Back to the Professional Practices Guides

Excise Tax Act and Act respecting the Québec sales tax

A broker may be called upon to sell an immovable that is subject, in whole or in part, to sales taxes. The mandatory forms take this reality into account and are designed to draw the seller’s attention to this possibility.

Taxation rates

The seller has the obligation to collect the taxes from the buyer and to remit them to the tax authorities of each government. The buyer has the obligation to pay them.

The taxation rate is 5% for GST and 9.975% for QST.

Situations where taxes apply

In real estate, the following are the taxable situations most often encountered:

• sale of a new immovable;
• sale of an immovable containing a commercial portion (such as a multi-dwelling unit with commercial premises), whether it is new or existing;
• sale of an immovable by an enterprise;
• renovated immovable (when the renovations represent 90% or more of the property, which generally implies that only the foundations and the exterior walls have been preserved);
• sale of vacant land if it constitutes business income for the owner.

Note of interest

In the case of the renovation of an immovable, it is necessary to distinguish between the owner-occupant and the owner-lessor, because the Ministère du Revenu makes this distinction.

In the case of an owner-occupant, the buyer will have to pay the taxes. However, the buyer will be eligible for a rebate on the same basis as for the purchase of a new home. In this case, the seller does not pay taxes until he sells the property.

In the case of the rental property, the owner will have to self-assess at the end of the renovations, based on the “fair market value” of the property. However, the immovable will not be taxable at the time of resale.

OBLIGATIONS OF THE PARTIES