Increased welcome tax on transactions over $500,000 in Quebec

Increased welcome tax on transactions over $500,000 in Quebec

Quebec City will propose to increase the welcome tax on properties sold for more than $500,000.

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This ordinance shall enter into force as soon as it is adopted. Provides for the introduction of three new tax brackets on property transfers over $500,000. The proposal will be made at the next meeting of the municipal council.

“This is a new tool that will allow the City to generate additional revenue without increasing the tax burden for the vast majority of buyers,” said Pierre-Luc Lachance, vice president of the executive committee.

Luc Monty, CEO of Quebec City, Pierre-Luc Lachance, Vice President of the Executive Committee and Chantal Pineault, Treasurer and Director of Finance, on Friday morning, during the announcement of the increase in hosting fees.

It is estimated that the introduction of the new levels could generate additional income of the order of $8 million per year. The vast majority (91%) of buyers will not be affected by these increases, which are mainly aimed at the commercial sector.

On the median home resale price of $684,000, the difference will be $920 more than the current transfer tax. For a $2.5 million commercial building, the difference will be $20,000 more.

There are expected to be 10,500 real estate transactions in the territory in 2023. Of this number, approximately 9% will be affected by this change. The motion will be presented on November 7 and then adopted on November 21.

Quebec City expects a drop in the number of real estate transactions of around 35% for the next year after the slowdown in the market. In 2022, the welcome tax generated revenue of $35.3 million.

Since 2017, Quebec City could have set a higher rate for the collection of portions worth more than $500,000, but it did not take advantage of this prerogative.

The current rate for transactions of $500,000 is 1.5%. With Friday’s announcement, the City will introduce three additional tiers: 2%, 2.5%, and 3% (see chart).

“We are in a different fiscal context than in the past. The elements that we have to deal with as a City are changing. […] We decided to limit the tax increase to 2.5% for next year. We have a deficit of $38.1 million, which is estimated to date. We have to diversify our income. For us, the real estate transfer tax represents an opportunity in this direction,” added Mr. Lachance.

“We made this decision to maintain a reasonable tax rate in an inflationary dynamic.”

According to him, most cities impose a 3% from the first level that exceeds 500,000 dollars, but Quebec City has chosen to gradually soften the increase to remain “competitive.”

“From a global standpoint, we want to make sure Quebec remains very attractive,” said Mr. Lachance.

This announcement is far from unanimous among businessmen. The Quebec Chamber of Commerce and Industry (CCIQ) deplores this new measure.

“In front of members of the CCIQ, on October 13, Mayor Bruno Marchand declared that he hoped that Quebec merchants would be among the least taxed in the country at the end of his first term. Currently among the ten largest Canadian cities, the city is at the bottom of the ranking. Therefore, Quebec businessmen would have expected a move in this direction and not the other way around,” said Steeve Lavoie, president and CEO of CCIQ.

Mr. Lavoie encourages the Marchand administration to reverse course by canceling the adoption of this statute.

TAX TRACKS FOR 2022

  • That does not exceed $53,200: 0.5%
  • Exceeding $53,200 without exceeding $266,200: 1%
  • Exceeding $266,200 without exceeding $500,000: 1.5%

The three new levels

  • Exceeding $500,000 without exceeding $1 million: 2%
  • Exceeding $1 million without exceeding $2 million: 2.5%
  • Over $2M: 3%*

* The rate set by the sections cannot exceed 3%, except in the case of the City of Montreal.

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