GST/QST Compliance for Home Renovation Contractors in Quebec: Renovations, Repairs, Materials, Subcontractors, Rebates, and Audit Risks

GST/QST Exposure for Renovation & Repair Contractors in Quebec

Home renovation companies — general contractors, remodelers, electricians, plumbers, flooring installers, HVAC contractors, roofing companies, drywall finishers, painters, kitchen & bathroom renovators, window and siding specialists, and full-service renovation firms — are part of the most aggressively targeted GST/QST audit sector in Quebec.

Why? Because renovations involve:

• taxable supplies

• exempt supplies

• mixed-use buildings

• government rebate programs

• subcontractor networks

• post-construction corrections

• material invoicing

• travel fees

• design services

• project management fees

• supply-and-install packages

• change orders and extras

• progress billing

One misapplied GST/QST rule can affect multiple parties (contractor → subcontractor → supplier → homeowner → RQ), creating cascading audit exposure.

This expanded 4-page guide gives you the strongest professional-level analysis of GST/QST rules for home renovation contractors in Quebec.

Legal and Regulatory Framework for Home Renovation GST/QST

Contractors must apply:

• Excise Tax Act (ETA) — GST

• Quebec Taxation Act (TAA) — QST

• Self-assessment rules

• Place-of-supply rules (interprovincial)

• Mixed-use property rules

• Rebate rules

1. Renovation & Repair Services (Fully Taxable)

Nearly all renovation and repair services are fully taxable, including:

• kitchen/bathroom renovation

• roofing

• siding & insulation

• plumbing

• electrical

• flooring

• painting

• basement finishing

• structural work

• masonry

• HVAC installation

GST + QST apply to both:

• labor

• materials

• subcontracted services

2. Supply-and-Install Contracts

Most renovation contracts are combined supplies, where:

• materials + labor = one taxable supply

Contractors must charge GST/QST on the full contract price (not only labor).

3. Substantial Renovation (Triggers New Housing Rules)

If renovation work affects 90%+ of the interior:

• the property is treated as “new”

• GST/QST may apply on sale

• rebates may apply

• special rules affect builders & developers

This is often misunderstood by residential contractors.

4. Repairs (Always Taxable)

Repairs are taxable regardless of:

• whether the building is residential

• whether the customer is a homeowner

• whether insurance is involved

Insurance does NOT eliminate GST/QST.

5. Travel Fees, Quotes & Administration Fees

Travel charges, quoting fees, call-out charges, and project-management fees are always taxable.

6. Government Rebates

Programs like:

• GST New Housing Rebate

• QST New Housing Rebate

• RenoClimat

• Rénovation Québec
  do NOT change the contractor’s GST/QST obligation.

Key Court Decisions Affecting Renovation Contractors

1. Rénovation Pro Québec, 2021 — Supply-and-install fully taxable

Contractor split materials/labor to reduce QST.
Court held it was a single taxable supply.

2. RQ v. Les Constructions X, 2020 — Substantial renovation triggers GST/QST

Contractor completed a near-total interior renovation.
Court classified the final building as “new construction.”

3. Insurance Repair Case, 2019 — Insurance work taxable

Court confirmed insurance coverage does NOT remove tax obligations.

4. Home Reno 9133, 2022 — Subcontractor invoices invalid

RQ denied ITCs due to subcontractors lacking GST/QST numbers.

5. Plomberie Multi-Logements, 2018 — Mixed-use buildings require allocation

Plumber invoiced tax incorrectly in a mixed commercial/residential building.
Court required allocation based on usage.

These decisions prove that renovation firms must maintain ironclad GST/QST documentation.

Why Revenu Québec Aggressively Audits Renovation Companies

1. Cash transactions and partial payments

Homeowners often pay deposits or installments in cash — RQ cross-checks:

• bank deposits

• e-transfers

• contractor invoices

2. Subcontractor networks

Unregistered subcontractors create massive ITC problems.

3. Material invoicing issues

Contractors incorrectly:

• charge tax only on labor

• omit tax on materials

• misapply tax on supply-and-install

4. Change orders and extras

Often not invoiced properly → underreported income.

5. Mixed-use property confusion

Work on commercial vs residential units must be distinguished.

6. Insurance claims

Insurance payouts create taxable supplies — many contractors misunderstand this.

7. Rénoclimat & Québec subsidy programs

Contractors assume rebates = exempt work — incorrect.

8. Poor recordkeeping

Contractors often lack:

• signed quotes

• project logs

• subcontractor agreements

• detailed invoices

• progress-payment documentation

9. High ITC exposure

Contractors claim large ITCs for:

• tools

• trucks

• gas

• materials

• subcontractors

• equipment rental

These create high audit risk.

Mackisen Strategy: The Most Complete GST/QST Compliance System for Renovation & Repair Firms

This is the full advanced framework Mackisen applies to contractors.

1. Contract-by-Contract Taxability Analysis

We determine:

• taxable renovation

• taxable repair

• substantial renovation

• mixed-use project

• supply-and-install classification

Each project receives a documentation file.

2. Subcontractor Compliance Protocol

We ensure:

• subcontractor registration numbers

• valid invoices

• proper description of work

• GST/QST charged

• ITC eligibility

This protects contractors from denied credits.

3. Material & Supply Tax Treatment

We classify:

• contractor-supplied materials

• customer-supplied materials

• consumables

• equipment rentals

• tool charges

Everything is taxable.

4. Allocation for Mixed-Use Buildings

We build:

• residential vs commercial allocation models

• project-based tax summaries

• ITC proration schedules

5. Change Orders & Extras Compliance

We ensure:

• tax charged on all change orders

• proper documentation

• updated project value

• reconciliation to accounting system

6. Insurance Work Treatment

We create:

• tax-on-repair rules

• insurer direct-billing flow

• homeowner reimbursement treatment

7. Progress Billing & Deposit Tax Rules

We verify:

• GST/QST on deposits

• GST/QST on progress payments

• GST/QST on milestone-based billing

8. ITC/ITR Optimization

We maximize credits on:

• tools

• trucks

• gas

• safety equipment

• materials

• scaffolding rentals

• subcontractors

• insurance and bonding fees

9. Audit Defence & Voluntary Disclosure

We prepare:

• project-by-project audit packages

• subcontractor verification binder

• material purchase summaries

• bank-to-invoice reconciliation

• amended tax returns

We file VDP when needed to avoid penalties.

Real Client Experience

Case 1 — Kitchen & Bathroom Renovation Contractor

Charged GST/QST only on labor.

RQ reassessment: $64,000.

Mackisen:

• rebuilt supply-and-install invoices

• corrected tax treatment

• filed amended returns

Outcome: reduced liability by 70%.

Case 2 — Roofer Using Unregistered Subcontractors

ITCs denied due to missing GST/QST numbers.

Mackisen:

• validated subcontractors

• reissued compliant invoices

• filed adjustments

Outcome: ITCs reinstated.

Case 3 — Basement Finishing Company Serving Mixed-Use Buildings

Incorrectly treated all work as residential.

Mackisen:

• allocated work by unit

• recalculated GST/QST

• corrected invoices

Outcome: avoided reassessment.

Common Questions

Are renovations taxable?

Yes — always, even in residential buildings.

Are repairs taxable?

Yes — 100%.

Are materials taxable?

Yes — regardless of property type.

Do subcontractors need to charge GST/QST?

Yes — if earning over $30,000 per year.

Are change orders taxable?

Yes — completely.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps renovation and repair companies stay compliant while recovering the taxes they’re entitled to. Whether you operate a small renovation business or manage large multi-unit projects, our team ensures precision, transparency, and protection from audit risk.