of issuance of the first tax bill, subject to certain exceptions for transfers between related parties ( e.g., two spouses, a parent and child, or a corporation and its shareholder, provided the shareholder holds at least 90% of the shares and the buyer does not re- sell or “flip” the property within 24 months of the initial exempt sale). Mutation tax rates are calculated on the higher of the purchase price and municipal evaluation of the property (both of which are identified in the deed, as is the amount payable, even where an exemption applies). The 2021 rates are as follows: (i) 0.5% of the first portion of the taxable amount up to $51,700; plus (ii) 1% of the portion of the taxable amount between $51,700.01 and $258,600; plus (iii) 1.5% of the portion of the purchase price in excess of $258,600.01. Québec municipalities are entitled to impose a surcharge of up to 3% for properties having a purchase price or municipal evaluation over $500,000. This is the case in many cities including Montreal, its suburbs, and surrounding areas. For example, Montreal charges (i) 1.5% on the portion of the purchase price between $258,600 and $517,100, (ii) 2.0% on the portion of the purchase price between $517,100 and $1,034,200, (iii) 2.5% on the portion of the purchase price between $1,034,200 and $2,000,000 and (iv) 3% on the portion in excess of $2,000,000. Even where an exemption applies, the city has the right to charge a supplemental tax as follows: none if the taxable value is less than $5000, 0.5% of the taxable value between $5000 and $40,000, plus a fixed amount of $200 if the taxable value exceeds $40,000. Non-resident vacant or underused property tax The 2021 federal budget announced the gov ernment’s intention to implement an annual national 1% tax on the value of Canadian property owned by non-Canadian

residents which is considered to be vacant or underused, effective January 1, 2022. The tax will require all owners, other than Canadian citizens or permanent residents of Canada, to file a declaration as to the current use of the property, with significant penalties for failure to file. Adjustments The buyer and seller adjust for taxes, utilities, and other prepaid expenses as at the date of transfer of ownership. In addition, in the case of commercial property, adjustments are also made for rents, third party operating expenses and common area maintenance expenses. Typically, the offer and deed will provide that the buyer chooses the notary and pays the notarial fees, including the cost of publication and the provision of notarial copies to both parties. If the purchase is financed, the lender will choose the notary to receive the deed of hypothec (mortgage), who will ideally also handle the sale, and the buyer will assume those costs. If there are existing encumbrances on the property ( e.g. , the balance of a hypothecary loan) to be paid out at closing, the notary will obtain a payout letter from the lender, arrange for payment from the sale pro ceeds and have the prior lender’s security radiated, all at the seller’s expense. Sales Tax The sale of a new residential property, or of an existing property that has undergone major renovations, from the builder / developer is subject to the GST and QST, with a partial rebate available for individuals only. If the purchase price is between $350,000 and $450,000, then up to 36% of the amount of GST not exceeding $6300 is refundable. If the purchase price is between $200,000 and $300,000, then 50% of the amount of QST not exceeding $19,950 is refundable.

ILN Real Estate Group – Buying and Selling Real Estate Series

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