Welcome Tax in Quebec: Here’s How It Works (2023)

Introduction

The popular name “welcome tax” is misleading. It is a property transfer tax that is not related to the arrival of a new residence in a city. Even if you already have a property in the same city, you will have to pay this “welcome tax”. Quebec’s Tax system is also different from those in other provinces. But don’t worry, here’s a guide to help you understand how the welcome tax works in Quebec.

What is welcome tax?

Welcome tax is the property transfer tax in Quebec. Why is it called welcome tax? One hypothesis is that the name derives from former Minister Jean Bienvenue, who also served as a judge on the Quebec Superior Court (District of Quebec). So, from his name, the property transfer tax is called “taxe de bienvenue”. In English, it is “welcome tax”!

How is welcome tax different from property transfer tax? 

They are the same type of tax! However, different from other provinces, in Quebec, the welcome tax (property transfer tax) is a city tax, not a provincial tax. For example, in Ontario, property transfer tax is a provincial tax (Except for Toronto city). The property buyer will receive a single invoice payable to the city a few months after the purchase of the property.

Who pays the welcome tax?

Property buyers pay the welcome tax. Not the sellers.

How to calculate welcome tax?

First, we need to understand the tax base. The tax bases for a new and an old property are different.

• New property: Welcome tax is calculated based on the selling price of a new home (before QST and GST).
• Old property: Welcome tax is calculated based on the higher value between the municipal assessment and the purchase price. In most cases, the purchased price is higher than the municipal assessment.

Different cities in Quebec have different welcome tax rates. For example, we can see the difference between Montreal city’s welcome tax and Brossard city’s welcome tax below. Moreover, Montreal has more tax brackets. But all the cities in Quebec use progressive tax rates.

Welcome tax example 

For example, you bought a property in Montreal and the purchase price is $500,000. The municipal assessment is $450,000. In this case, the purchase price is higher than the municipal assessment. So, we use $500,000 as the welcome tax base. The purchase price is $500,000

• 0–$53,200: $53,200 x 0.5% = $266
• $53,200–$266,200: $213,000 x 1% = $2,130
• $500,000– $266,200: $233,800 x 1.5% = $3,507

Your welcome tax will be $5,903. Please keep in mind that when you apply for a mortgage, the bank will not include the welcome tax amount in your mortgage, therefore you need to set aside money for welcome tax payment.

Is welcome tax only in Quebec?

Yes, the welcome tax is only in Quebec. But, in other provinces, buyers pay a land transfer tax instead of a welcome tax. Welcome tax in Quebec and property transfer tax (land transfer tax) in other provinces in Canada are the same concept.

How long does it take to get a welcome tax notice?

Within 4 to 8 weeks, the city will send you an invoice for the tax and you must pay the amount within 30 days. If you buy a new building, the expected time of receiving the welcome tax invoice may be more than 8 weeks. Technically, you should pay the amount within 3 months, so call the municipality if you haven’t received the invoice so that you can avoid the late fee.

How to avoid paying welcome tax?

You can avoid paying the welcome tax in these 5 situations.

1. If the value of your property is less than $5,000, you don’t have to pay welcome tax.
2. The same exemption goes for if the transfer is between spouses—married, in a civil union, or common-law relationship
3. If you inherited or transfer property from your direct family. (Son, daughter, mother, father, grandmother, grandfather, etc.).
4. If you transfer property between ex-spouses—married, in a civil union or common-law relationship, or exposes’ direct family (son, daughter, father or mother, grandmother, and grandfather), within 12 months of the date of your legal separation.
5. If you transfer property between the company and a shareholder holding more than 90% of the shares of the company.

In the above case, you only pay $200 for the property transfer. Compared to several thousand welcome taxes, a $200 property transfer fee is nothing.

Can I get a welcome tax refund?

Yes! Some cities of Quebec offer you a total or partial refund of the Welcome tax. But you must pay the welcome tax first and get the refund after. You must pay the amount of tax that the city request for the property transfer tax. After your payment, the welcome tax refund procedure begins. Montreal is providing financial real estate subsidies for buyers. You must meet all these 3 criteria:

• You are buying a newly built property. You don’t need to have a kid or be in a couple. You can get reimbursed between $5,000 and $15,000.
• You are a first-time buyer; you must have a child or children under the age of 18 among you. (the child or children must live with you at least 40% of the time). You can get reimbursed between $5,000 and $7,000.
• You are not a first-time buyer and you have a child or children under 13 (again, the child or children must live with you at least 40% of the time). You can get reimbursed between $5,000 and $7,000.

Contact your city directly to find out if you are eligible to get a welcome tax refund. Here is where you can get your welcome tax refund in Montreal.

What will happen if I am not able to pay the welcome tax?

If you are unable to pay your welcome tax, the city may sell your property at auction to recoup the outstanding payment. Late payment is also subject to interest and penalty fees. So please calculate the welcome tax into your closing cost.

When is the welcome tax due?

You must pay the welcome tax within 30 days from the invoice issue date. But what if I didn’t receive the invoice because of a postal failure or a mistake by municipal workers? You can explain the situation but the chances of getting the late fee waived are slim.

Can I pay the welcome tax in installments?

Normally, welcome tax is one lump sum payment to the city. But it also depends on your city’s regulations. Some cities may allow you to pay your tax amount in installments thus you may check with your city to see whether you can do installments.

Is the welcome tax deductible?

Welcome tax is not tax deductible from income tax. But if your property is a rental property, you can add this tax to your property’s capital cost and apply for Capital Cost Allowance (CCA). Please read more blogs Here.