GST/QST Compliance for Professional Corporations in Quebec: Lawyers, CPAs, Engineers, Architects, and Consultants

Professional corporations (PCs) — including lawyers, CPAs, engineers, architects, dentists, notaries, consultants, actuaries, and medical specialists providing taxable services — face particular GST/QST obligations in Quebec. Although the professional activity determines whether a supply is taxable or exempt, the corporation itself must register, collect, and remit taxes once it exceeds the small-supplier threshold.

Many professionals unknowingly make errors such as charging incorrect taxes across provinces, mishandling disbursements, failing to self-assess on interprovincial work, or claiming ineligible ITCs. This guide explains GST/QST rules for professional corporations and how to stay compliant.

Legal and Regulatory Framework

Professional corporation GST/QST rules are governed by the Excise Tax Act (ETA) and the Quebec Taxation Act (TAA).

Taxability of Professional Services

Most professional services are fully taxable, including:

• legal services

• engineering services

• accounting services

• architectural design

• consulting and management

• actuarial services

Exempt professional services include:

• regulated health services performed for medical purposes

• certain financial services (e.g., arranging loans)

Mandatory Registration

A professional corporation must register for GST/QST if:

• taxable revenues exceed $30,000 in any 12-month period, or

• the corporation provides professional services on a continuous commercial basis.

Out-of-Province and International Clients

GST/QST rules depend on the client’s location:

• Quebec clients → GST + QST

• Other provinces → GST/HST based on province

• U.S. or international clients → may be zero-rated if service is exported properly

Correct client-address documentation is essential for zero-rating.

Key Court Decisions

1. Demers Law Group, 2021 — Zero-rating requires proof

Law firm claimed services were provided to U.S. clients but lacked residency documentation. Zero-rating denied.

2. RQ v. Architecte Montréal, 2020 — Interprovincial work must be taxed correctly

Architect charged QST to Ontario client instead of HST. Reassessment confirmed.

3. Consulting Firm 9231, 2019 — Disbursements vs reimbursable expenses

Court ruled that many “disbursements” were actually taxable services and needed GST/QST applied.

4. CPA Firm Québec, 2022 — ITCs denied due to mixed supplies

A CPA firm delivered exempt financial services and taxable consulting. ITCs had to be prorated.

These cases show that tax treatment of professional services depends on both the service type and client location.

Why CRA and Revenu Québec Target Professional Corporations

Professionals face high audit risk because:

1. High-value invoices
   One misapplied GST/HST/QST rule can lead to large assessments.

2. Cross-border and interprovincial services
   Complex destination-based rules often misunderstood.

3. Disbursement confusion
   Professionals frequently misclassify fees as disbursements (non-taxable).

4. Mixed activities
   Professional firms offering exempt and taxable services must track ITC allocation.

5. Significant ITC/ITR claims
   Software, rent, research tools, advertising, and subcontractors generate large refunds.

6. Client billing structures
   Contingency fees, retainers, and pre-authorized billing require correct tax application.

Mackisen Strategy: How We Protect Professional Corporations

1. Service Classification & Taxability Review

We classify:

• taxable professional services

• exempt financial/medical services

• mixed-supply activities requiring allocation

2. Correct GST/QST/HST Billing for Each Client

We design billing systems for:

• Quebec clients

• other provinces

• U.S. and international clients

• multi-jurisdictional services

3. Disbursement vs Taxable Expense Analysis

We determine:

• true disbursements (no GST/QST)

• taxable reimbursable expenses

• when to charge GST/QST on costs passed to clients

4. ITC/ITR Optimization

We ensure proper credits on:

• rent

• software (QuickBooks, Caseware, Microsoft, legal tools)

• marketing

• subcontractors

• travel

• laptops, equipment

5. Audit Defence

We manage:

• correspondence with auditors

• documentation of service location

• ITC justification

• disbursement classification

6. Voluntary Disclosure

Useful when:

• GST/QST was not charged correctly

• ITCs were claimed improperly

• interprovincial billing was misapplied

Real Client Experience

A Quebec engineering firm billed Ontario clients using GST/QST instead of HST. RQ and CRA reassessed $32,000 in combined tax adjustments.

Mackisen:

1. Corrected interprovincial tax rules.

2. Identified additional ITCs on software, subcontractors, and equipment.

3. Filed voluntary disclosure for prior years.

4. Reduced the assessment by 58 percent.

Outcome: Final payable dropped to under $14,000.

Common Questions

Are legal services taxable?

Yes, unless delivered to non-residents under zero-rating rules.

Do professional corporations need to register for GST/QST?

Yes, once they exceed $30,000 or operate continuously.

Are consulting services zero-rated for foreign clients?

Yes, if they qualify and documentation supports the export.

Are disbursements taxable?

True disbursements are not, but many costs billed to clients are taxable.

Can ITCs be claimed for professional software?

Yes, if used for taxable services.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.