Commercial video
Buying a house: the transfer tax
D-15.1 - Act respecting duties on transfers of immovables
1. In this Act and in the regulations, unless the context indicates a different meaning,
"consideration" includes:
(a) the value of any property furnished by the transferee at the time of a transfer;
(b) money payment;
(c) the prior claims, hypothecs and other charges encumbering a property at the time of the transfer;
(d) the amount, in capital, interest and outlays, of that portion of the debt which is extinguished when a creditor acquires the right of ownership on a property as the consequence of a real security encumbering the property in his favour, except with regard to municipal and school taxes;
(e) (paragraph repealed);
(f) (paragraph repealed);
"transfer duties" means the duties provided for in section 2;
"municipality" means a local municipality;
"public body" means
(a) a government;
(b) a local municipality or a regional county municipality;
(c) a legal person established in the public interest whose council is composed, as to the majority of its members, of a body of elected municipal representatives, or whose budget is submitted to such a body in accordance with the law;
(d) a legal person established in the public interest of one of the bodies mentioned in paragraphs a, b and c, designated by regulation;
(e) a school board;
"person" means a person and a trust, partnership, association, syndicate and any other group of any kind whatever;
"regulation" means a regulation made by the Government under this Act;
"transfer" means the transfer of the right of ownership on a property, the establishment of emphyteusis and the transfer of the rights of the emphyteutic lessee as well as a contract of lease of a property, provided the period running from the date of transfer to the expiry of the term of the contract of lease, including any extension or renewal mentioned therein, exceeds 40 years; the word "transfer" does not include transfer for the purpose only of securing a debt, nor reconveyance by the creditor.
New powers of municipalities
Higher Property Transfer Duties
On June 15, 2017, the Government of Québec adopted an Act mainly to recognize that municipalities are local governments and to increase their autonomy and powers. This Act amends section 2 of the Act respecting Duties on Transfers of Immovables. In fact, for the tax portion exceeding $500,000, it allows every municipality to set a rate higher than the one that was provided, whereas until now only the City of Montréal could do so. It should be noted that this additional rate may not exceed 3%, except for the City of Montréal. Every year, tax portions will also be increased based on the general Consumer Price Index for Québec.
As of January 1, 2018, municipalities may also impose new municipal taxes in their territory (must be direct taxes), as well as regulatory dues.
Calculation of transfer duties
The duties which are payable by the buyer of the property, is calculated in two steps:
First, the basis of imposition for transfer duties must be established, which will be the greatest of the three following amounts:
the price paid (excluding GST and QST);
the amount of the consideration stipulated in the act of sale, if different from the price paid;
the market value of the property at the time of its transfer, i.e. the value entered on the property assessment roll multiplied by the comparative factor. You should not look only at the comparative factor indicated on the tax account since it could differ from what is on the property assessment roll. The tax account does not reflect the comparative factor established for the first fiscal year to which the roll applies. The comparative factor may be amended for subsequent fiscal years.
Second, starting from the basis of imposition established in the first step, the following must be calculated:
0.5% of the first portion not exceeding $50,000;
1% of the portion exceeding $50,000 but not exceeding $250,000;
1.5% of the portion exceeding $250,000.
However, a municipality may, by by-law, determine a rate that is higher than 1.5% for any tax base portion that exceeds $500,000. The rate set cannot exceed 3% (except for the City of Montréal).
Example
A property is sold for $265,000. The value of the property entered on the property assessment roll is $260,000 and the comparative factor is 1.02. The basis of imposition is therefore established at $265,200, i.e. the highest of the sale price ($265,000) and the market value of the property (Value of the property entered on the property assessment roll multiplied by the comparative factor: $260,000 x 1.02 = $265,200). The transfer duties payable to the municipality will total $2,478, i.e.:
The first $50,000 multiplied by 0.5 = $250
The following $200,000 multiplied by 1 = $2,000
The $15,200 remaining multiplied by 1.5 = $228
For more information on property transfer duties payable during a transaction, feel free to contact the municipality concerned. For the city of Montreal, contact the district concerned, dial 311 (on Montreal Island) or 514-872-0311 (elsewhere) or send an email. You may also read the Information Bulletin 2017-14 published by the Ministère des Finances by clicking the following link: http://www.finances.gouv.qc.ca/documents/bulletins/en/BULEN_2017-14-a-b.pdf.
For more information, do not hesitate to contact Info OACIQ by email at info@oaciq.com or by telephone at 450-462-9800 or 1-800-440-7170.