New powers of municipalities
Higher Property Transfer Duties
(Update of the article published on March 25, 2013)
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).
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.
For more information, do not hesitate to contact Info OACIQ by email at email@example.com or by telephone at 450-462-9800 or 1-800-440-7170.