By purchasing the undivided half in our residence from my former spouse, can I be exempted of the “Welcome Tax”? Well, sometimes most definitely!

Did you know that the term “Welcome Tax” is derived from the name of the former Immigration Minister Jean Bienvenue, who recommended the establishment of transfer tax in 1976?

But what is the transfer tax? In fact, every municipality must collect duties on the transfer of any immovable situated in its territory, without exception. This right is commonly called transfer tax or “Welcome Tax“. The transfer tax is calculated as follows (Article 2 of the Act respecting duties on transfers of immovables):

 (1) On that part of the basis of imposition which does not exceed $50,000: 0.5%;

 (2) On that part of the basis of imposition which is in excess of $50,000 but does not exceed $250,000: 1%;

 (3) On that part of the basis of imposition which exceeds $250,000: 1.5%.

Thus, for a residence worth $ 150,000 at the time of the purchase, it would be appropriate to calculate 0.5% of the first $ 50,000 and 1% on the remaining $ 100,000.

However, the law provides some exceptions to this rule. For example, there will be an exemption from the payment of transfer duties when the deed relates to the transfer between spouses. The law defines “spouses” as spouses and civil union spouses. Regarding the common law spouses, they can also prevail of this exemption, provided that on the date of transfer, the spouses lived as married to each other and have cohabited with each other for a period of 12 months ending before the date of transfer or if they are the father and mother of the same child.

What will happen during a separation? For married couples, the divorce date is very important. Indeed, the transfer must take place before the divorce takes effect without exception, within 30 days following the judgment. Section 12 of the Divorce Act provides that divorce takes effect on the 31st day following the date on which the judgment granting the divorce is pronounced. Failure to do so on time, the former spouse must pay the welcome tax on the transfer.

With respect to common-law spouses, the former spouse can be exempt from paying the transfer tax to the extent that the transfer takes place within 90 days of the end of the common life.

You have questions about your situation? Do not hesitate to contact us for more information.

Text written by Me Roxane Trudel-Pigeon