UHY Global Study: Canada levies one of the world’s lowest real estate transfer taxes

25 July, 2016   -   By admin

This post is also available in: Français (French)

(July 25, 2016) Canada levies one of the lowest property transfer taxes in the world on real estate, charging on average 1.8% or USD $17,800, in tax on a property purchase of USD $1 million, reveals a new global study by UHY.

This is far lower than the global average of 3.3% (USD $33,038) for properties worth USD $1 million.

UHY concludes that by keeping property transfer taxes in this price bracket low, governments encourage both labour market mobility of senior executives and valuable overseas investment from High Net Worth individuals.

UHY observes that in Canada real estate transfer taxes can vary between municipalities and 1.8% represents an average of the rates charged in three of Canada’s largest cities, Montreal, Toronto, and Vancouver.

UHY says that major European economies including France, Germany, and Spain levy among the highest property transfer taxes in the world (see table below).

UHY’s findings show that at 11.3%* Belgium has the highest average property transfer taxes for real estate worth USD $1 million of any country in the study – a charge of USD $113,131. Other western European economies at the top of the table include France and Germany, charging USD $50,901 and USD $50,000 respectively.

New Zealand and Russia have the lowest taxes in the study, effectively charging 0% on prime property purchases.

New Zealand has no transaction taxes on real estate and residential property transfers between home owners, which are also exempt from the government’s Goods and Services tax. Similarly Russia imposes no transfer taxes on the buyer, who only pays a minor fixed amount of State Duty of approximately USD $30.

UHY says that while the G7 economies charge on average 3% (USD $29,720) – broadly in line with the global average – tax charges in the BRIC economies are around a third lower at 2.3% (USD $22,720).

UHY tax professionals studied tax data for individuals purchasing a house worth USD$1 million in 26 countries across its international network, including all members of the G7, as well as key emerging economies.

Comments Ken Shemie, a partner at UHY Victor LLP: “Many economies risk over-exploiting property transfer taxes as a way to increase revenues, and it is encouraging to see Canada exercising restraint in this area.”

“Higher property purchase taxes can put a strain on Canadian buyers, who may not actually be particularly wealthy, given house price inflation in some locations in recent years.”

“The United States is seen as having enviable labour market mobility, and it has one of the lowest tax rates in our study. The low level of transfer tax enables US home owners to move more freely from city to city.”

“Levying significant taxes on the cost of a new property can also constrain labour market mobility. If businesses have to offer much greater incentives for senior executives to relocate, this could have a serious impact on job creation and business investment, and ultimately on the broader economy.”

Ken Shemie adds “Prime properties, especially in major cities, are particularly desirable for wealthy investors from overseas, but where there are excessively high taxes, these markets could become less attractive. Cities such as Paris or Berlin could lose out to locations such as Vancouver where property transfer taxes are seen as more reasonable.”

“These wealthy overseas investors contribute to the local economy in many other ways, through discretionary spending while they are staying in the property, as well as maintenance costs, for instance by refurbishing extensively, or employing staff.”

Residential property transfer taxes for the purchaser of a property worth USD$1,000,000

Rank Country Rate** USD Amount
1 Belgium* 11.3% $113,131
2 Spain 8.0% $80,000
3 Pakistan 6.0% $60,000
4 France 5.1% $50,900
5 India 5.0% $50,262
6= Croatia 5.0% $50,000
6= Germany 5.0% $50,000
6= Malta 5.0% $50,000
9 Australia**** 4.8% $48,155
10 Uruguay*** 4.0% $40,000
Europe Average 3.8% $38,356
11 UK 3.5% $35,383
World Average 3.3% $33,038
12 Japan 3.0% $30,135
G7 Average 3.0% $29,720
13 Israel 2.7% $27,368
BRIC Average 2.3% $22,720
14 Denmark 2.1% $21,000
15 China 2.1% $20,586
16 Poland 2.0% $20,019
17= Brazil 2.0% $20,000
17= Mexico 2.0% $20,000
17= Netherlands 2.0% $20,000
20 Canada**** 1.8% $17,833
21 Italy*** 1.7% $16,713
22 Rep of Ireland 1.0% $10,000
23 USA**** 0.6% $5,970
24 Romania 0.2% $1,500
25 Russia 0.0% $30
26 New Zealand 0.0% $0

* This figure represents an average of the rates in Brussels, Flanders, and Wallonia which can vary from 9.8% to as high as 12.5%.
**Rates rounded to nearest tenth
***Rate paid on cadastral value of property, not market price; for Italy (based on 2015 data), it includes the law with the provision that the rate applies on the cadastral value of the property, which is largely lower than the market price
****Average of local variations

About UHY Victor LLP
UHY Victor LLP is a member of UHY, an international network of independent accounting and consulting firms with offices in major business centres throughout the world. Further information can be found at www.uhyvictor.com.

UHY Victor press enquiries: Ken Shemie at info@uhyvictor.com

UHY press contact:
Dominique Maeremans +44 20 7767 2621
Email: d.maeremans@uhy.comwww.uhy.com

Nick Mattison
Mattison Public Relations
+44 20 7645 3636, +44 7562 6522 71
Email nick.mattison@mattison.co.uk

About UHY
Established in 1986 and based in London, UK, UHY is a network of independent audit, accounting, tax and consulting firms with offices in over 296 major business centres across more than 89 countries.

Our staff members, over 7,660 strong, are proud to be part of the 16th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to www.uhy.com.

UHY is a full member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit www.forumoffirms.org

Network Disclaimer:
UHY is an international association of independent accounting and consultancy firms, whose organising body is Urbach Hacker Young International Limited, a UK company. Each member of UHY is a separate and independent firm. Services to clients are provided by the UHY member firms and not by Urbach Hacker Young International Limited. Neither Urbach Hacker Young International Limited nor any member of UHY has any liability for services provided by other members.

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