How much is the welcome tax?
When a property in Quebec sells, the buyer must pay the real property transfer tax (site in French only) , better known as the “welcome tax.”
The goal of this tax is to give municipalities an additional source of revenues. And the name isn’t a bad joke about new owners being taxed on arrival. It was actually named for former Minister Jean Bienvenue (“bienvenue” being the French word for “welcome”), who sponsored the law allowing municipalities to tax real estate transactions taking place within their boundaries.
How to calculate it
The welcome tax is calculated using the higher of two values: a property’s municipal assessment or its purchase price.
For example, if a house with a municipal assessment of $249,000 sells for $280,000, then the welcome tax will be based on $280,000.
From this base amount, the taxation rate is then applied by tranches. It’s calculated like this:
- $0 to $50,900 = 0.5% of the amount in this tranche
- $50,900.01 to $254,400 = 1.0% of the amount in this tranche
- $254,400.01 and more = 1.5% (up to 3%) of the amount in this tranche
Add the amounts in each tranche to get the total of the payable welcome tax. Here’s an example:
For a property of $280,000
- 0.5% on the first $50,900 = $254.50
- 1% on the tranche between $50,900.01 and $254,400 ($203,500) = $2,035
- 1.5% on the remaining $25,600 = $384
- $254.50 + $2,035 + $384 = $2,673.50
You should be aware however that a municipality can adopt a regulation setting a higher amount, or surtax, of up to 3% on any tranche over $500,000. Montréal was the first city to do so, but several others followed suit in 2019. It’s best to check your municipality’s website to find out the tranches and rates (in French) that apply to your situation.
When to pay
The welcome tax is collected by the municipality a few weeks or months after the notarized act is finalized. In general, the buyer will receive a notice of payment about three to six months after seeing the notary. This timeframe varies by city and depending on the time of year in which the transaction took place.