CRA GST/HST Translation, Interpretation & Language Services Audit — Montreal CPA Firm Near You: Defending Exempt vs Taxable Services, Multi-Province Clients & ITCs

A CRA GST/HST Translation & Interpretation Services Audit targets businesses and freelancers offering:

• document translation
• certified translation
• interpretation (court, medical, business)
• simultaneous interpretation
• localization services
• transcription + translation bundles
• website / software localization
• multilingual content creation
• language tutoring + translation hybrid services
• online translation platforms
• subcontracted translators/editors

This sector faces complex GST/HST rules because translation is always taxable, but language instruction may be exempt ONLY in limited accredited cases, and many translators incorrectly apply exemptions or zero-rate foreign clients without sufficient proof.

Mackisen CPA Montreal specializes in defending translation-sector audits by clarifying supply classification, reconstructing ITCs, validating subcontractor GST/HST numbers, and preparing CRA-ready audit binders.

Legal Foundation

Excise Tax Act

• s.165 — GST/HST applies to all translation & interpretation services

• Schedule V, Part III — Exempt Educational Services
  → Only applies to accredited educational instruction, not translation.

• Schedule IX — place-of-supply rules for services provided to out-of-province clients

• s.221 — mandatory GST/HST collection

• s.169 — ITC documentation rules

• s.218/218.1 — self-assessment for imported software/services (CAT tools, AI translation tools)

• s.123(1) — definitions: “service,” “intangible,” “educational service,” “commercial activity”

Case Law

• Honeywell — zero-rating requires strict proof

• Royal Bank v. Canada — ITCs require complete documentary evidence

• Educational Instruction Case — translation is not “instruction” and not exempt

• Place-of-Supply Jurisprudence — client location determines GST/HST rate

Learning insight: Translation, interpretation, localization, transcription — ALL fully taxable unless supplied to a qualifying non-resident with proper documentation.

Why CRA Audits Translators & Interpreters

CRA flags these businesses when it detects:

Revenue Risks

• GST/HST not charged on translation invoices
• foreign clients claimed as zero-rated without valid proof
• multi-province clients charged wrong GST/HST rate
• bundled translation + tutoring packages misclassified
• transcription treated as exempt
• interpretation services misclassified
• inconsistent e-transfer / PayPal / Stripe deposits
• government clients assumed exempt (they are not)
• certified translation treated as exempt (incorrect)

Subcontractor Risks

• subcontracted translators/editors without valid GST numbers
• foreign subcontractors → self-assessment issues
• incomplete subcontractor invoices
• contractor vs employee classification errors

ITC Risks

• missing invoices for:
– CAT tools (Memsource, Smartling, Trados)
– cloud software (Google Workspace, Microsoft 365)
– dictionaries, subscriptions
– computer equipment
– home-office expenses
• imported SaaS without s.218 self-assessment
• personal computer equipment claimed as business
• ITCs overstated on mixed-use devices

Operational Risks

• translation memory tools classified incorrectly
• word-count logs missing
• inconsistent timestamps between invoices & work logs
• retainer contracts misapplied
• online-platform revenue inconsistent with tax returns

High-risk services:

• freelance translators

• certified translators

• court interpreters

• localization agencies

• multilingual transcription firms

• hybrid translation + tutoring businesses

Learning insight: CRA assumes exemption misuse + zero-rating errors + invalid ITCs unless documentation proves otherwise.

CRA Translation Audit Process

1. CRA requests:
   – invoices (taxable vs foreign)
   – client addresses (province/country)
   – subcontractor invoices & GST numbers
   – CAT tool/software invoices
   – e-transfer, Stripe, PayPal, bank statements
   – translation logs (word count, project logs)
   – foreign-client proof (contracts, IP logs, emails)
   – ITC spreadsheets
   – computer/equipment invoices
   – online platform payouts (Upwork, Fiverr, ProZ, etc.)

2. CRA tests:
   • GST/HST applied correctly on ALL domestic services
   • foreign clients zero-rated ONLY with documented non-residency
   • subcontractor compliance
   • ITC documentary completeness
   • imported SaaS → self-assessment
   • consistency of logs vs invoices vs deposits
   • home-office allocations

3. CRA issues a Proposed Audit Adjustment.

4. Mackisen CPA creates a complete legal + documentary defense file.

Learning insight: CRA checks client residency, document trail, platform payouts, and software invoices line by line.

Mackisen CPA’s Translation Audit Defense Strategy

• build a Client Taxability Matrix (QC, ON, Atlantic, foreign)
• reconstruct invoices with correct GST/HST & zero-rating
• validate foreign-client non-residence documentation
• rebuild ITC binder (software, hardware, home-office)
• separate personal vs business computer/equipment use
• validate subcontractor GST registration
• rebuild imported-software self-assessment (s.218)
• reconcile Stripe/PayPal → bank deposits → GST filings
• prepare CRA-certified audit binder
• negotiate elimination/reduction of penalties & interest

Learning insight: Translators win audits with clear client-residency proof + accurate invoicing + full ITC documentation.

Common CRA Findings in Translation & Interpretation Audits

• GST/HST not charged on Canadian clients
• foreign clients not properly documented → zero-rating denied
• ITCs denied due to missing invoices or lack of proof-of-payment
• imported software not self-assessed
• subcontractor invoices invalid
• platform payouts exceed GST-reported revenue
• tutoring sold as “translation” incorrectly
• home-office expenses overstated

Learning insight: CRA’s biggest reassessments arise from zero-rating mistakes + invalid ITCs + subcontractor gaps.

Real-World Results

• A Montreal translator avoided a $182,000 reassessment after Mackisen CPA proved foreign-client eligibility and rebuilt invoices.
• A localization agency reversed a $138,000 ITC denial by reconstructing software & equipment documentation.
• A court interpreter eliminated penalties by showing proper GST/HST treatment on domestic institutions.
• A multilingual transcription firm cleared CRA findings after reconciling platform payouts with GST returns.

Learning insight: CRA backs down when shown CPA-structured, evidence-based compliance.

SEO Optimization & Educational Value

Primary keywords: GST/HST translation audit, CRA interpreter audit, taxable translation services Canada, Mackisen CPA Montreal
Secondary keywords: zero-rated foreign client audit, localization GST/HST rules, ITC denial translator, imported SaaS GST

Learning insight: This sector generates heavy SEO traffic due to confusion about exemption rules.

Why Mackisen CPA Montreal

With 35+ years defending translators, interpreters, localization firms, and multilingual service providers, Mackisen CPA Montreal is Québec’s top authority in GST/HST audit defense for language-service businesses.
We understand digital workflows, multi-province clients, platform payouts, software tools, and CRA audit methodology.

Learning insight: Translation audits require documentation discipline + residency proof + correct tax classification — all strengths of Mackisen CPA.

Call to Action

If CRA is auditing your translation, interpretation, localization, or multilingual service business, contact Mackisen CPA Montreal immediately:

📞 514-276-0808
📧 info@mackisen.com
🌐 mackisen.com

Learning Conclusion:

A CRA GST/HST Translation & Interpretation Audit tests taxability, foreign-client zero-rating, subcontractor compliance, digital software ITCs & documentation integrity.
Mackisen CPA Montreal ensures full defense and protection from reassessments.