As part of the 2016-2017 Budget (the " Budget "), Carlos Leitão, Quebec's Minister of Finance, announced several amendments to the Québec transfer duty regime for certain transfers of real property pursuant to the Act respecting property transfer rights (the " Act "). On February 8, 2017, these changes were ratified by legislation applicable to all property transfers located in Québec after March 17, 2016.
On November 9, 2017, the Government of Québec introduced Bill 146, An Act to implement mainly tax measures announced in the Budget Speech of March 28, 2017 (" Bill 146 "), which provides additional clarifications to these changes.
Changes as a result of the budget
Prior to the budget, the law stipulated that all municipalities were to collect fees for the transfer of immovables from the date of registration of such transfers in the land register of Québec. Because of this wording, certain transactions were structured in such a way as to avoid registration in the land register, thereby indefinitely delaying the payment of transfer duties. As a result of the budget, effective March 18, 2016, transfer taxes are now payable on the date of transfer of the property, regardless of whether the transfer is registered or not. Assignees of real property must now either register the transfer or file a return with the municipality where the property is located within 90 days of the date of the transfer. In case of failure to register or to make a declaration,
The amendments to the Act presented in the budget also brought a review of existing exemptions to payment of transfer duties. For example, prior to the 2016-2017 budget, transfers between two closely related corporations were exempt provided certain conditions were met regarding the ownership of 90% of the voting shares by the related corporation, or the ownership of 90% of the fair market value of the shares issued and outstanding by the related corporation.
Since the Budget, these exemptions under the Act have been tightened, resulting in a single test based on the ownership of 90% of the number of voting rights attached to the issued shares (" Voting Rights Exemption "). "). In addition, the voting rights exemption must be maintained for 24 months following the transfer of the property. Failure to comply with the 24-month restriction period entails an obligation to pay the applicable transfer duties. If the exemption from voting rights ceases to apply within 24 months of the transfer of the property, a declaration must be made to the municipality and the transfer taxes must be paid.
Further changes have been made to the Act, in accordance with Bill 122: An Act primarily intended to recognize that municipalities are local governments and to increase their autonomy and powers in this respect, which has given Quebec municipalities the the autonomy required to establish their own transfer tax rates, up to a maximum of 3%, for any real property transfer tranche in excess of $ 500,000.
Additional amendments pursuant to Bill 146
Bill 146 further modifies the Quebec transfer tax system, as follows:
- By removing the requirement to communicate the names of the members of any professional corporation that has rendered services in connection with the transfer of an immovable at the time of the filing of a notice of disclosure;
- By creating exceptions to the requirement to file a Disclosure Notice when the Voting Waiver ceases to apply, in the context of the amalgamation or dissolution of a corporation;
- By easing the exemption rule applicable to transfers of immovable property in the context of an estate.
With respect to the exceptions to the requirement to file a notice of disclosure in the context of a merger or liquidation, in accordance with Bill 146, the assignee of an immovable whose transfer was exempt from the payment of transfer duties under the Voting Waiver will not have to pay transfer duties that would otherwise have been payable in respect of the transfer if at any time in the next 24 months the transfer date of the immovable, the transferor and transferee who are parties to the transfer cease to be closely related corporations because of any of the following events:
- their fusion;
- the transferor's or transferee's amalgamation with one or more corporations, if the corporation resulting from the amalgamation is closely related to the transferee or transferor throughout the period that begins immediately after the amalgamation and ends 24 months after the amalgamation date of transfer of the building; or
- the dissolution of the assignee or assignor.