Changes to Quebec Real Estate Transfer Duties - Transfer by / to Group

On July 17, 2025, the Québec Minister of Finance released Information Bulletin 2025-5, “Changes to certain exemptions from the payment of transfer duties”, in which it announced its intent to modify certain exemptions under the Québec land transfer tax regime (the “Announced Measures”) contained in the Act respecting duties on transfers of immovables (the “Act”). These provisions apply to the transfer of real estate made after July 17, 2025.

Transfer of real property by a group of natural persons to a legal person, and vice versa

Under the current legislation, there is no specific exemption where a group of natural persons (individuals who are not trusts) transfer real estate to a legal person (which includes a corporation and a partnership, but not a trust), even if that group in the aggregate owns more than 90% of the legal person. So for example, if a property is owned 50/50 by two natural persons, there is a concern that they cannot transfer to a legal person that they own 50/50 without triggering land transfer tax.

Now there will be an exemption where:

• The transferor group owns shares in the capital stock of the legal person transferee that give that group at least 90% of the voting rights that may be exercised under any circumstances at the annual meeting of shareholders of the transferee (or for a partnership, at least 90% of the profits and losses of the partnership); and
• each member of the transferor group holds these shares (or profit/loss interest) in a proportion equivalent to their share in the property immediately before the transfer.

There is no requirement that there be any connection between the members of the group, other than them being owners of the property and then holders of the legal person. As with the usual closely related exemption in subparagraph (d) of the first paragraph of section 19 of the Act, the above conditions will have to be met at all times during the 24-month period following the transfer (with an exception in case of the death of a transferor), otherwise, transfer duties will retroactively apply to the date of transfer.

While the Announced Measures do not explicitly address this point, it seems that the 24-month requirement would not be met where, during said period, share ownership percentages were to change among the group of shareholder-transferors, despite such group still holding 90% or more of the voting rights in the transferee corporation. Internal reorganizations within such 24-month period could possibly unintendingly trigger transfer duties on past transfers of real property.

The inverse transfer is now also exempt, applying to transfers from a legal person to its shareholders / partners, where such natural persons own, and have owned for the past 24-month before the transfer, in the aggregate 90% or more of the voting stock of the corporation (or 90%+ profit/loss interest of a partnership), and have held such shares or interest in the same proportion as their ownership interest in the immovable as at immediately after said transfer.

However, suppose the transferor of the real estate was constituted less than 24 months before the transfer of that real property. In that case, the exemption from the payment of transfer duties will only be granted at the time of the transfer if the conditions for exemption are met throughout the period beginning on the date of constitution of the legal person and ending on the date of the transfer.

The Minister indicated that exemptions from the payment of transfer duties that may currently apply to a transfer involving a natural person and a legal person under paragraphs 19 (a), (a.1), and (b.2) of the Act will, after July 17, 2025, no longer apply to the transfer of an immovable by several transferors who are natural persons or to several transferees who are natural persons. Thus, these kinds of transfers must fit into the new rules.

The disclosure mechanism to inform the municipality of the exemption condition ceasing to be met will be modified to apply to the new exemptions, and carve-outs for certain amalgamations and dissolutions will be implemented.

Technical Amendments to the Partnership Exemptions

There is currently a deemed ownership rule for the purposes of the 90%+ corporate ownership test, to prevent the exemption from being claimed where another party has a right to acquire the shares of the corporation, and if exercised that right would result in the 90%+ test being broken. Section 4.3 of the Act deems, for purposes of determining whether a person (or group of persons) hold shares of the corporations granting 90% or more of the voting rights of the corporation, that any person who has a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, shares of a legal person or to control the voting rights of such shares, or to cause a legal person to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of the legal person, is deemed, at that time, to have exercised that right, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of a person.

Thus, the existing “deemed ownership” currently only applies to corporations, but the Minister has announced that this principle will be extended to partnerships (which are currently not covered by this rule):

the Act will be amended so that each person other than the transferor or the transferee, who at any time has a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently, either to, or to acquire, a share in a partnership’s profits or losses, or to cause a partnership to redeem, acquire or cancel shares in the profits or losses belonging to other persons, is deemed, at that time, to have exercised that right, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of a person.

Technical Adjustment to the Exemption for Registered Agricultural Operations

The Announced Measures will also implement a technical adjustment to the disclosure mechanism in relation to the exemption for transfers of an immovable that is, or will be within one year of the transfer, a registered agricultural operation. This amendment will apply to the transfer of an immovable made on or after March 18, 2016.