Blog: Mutations Tax and Unregistered Real Estate Transfers

June 6th, 2016 déclarations de revenus fédérales aux États-Unis

In its 2016-2017 Budget, Quebec’s Finance Minister introduced major changes to the Act Respecting Duties on Transfer of Immovable, which is the legislation by which are levied the transfer duties often referred to as Mutation tax or Welcome tax.

The changes introduced by the Minister are numerous and far-reaching. The purpose of this article is to briefly review what is arguably the most significant change: the obligation to report and pay transfer duties on the change of ownership of a                                                                                          real property that is not reported on the Quebec                                                                                        land registry.

Until March 17, 2016, the payment of transfer duties in Quebec was linked to the registration of a transaction on the Quebec land registry. For valid commercial reasons, certain transfers of real property were not registered on the Quebec land registry (through the transfer of a bare trustee or nominee corporation acting as prête nom to hold title) and thus the payment of the transfer duties was postponed indefinitely. Since March 18, 2016 the following rules are applicable:

  • The transfer duties are payable from the moment of the transfer of real property located in Quebec, whether registered on the Quebec land registry or not;
  • Where the transfer of real property is not registered in the Quebec land registry, the transferee of the property (or beneficial interest therein) will be required to disclose in writing the transfer to the municipality where the real property is located within 90 days from the date of the transfer;
  • The transfer duties will be payable by the transferee on or before the 31st day following the issuance by the municipality of an invoice to this effect;
  • The transferee who fails to disclose the unregistered transfer of real property within the prescribed delay will be subject (in lieu of the transfer duties) to the payment of special duties to Revenu Québec equal to 150% of the transfer duties otherwise payable;
  • If the transferee discloses the unregistered transfer of real property to the municipality after the prescribed delay has lapsed, transfer duties will be payable to the municipality and one third (1/3) of the special duties will be payable to Revenu Québec. Under certain conditions, the transferee will be entitled to make a disclosure under Revenu Québec’s voluntary disclosure policy. Revenu Québec will be allowed to waive up to one sixth (1/6) of the special duties under voluntary disclosure.

As a result of the above, the transfer of real property that is not registered on the Quebec land registry may have to be disclosed as early as June 16, 2016 (90 days after March 18). Special care should be given to the application of these new rules in all transactions affecting the beneficial ownership and ownership on title of real property located in Québec.

Please contact the Crowe BGK tax group should you require additional information or clarification.

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