The federal government has announced a major reduction in withholding tax on property transactions for filers in an effort to support the construction and real estate sectors.
Under the proposal, the withholding tax on property purchases for filers will be reduced from 2.5% to 1.25%. The tax on property sales for filers will also be reduced from 5.5% to 2.75%.
The government said the construction sector has a strong link with employment generation, as it supports several allied industries, including cement, steel, paint, tiles, hardware, timber and transport.
According to the budget speech, the reduction is meant to make transaction taxes more reasonable and revive activity in a sector that has slowed due to high costs and weak demand.
The proposed relief is likely to benefit documented buyers and sellers, as the lower rates apply to filers. It may also help improve transaction volumes in the formal property market.
However, the full impact will depend on market conditions, provincial taxes and whether lower federal withholding rates are enough to offset the broader slowdown in construction activity.