OfflineIn figuring an additional tax when doing transactions im Montreal one needs to be made aware of the "Welcome Tax."
This is the only Provence that it exists in but is a cost that needs to be figured in.
The chart below lists the general transfer/welcome tax
On the portion of the value:
Rate
From 0 to $50,000:
0.5 %
Over $50,000 but not exceeding $250,000:
1.0 %
Over $250,000 but not exceeding $500,000:
1.5 %
Over $500,000:
2.0 %
As an example, taxation on a property value of $610,000 calculated on the above scale would be as follows:
The first $50,000 multiplied by 0.5%: $250
The next $200,000 multiplied by 1.0%: $2,000
The next $250,000 multiplied by 1.5%: $3,750
The last $110,000 multiplied by 2%: $2,200
Consequently, the total land transfer duties on this property would be $8,200.
Do not hesitate to contact Ville de Montréal if you have any further questions in this regard.
The ACAIQ Info Centre is open from 9:00 a.m. to 4:00 p.m. on Monday, Tuesday, Thursday and Friday, and from 10:00 a.m. to 4:00 p.m. on Wednesday to answer any questions regarding the Real Estate Brokerage Act. To contact an agent at the Centre, call 450 462-9800 or 1 800 440-7170 or send an email to info@acaiq.com, making sure to include your complete contact information so an agent can call you back...J. Addeski C-21
In a nutshell when a home is purchased by a buyer in Quebec, the municipality says “Welcome, now pay me!”, and when and if you sell your home next year and buy the home across the street, the city will again say “Welcome back! – even though you never left! Now pay me again!”.
Of course this is how it feels to the buyer. But this tax is really a duty that is charged by the municipality or city on the transfer of immovable property (including homes, duplexs, revenue properties, condos and land). Usually they are calculated on the value of the property and are payable by the buyer in one lump sum payment within 30 days of receipt by the new owner.
There are a lot of myths where Welcome Tax comes from and why its called Welcome Tax at all, as fitting a name as it is. In actuality in Quebec Welcome Tax was recommended in 1976 in Quebec by M. Jean Bienvenue (Welcome in French), after the province began to eliminate the transfer of provincial sales tax revenues to the municipalities. At that time municipalities were given the option to levy taxes on the transfer of property. This remained an option until 1992, when the Welcome Tax became mandatory for all municipalities to collect this tax on the transfer of immovable property in Quebec.
However there are certain programs in place in certain municipalities that will allow for the reduction or refund of the Welcome Tax to encourage new buyers to move to these areas.
From Minister Bienvenue, many people began to call the tax the “Taxe de Bienvenue” in French and translated by anglophones into Welcome Tax as we all know it today.
Know that you know where this dreadful tax comes from, how does one calculate the welcome tax when considering a property purchase?
The government uses the highest value of the following:
The amount that was actually paid for the property (excluding GST/QST).
The amount shown on the deed of sale
The market value of the property according to the government (the municipal evaluation of the property multiplied by a current comparative factor of 1.19).
Usually within about 4-6 weeks of signing for your new property the municipality will send you an invoice in the mail that must be paid in full within 30 days. On top of all the expenses that good real estate brokers will discuss with new homeowners, this is a substantial cost that home buyers should save for before making a purchase. That’s right, you must save for it, as the banks will not wrap the welcome tax into your mortgage as they often do with other municipal taxes.
There are some ways to save or avoid welcome tax, besides the Home Ownership Program offered by the city of Montreal, you can be exempted from paying welcome tax when:
The property is being transferred from a direct ascendant or descendant. For example a father to a son, son to mother, etc.
Transfer of ownership is between married or civil-union spouses, same-sex couples included.
Newly divorced couples if the transfer is done within 30 days of the judgment.
If the transfer is done by a natural person to a company (legal person) that is 90% owned by the same natural person.
The value is less than $5,000.
Many first-time homebuyers are not aware that the Welcome Tax is charged each time you transfer property even if you move to a different home in the same municipality, you will be charged again.
As property values have increased, and municipal evaluations have also increased substantially over the years, the amount of Welcome Tax collected by municipalities has been tremendous.
Now that you know where Welcome Tax came from and how to calculate it, I invite you contact me at 514-425-6262 if you are thinking about buying a home, condo or revenue property and would like to know the full list of costs, benefits and programs available to you.
R. Mitchell Notary Quebec