Did you buy a building from a family member? Are you selling a building to a corporate entity? In some situations, you may be exempted from the “welcome tax.” Find out everything you need to know.
The Act Respecting Duties on Transfers of Immovables defines certain situations in which buyers can be exempted from paying transfer duties. In these cases, the buyer must pay a supplementary duty, a form of transfer duty compensation.
Reasons for exemption
Property transfer duties can be exempted in the following cases:
- Transfer of a building to an ascendant or descendant in the direct line, such as a father selling a home to his son, or a grandmother to her grandson.
- Transfer between spouses, whether married or common-law couples (as defined in the Act Respecting Duties on Transfers of Immovables), under certain conditions. Same-sex couples are included in this legal provision.
- When the transferor is a natural person (an individual) and the transferee is a legal person (corporate entity) if, immediately after the transfer, the transferor owns at least 90 per cent of the shares of the capital stock and full voting rights.
The notary must make a note in the deed of sale for the buyer to be exempted from transfer duties. The city can request, if necessary, any document to justify the exemption.
To get an exemption, the following time limits must apply:
- For common-law couples who are separating due to a breakdown in their relationship, the property transfer must take place within 12 months of their separation.
- For married couples, if the divorce judgment did not grant the building and/or property to one of the parties, the transfer must take place within 30 days following the date of the divorce judgment.
Once these time limits have passed, the buyer cannot be exempted from property transfer duties.
Loss of exemption
Exemption can be lost. This can happen, for example, when shares of capital stock are sold that change the control of a company (90 per cent or more of voting rights).
If exemption is lost, you have 90 days to disclose it to the city.
Buyers whose transaction is exempted may need to pay a supplementary duty not to exceed $200.