Who can be exempt from paying the welcome tax?

Monday February 26th, 2018

Who can be exempt from paying the welcome tax?

The welcome tax is also known as the land transfer tax. Former Minister Bienvenue had created this tax to allow municipalities to tax real estate transactions carried out on their territory as an additional source of income. The new owner is responsible for the transfer tax. If you separate from your spouse and buy his or her share of the property, you must also pay a transfer tax, with some exceptions. As well, if you inherit a property, you will be required to pay a welcome tax. Someone who transfers their immovable may also be required to pay this tax. In some cases, the new owner does not have to pay a transfer tax. Here are some examples:

  • Transfer to an ascending direct line (with parents and grand-parents)
  • Transfer to a descending direct line (with children and grand-children)

For example, Grandma decides to transfer her cottage to her grandson; the grandson won’t have to pay the transfer tax. However, caution is required. Should the grandson transfer the immovable to his sister, then she will be required to pay this tax.

  • Transfer between spouses
  • There is an exemption when the transfer takes place between spouses and civil union couples. In the case of a divorce, with some exceptions, the transfer must be done prior to the divorce, otherwise the tax will apply.
  • Common- law partners may also benefit from this exemption if they were living together for more than 12 months prior to the transfer. To avoid the transfer tax, the transfer must be done within 90 days from the date of separation.

It is recommended to validate with a notary.

  • Transfer between an assignor and a company he controls

There is no transfer tax to be paid when the property transfer is done between a person and a company controlled by this person. The person must hold more than 90% of the company's shares and have a voting right.

  • Value less than $5000

The law provides for an exemption on the transfer tax if the value of the immovable is less than $5000. It is unlikely nowadays to buy a property at this price, but such a situation could occur in the case of the transfer of a small piece of land between neighbours, for example. How to calculate the welcome tax The calculation is based on the higher amount between the purchase price and the municipal evaluation. From this amount, the distribution is as follows:

Quebec Province, outside Montreal :

Amount Tier
0.5% of the first $50 000
1.0% of the next $50 000 to $250 000
1.5% of the portion exceeding $ 250 000

For Montreal:

Amount Tier
0.5% of the first $50 000
1.0% of the next $50 001 to $250 000
1.5% of the next $250 001 to $500 000
2.0% of the next  $500 001 to 1 000 000
2.5% of the portion exceeding $1 000 001

Then you add all three amounts. The total represents the amount of the welcome tax. Example: Purchase of $280 000

  • 0 to $50 000 = $50 000 x 0,5% = $250
  • $50 000 to $ 250 000 = $200 000 x 1% = $2 000
  • $250 000 to $280 000$ = remaining $30 000 x 1,5% = $450
  • Total payable: $250 + $2 000$ + $450$ = $2 700

For any additional info, please contact your notary or 1-800-NOTAIRE. This information is free. You can also visit the Chambre des notairesweb site.

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