What is the welcome tax?
When you buy a new property and you go to the notary/lawyer to register the transaction, the last tax that you must pay is the title transfer tax. When hearing the word ?tax? most people respond by saying, ?No, not another tax!? Unfortunately, this is reality.
This tax was nicknamed the ?Welcome tax?. Historically, this tax was designed to provide a supplemental income to the municipalities after the provincial government took their part. Minister Bienvenue (minister at the time and who eventually became the famous judge well known for his announcements) gave permission to the municipalities to tax the real estate transactions in their area. You can certainly understand why no one appreciates this tax and why several have also considered it illegal. However, it is a good source of revenue for the cities.
Many people have thought that the expression ?Welcome tax? was really meant to welcome new buyers. However, you can be sure that it is in honor of Minister Bienvenue. (Bienvenue means welcome in English)
In order to calculate this tax, you must first base it on the highest price between the purchase price and the municipal evaluation. Previously, it was calculated simply on the municipal evaluation. However, in the last few years, since sales were completed at a higher price than the municipal evaluation, cities were losing revenue. Therefore, they decided to modify the manner in which they calculate the tax. This way they are also able to profit from the real estate boom.
From this amount, you must first divide it into the following categories:
$0 - $50,000 = .5% of the amount in this category
$50,000 - $250,000 = 1% of the amount in this category
$250,000 and more = 1.5% of the amount in this category
Then you add the amounts together that correspond to your tax.
Example #1 ? A property purchased at $280,000
$0 - $50,000 = 50,000 x 0.5% = $250
$50,000 - $250,000 = $200,000 x 1% = $2,000
$280,000 - $250,000 = $30,000 x 1.5% = $450
Add together: $250 + $2,000 + $450 = $2,700
Example #2 ? A property purchased at $125,000
$0 - $50,000 = 50,000 x 0.5% = $250
$50,000 - $250,000 = $75,000 x 1% = $750
Add together: $250 + $750 = $1,000
People often ask how much time they have to pay this tax. You generally receive the notification for payment around 3 to 6 months after you have finalized the transaction with the notary/lawyer. The exact timing depends on the city and the period in which you finalized the transaction with the notary/lawyer. Once the notice has been received, you will have 30 days to pay the balance.
