Act respecting duties on transfers of immovables
Of all specific statutes, those dealing with property transfers1 are most likely to have an impact on a broker’s real estate transactions.
From 1976 to 1992, the application of this statute – which was formerly called An Act to authorize municipalities to collect duties on transfers of immovables – was left to the discretion of each municipality. Since January 1, 1992, all municipalities in Québec are required to collect a transfer tax (which is the same everywhere) on certain immovables. The “welcome tax,” as it is commonly known, is the tax referred to in this Act.
Definition of a transfer of immovable
According to the Act respecting duties on transfers of immovables, the following events constitute transfers:2
- sale of an immovable;
- donation of an immovable;
- declaration of transmission in the context of the succession transfer of an immovable;
- exchange of immovables;
- judicial sale (excluding the taking in payment);
- lease of an immovable with a term exceeding 40 years;
- emphyteusis and expiry of rights of the emphyteusis.
1 CQLR, c. D-15.1.
2 Act respecting duties on transfers of immovables, CQLR, c. D-15.1, s. 1.
Transfer duty calculation
When a person buys a property, the city collects a transfer duty. Buyers will often wonder how much they will be required to pay.
Basis of imposition
To calculate transfer duties, one must know the amount that will be taken into consideration. Section 2, paragraph 2 of the Act respecting duties on transfers of immovables states:
“The basis of imposition for transfer duties shall be the greatest of the following amounts:
- the amount of the consideration furnished for the transfer of the immovable;
- the amount of the consideration stipulated for the transfer of the immovable;
- the amount of the market value of the immovable at the time of its transfer.”
The amount of the consideration furnished is the price paid by the buyer of the immovable.
The consideration stipulated is determined by the parties at the time of settlement of an estate or at the time of transfer of an immovable by donation, i.e. in situations not involving the payment of money.
The market value can be determined by a chartered appraiser; however, cities use the standardized municipal value, which is the amount of the municipal assessment found on the municipal tax bill.
► DUTIES AND OBLIGATIONS OF THE BROKER
When drafting the deed of sale, the notary will provide the buyer with the amount he or she will have to pay in transfer duties.
Notwithstanding this, the broker representing the buyer should provide this information to his client before the meeting with the notary.
The calculation of the transfer duties will be found in the section “Information required under section 9, paragraph 1 of the Act respecting duties on transfers of immovables”3 of the deed of sale.
Several aspects (exemptions, special programs, etc.) may be subject to specific regulations that will have an impact on the final calculation. Therefore, before talking to the client about the transfer duties for a given transaction, the broker must verify the information on the municipality’s website.
Transfer duties are due as of the registration of the transfer.4
For more information: Power of municipalities – Property Transfer Duties
3 CQLR, c. D-15.1.
4 Act respecting duties on transfers of immovables, CQLR, c. D-15.1, s. 6.
