, he allegedly proposed this name when the law establishing this tax was adopted. However, this story has been largely debunked by historians. In reality, the term spontaneously appeared in everyday language, likely due to the irony it evoked.
How It Works
Calculation: To calculate this tax, you must base it on the higher value between the municipal assessment and the purchase price of the property.
Rates: The rates vary according to value brackets and the specific tax rates of each municipality.
Exemptions: Certain cases are exempt from paying the transfer duty:
- Transfers between spouses;
- Direct line transfers for ascendants and descendants within a family;
- If the property value is less than $5,000;
- Non-profit organizations that acquire a property for social, cultural, or educational purposes may, under certain conditions, benefit from an exemption.
How to Calculate the Welcome Tax?
The calculation of the welcome tax is done in several steps:
- Determine the Tax Base: This is generally the purchase price of the property.
- Apply the Progressive Rates: For example:
- Bracket 1: The first $61,500 is taxed at 0.5%.
- Bracket 2: The amount between $61,500.01 and $307,800 is taxed at 1%.
- Bracket 3: Any amount exceeding $307,800 is taxed at 1.5%.
- Sum the Results: Add the amounts obtained for each bracket to find the total tax amount.
Example
The transfer duty for a property with a tax base of $350,000 is calculated as follows:
Note: The information contained in this text is of a general nature and does not constitute legal advice. It is important to consult a professional to obtain advice tailored to your particular situation.
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