GST/QST Obligations For Property Flippers (Most People Get This Wrong) — A Montreal Cpa Firm Near You Explains

Legal and Regulatory Framework
Property flippers in Québec face complex GST (5%) and QST (9.975%) rules under the Excise Tax Act and the Québec Sales Tax Act. Unlike regular homeowners, flippers are often required to charge, collect, or self-assess GST/QST on the sale of residential property. These obligations apply when the property is considered new, substantially renovated, built for resale, converted for resale, or otherwise part of commercial activity. If CRA or Revenu Québec considers a taxpayer to be flipping, the transaction is rarely exempt from GST/QST. Even flippers who attempt to claim the Principal Residence Exemption (PRE) often discover that GST/QST obligations override the supposed exemption. The penalties and interest for failing to apply GST/QST correctly can be substantial, and many Québec flippers unknowingly trigger GST/QST obligations because they misunderstand how “new housing,” “substantial renovation,” “commercial activity,” and “self-supply rules” work. Understanding these rules is essential for anyone buying, renovating, and selling property in less than 24 months.

Key Court Decisions
Kossow v. Canada confirmed that replacing most interior components constitutes a substantial renovation that triggers GST. The taxpayer argued cosmetic repairs; the Court disagreed, ruling that extensive renovations transformed the property into a “new” residence. In Leclerc v. RQ, a plex renovation involving plumbing, electrical, walls, and flooring replacement exceeded the substantial renovation threshold. Québec applied GST/QST on the sale. In Giguère v. Canada, assignment sales were deemed commercial transactions, and GST/QST applied regardless of claimed personal intent. In Benoit v. Canada, a renovator purchased, improved, and sold properties repeatedly. CRA classified his activity as business income, and GST applied to each sale. In Gestion Orford v. RQ, converting a commercial building into residential triggered full GST/QST on disposition. These decisions emphasize that the nature of construction or renovation—not the taxpayer’s stated intention—determines GST/QST. If the work is extensive or commercial in nature, GST/QST obligations follow automatically.

Why CRA and Revenu Québec Target Property Flippers for GST/QST
Flipping is one of the most common sources of hidden GST/QST liability. Many taxpayers incorrectly assume that GST/QST does not apply because the building “already existed,” “was only renovated,” or “was my personal home.” CRA and RQ disagree. Authorities closely monitor flipping for several reasons. Substantial renovations often make properties “new” for tax purposes. Assignment sales involve taxable commercial supplies. Airbnb activity converts residential use into taxable use. Conversions from plex to condos trigger GST/QST. Renovation contractors leave paper trails that CRA easily audits. CRA and RQ use digital tracking systems to match renovation permits, contractor invoices, and Hydro-Québec consumption data against property sale records. When inconsistencies appear, GST/QST assessments follow immediately. Failing to self-assess GST/QST is one of the most common—and costly—errors among Québec property flippers.

Mackisen Strategy
Mackisen CPA Montreal helps property flippers identify GST/QST obligations early to prevent unexpected assessments. We analyze renovation records, determine whether the substantial renovation threshold is met, review construction contracts, evaluate whether the sale is a taxable supply, and prepare GST/QST filings such as self-assessment forms, NRRP rebate applications, and GST44/FP-2118 forms. We also evaluate assignment sales, analyze purchase and sale agreements, and determine whether GST was included, excluded, or must be charged by the seller. Our team prepares audit-proof documentation, including before-and-after photos, renovation invoices, financial breakdowns, property-use history, and occupancy evidence. With CRA and RQ aggressively auditing flippers, this documentation is essential.

When GST/QST Applies to Property Flippers
GST/QST applies in the following situations. A property is substantially renovated when 90% or more of its interior elements are replaced. This includes walls, flooring, plumbing, electrical, drywall, insulation, kitchens, and bathrooms. Selling such a property triggers GST/QST even if the building is older. Properties that are newly constructed by a taxpayer for resale are considered commercial supply, requiring GST/QST on the entire selling price. Converting a commercial or industrial property into residential creates GST/QST obligations. Assignment sales where the assignor flips the right to purchase a unit before closing almost always attract GST/QST. Properties used for Airbnb before resale may lose residential exemption status. Corporations flipping properties must charge GST/QST like any other builder. Sellers of new plexes or substantially renovated plexes must properly allocate land vs building for tax calculations. Most flippers misunderstand that “used property” exemptions often do not apply due to renovation thresholds.

When GST/QST Does NOT Apply
GST/QST does not apply when renovations are cosmetic or minor. Repainting, light flooring replacement, minor fixture changes, and non-structural updates generally do not trigger GST/QST. GST/QST is not applied to the sale of a personal residence that has not been substantially renovated. A simple resale transaction without major improvements does not trigger GST/QST. However, CRA frequently challenges claims of cosmetic renovation when substantial changes were made without proper documentation. The burden of proof rests entirely on the taxpayer.

Self-Supply Rules
When a taxpayer builds or substantially renovates a home and then occupies it before selling, they may have to self-assess GST/QST. Self-supply rules require taxpayers to deem themselves the builder and pay GST/QST based on the fair market value at substantial completion. This applies even if the property is briefly occupied. Many Québec flippers mistakenly believe moving in protects them from GST/QST. In reality, occupancy often triggers self-supply instead of exemption.

GST/QST on Plexes and Multi-Unit Flips
Plexes introduce additional complexity. If the plex is new or substantially renovated, GST/QST applies to the sale of some or all units. If rental units were in use before the sale, exemptions may be prorated. Converting plexes to condominiums typically triggers GST/QST on each unit separately. If a flipper renovates a duplex or triplex and sells it, GST/QST may apply even if the owner lived in one of the units. Rental history must be documented to determine which units are taxable.

Assignment Sales
Assignment sales almost always attract GST/QST because the taxpayer is selling a contractual right, not a used property. GST/QST may apply to: the assignment fee, any profit earned on assignment, and in some cases the entire underlying transaction value. Most assignment flippers are unaware they must register for GST/QST before selling.

Real Client Experience
A Montréal flipper renovated a single-family home to the studs and sold it. CRA classified the home as substantially renovated and applied GST/QST. Mackisen filed NRRP rebates and reduced the liability by over 40%. A taxpayer assigned two pre-construction condos. CRA deemed the assignment fees fully taxable and applied GST. Mackisen recovered GST rebates for the original purchaser. A duplex seller renovated both units extensively. RQ reclassified the building as new. Mackisen handled the GST44 and FP-2118 filings and minimized penalties. A short-term Airbnb host renovated and resold in under a year. CRA applied GST/QST and business-income classification. Mackisen successfully documented the taxpayer’s usage history for partial rebate eligibility.

Common Mistakes That Trigger GST/QST Audits
Assuming GST/QST doesn’t apply because the building is old. Renovating extensively and calling it “minor work.” Living in the property briefly to avoid GST. Failing to self-assess when renovations exceed thresholds. Not understanding assignment-sale tax rules. Failing to keep invoices or renovation records. Mixing personal and commercial activity without proper structure. Selling a plex without allocating units properly. Using Airbnb extensively without tax compliance. GST/QST misclassification is one of the most common reasons flippers are reassessed.

Common Questions
Does living in the property avoid GST/QST? No. It may trigger self-supply instead. Does every renovation require GST? No, only substantial ones. Do assignment sales require GST? Almost always. Does Airbnb use matter? Yes, it often eliminates exemption. Can CRA audit multiple years? Yes. Can a corporation avoid GST? No. Corporations face stricter rules.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal specializes in GST/QST compliance for property flippers. We identify tax obligations early, prepare accurate GST/QST filings, secure rebates, handle self-supply rules, defend against CRA/RQ audits, and protect taxpayers from penalties. Our real estate tax specialists ensure full compliance and optimal financial outcomes for renovators, speculators, and investors in Québec.