Welcome! Now Pay Me! A Brief History and Calculation of the Dreaded Welcome Tax

By Andrew Mitchell | Buying Real Estate

As a real estate agent I often am present at the notary for the signing of the act of sale where the deed of ownership trades hands from seller to buyer. The dreaded Welcome Tax is one of the costs I always discuss with clients who are purchasing a home. It does sometimes still come as a shock to many buyers when the notary announces that the buyers will be responsible to pay thousands of dollars in Welcome Tax. Otherwise known as the Tax de Bienvenue, or more formally the Droit de Mutation / Duty on the Transfer of Immovables in Quebec.

Find out more about one of the largest taxes you might pay when you buy a home, the dreaded Welcome Tax!

In a nutshell when a home is purchased by a buyer in Quebec, the municipality says “Welcome, now pay me!”, and when and if you sell your home next year and buy the home across the street, the city will again say “Welcome back! – even though you never left! Now pay me again!”.

Of course this is how it feels to the buyer. But this tax is really a duty that is charged by the municipality or city on the transfer of immovable property (including homes, duplexs, revenue properties, condos and land). Usually they are calculated on the value of the property and are payable by the buyer in one lump sum payment within 30 days of receipt by the new owner.

Why is it Called Welcome Tax?

There are a lot of myths where Welcome Tax comes from and why its known as Welcome Tax at all, as fitting a name as it is.

In actuality in Quebec Welcome Tax was recommended in 1976 in Quebec by M. Jean Bienvenue (Welcome in French) minister in Robert Bourassa’s Liberals, after the province began to eliminate the transfer of some provincial sales tax revenues to the municipalities.

When the PQ took power it was Guy Tardif in René Lévesque’s cabinet who brought it forward into law. The name stuck to its creator Jean Bienvenue however and it became commonly knows as the Tax de Bienvenue or Welcome Tax. At that time municipalities were given the option to levy taxes on the transfer of property. This remained just an option until 1992, when the Welcome Tax became mandatory for all municipalities to collect on the transfer of immovable property in Quebec.

Guy Tardif father of Quebec's Welcome Tax

Guy Tardif l’équipe Lévesque, Parti québécois : faut rester forts au Québec Éditeur : Montréal : Thérèse Simoneau, agent officiel de Guy Tardif, [1981] BAnQ

However there are certain programs in place in certain municipalities that will allow for the reduction or refund of the Welcome Tax to encourage new buyers to move to these areas.

Now that you know where this dreadful tax comes from…

How Do You Calculate the Welcome Tax When Buying a Home?

The government uses the highest value of the following:

  • The amount that was actually paid for the property (excluding GST/QST).
  • The amount shown on the deed of sale
  • The market value of the property according to the government (the municipal evaluation of the property multiplied by a current comparative factor for the city of Montreal of 1.03 for 2016).

That value is then calculated as follows:

Value Rate

$0 – $50,000 = 0.5%
$50,000 – $250,000 = 1%
$250,000 – $500,000 = 1.5%
$500,000 – $1,000,000 = 2%
$1,000,000+ = 2.5%

So if the taxable value is $580,000, it would be calculated:

$50,000 x 0.5% $250
$200,000 x 1% $2,000
$250,000 x 1.5% $3,750
$80,000 x 2% $1,600
Total $7,600

Outside of Montreal, in the rest of Quebec, the welcome tax is calculated as follows:

$0 – $50,000 = 0.5%
$50,000 – $250,000 = 1%
$250,000+ = 1.5%

Or use our handy complete home buying calculator which will give you a good indication of ALL the costs that are involved with buying a home as well as your monthly payments.

the banks will not wrap the welcome tax into your mortgage as they often do with other municipal taxes

Usually within about 4-6 weeks of signing for your new property the municipality will send you an invoice in the mail that must be paid in full within 30 days. On top of all the expenses that good real estate brokers will discuss with new homeowners, this is a substantial cost that home buyers should save for before making a purchase. That’s right, you must save for it, as the banks will not wrap the welcome tax into your mortgage as they often do with other municipal taxes.

Can You Avoid Paying the Welcome Tax?

There are some ways to save or avoid welcome tax, besides the Home Ownership Program offered by the city of Montreal, you can be exempted from paying welcome tax when:

  • The property is being transferred from a direct ascendant or descendant. For example a father to a son, son to mother, etc.
  • Transfer of ownership is between married or civil-union spouses, same-sex couples included.
  • Newly divorced couples if the transfer is done within 30 days of the judgment.
  • If the transfer is done by a natural person to a company (legal person) that is 90% owned by the same natural person.
  • The value is less than $5,000.

Many first-time homebuyers are not aware that the Welcome Tax is charged each time you transfer property even if you move to a different home in the same municipality, you will be charged again.

As property values have increased, and municipal evaluations have also increased substantially over the years, the amount of Welcome Tax collected by municipalities has been tremendous.

Now that you know where Welcome Tax came from and how to calculate it, I invite you contact me if you are thinking about buying a home, condo or revenue property and would like to know the full list of costs, benefits and programs available to you.

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An earlier version of this article I wrote appeared in the Montreal Times newspaper. 

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About the Author

I'm Andrew Mitchell, Chartered Real Estate Broker and Owner of Vistacor Realty Group. I help buyers, sellers and investors in the West Island, Montreal and Vaudreuil-Soulanges areas buy and sell homes. My goal is to provide you with useful, straight-forward insights and relevant real estate market updates. Contact me with any questions. Follow me on twitter here.