GST/QST Compliance for Real Estate Agents and Brokers in Quebec: Commission Rules, Zero-Rated Transactions, and Audit Risks

Real estate brokers, agents, and agencies in Quebec face strict GST/QST rules on commissions, referral fees, marketing services, property assignments, and joint-venture arrangements. Although many real estate sales (such as used residential properties) are exempt from GST/QST, the commissions earned by agents and brokers are fully taxable.

Confusion around exemptions, assignments, mixed-use properties, and out-of-province buyers frequently leads to audits. This guide explains GST/QST rules that apply to real estate professionals, how commissions should be invoiced, and how to avoid common compliance pitfalls.

Legal and Regulatory Framework

GST/QST real estate compliance is governed by the Excise Tax Act (ETA) and the Quebec Taxation Act (TAA).

Commissions Are Taxable

Real estate commissions — including:

• residential resale commissions

• commercial commissions

• assignment transaction commissions

• referral fees

• broker-to-broker sharing agreements
  are fully taxable, even when the underlying property sale is exempt.

Agents must charge:

• GST (5%)

• QST (9.975%)
  on all taxable commissions.

Zero-Rated Real Estate Transactions

Some real estate supplies are zero-rated:

• sales of farmland to a registrant farmer

• certain exports of real property

• GST/HST new housing rebates in specific cases
  Even in zero-rated transactions, commissions remain taxable.

Exempt Real Estate Transactions

Exempt transactions include:

• sale of used residential properties

• long-term residential leases

• certain residential building transfers
  However, services related to exempt supplies are still taxable.

Mandatory Registration

Brokers must register for GST/QST if commissions exceed $30,000 in any 12-month period.
Most brokers must register immediately due to typical income levels.

Key Court Decisions

1. Agence Immobilière X, 2020 — Commissions taxable even when property sale exempt

Court confirmed that resale of used residential property is exempt, but broker services are fully taxable.

2. RQ v. Courtier Y, 2019 — Referral fees taxable

Referral fees between brokers must include GST/QST regardless of the property type.

3. Assignment Transaction Case, 2021 — GST/QST applies to broker services on assignments

Even if the assignment profit is exempt or disputed, the commission is taxable.

4. Property Management Co., 2022 — Administrative fees taxable

Property management services, lease-up fees, and tenant placement services are taxable.

These rulings confirm that broker services are nearly always taxable.

Why CRA and Revenu Québec Target Real Estate Professionals

Real estate agents and agencies are heavily audited because:

1. Commission-based income easily traced
   RQ obtains data from notaries, brokers, agencies, and OACIQ.

2. Confusion about exempt vs taxable commissions
   Many agents incorrectly believe resale home commissions are exempt.

3. Large ITC/ITR claims
   Advertising, vehicle expenses, brokerage fees, and staging expenses lead to high refund claims.

4. Assignment transactions growing
   Assignments create GST/QST confusion for both clients and brokers.

5. Property management income
   Often taxable but misclassified.

6. Out-of-province and foreign buyers
   Destination-based rules are frequently misunderstood for marketing or consulting services.

Mackisen Strategy: How We Protect Brokers and Real Estate Agencies

1. Commission GST/QST Analysis

We determine:

• taxability of commissions

• correct invoicing

• broker-to-buyer or broker-to-agency invoicing structures

2. Assignment and Complex Transaction Review

We classify:

• assignment commissions

• referral fees

• profit-share arrangements

• cross-border real estate transactions

3. ITC/ITR Optimization

We maximize allowable credits for:

• vehicle expenses

• advertising

• brokerage desk fees

• CRM software

• staging materials

• office supplies

• photography and videography

• lead-generation platforms

4. Documentation & Compliance

We prepare:

• GST/QST-compliant invoices

• commission reconciliation schedules

• proof of taxable services

• OACIQ-compliant records

5. Audit Defence

We handle:

• auditor correspondence

• income vs bank deposit reconciliation

• documentation of taxable services

• ITC support

6. Voluntary Disclosure

For brokers who did not register, mischarged GST/QST, or underreported commissions, we file voluntary disclosure to reduce penalties.

Real Client Experience

A Montreal real estate broker earning $180,000 in annual commissions mistakenly believed that commissions on used residential properties were exempt from tax.

RQ reassessed $27,000 in GST/QST.

Mackisen:

1. Corrected commission GST/QST calculations.

2. Identified ITCs on vehicle, advertising, and brokerage fees totaling more than $12,000.

3. Filed voluntary disclosure for late registration.

4. Negotiated full cancellation of penalties.

Outcome: Final payable reduced from $27,000 to under $9,000.

Common Questions

Are commissions taxable on resale homes?

Yes — commissions are taxable even when the sale itself is exempt.

Are referral fees taxable?

Yes.

Do new agents need to register for GST/QST?

Only after exceeding $30,000, but most register earlier to recover ITCs.

Are staging and marketing services taxable?

Yes. All broker-related services are taxable.

Can brokers claim ITCs on vehicle expenses?

Yes, if used for taxable real estate activities.

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.