GST/QST on Commercial Leases in Quebec: What Landlords and Tenants Must Charge, Collect, and Claim

Introduction

Commercial leases in Quebec are fully taxable for GST/QST purposes — yet they remain one of the most misunderstood areas of sales tax compliance.
Business owners frequently enter commercial leases without clear clauses for GST/QST, landlords sometimes forget to collect tax, and tenants often don’t claim input tax credits (ITCs) or input tax refunds (ITRs) properly.
Revenu Québec audits commercial leases aggressively because missing GST/QST on rent results in unpaid tax, penalties, and interest — often going back several years.
This guide explains how GST/QST applies to commercial leases, what each party must do, and how to avoid costly reassessments.

Legal and Regulatory Framework

Under the Excise Tax Act (GST) and Quebec Taxation Act (QSTA):

• All commercial rent is taxable, unless a specific exemption applies.

• Landlords must charge, collect, and remit GST/QST on rent and additional rent (operating expenses, CAM fees, taxes).

• Tenants may claim ITCs/ITRs if the lease relates to commercial activities.

• Lease agreements must clearly indicate tax treatment.

• GST/QST applies to:

  • Base rent

  • Percentage rent

  • Additional rent (taxes, insurance, CAM charges)

  • Parking, storage, and common-area fees

• Registration is mandatory when taxable supplies exceed $30,000.

Authorities enforce through:

• ETA s.165/QSTA s.16 (tax on taxable supplies)

• ETA s.221/QSTA s.22 (obligation to collect)

• ETA s.169(4)/QSTA s.39 (documentation)

• ETA s.286/QSTA s.24 (record-keeping)

Key Court Decisions

Courts have ruled that:

• Commercial rent is taxable even if the lease is silent on GST/QST.

• If the landlord fails to charge tax, they remain liable for the uncollected amounts.

• Tenants cannot claim ITCs/ITRs without compliant invoices.

• “Additional rent” (taxes, repairs, snow removal, CAM) forms part of the taxable supply.

• Misclassification of units (commercial vs residential) results in reassessments.

These decisions confirm that commercial leases must follow strict tax rules regardless of contract wording.

Why CRA and Revenu Québec Target These Issues

Commercial leasing creates high audit risk because:

• Landlords often forget to collect GST/QST on additional rent or parking.

• Tenants frequently miss ITC/ITR claims due to invalid invoices.

• Many mixed-use buildings have incorrect allocations.

• Lease agreements are often poorly drafted with missing GST/QST clauses.

• Late registration triggers multi-year reassessments for landlords.

• High-value rent payments mean high-dollar adjustments.

Industries affected: retail, restaurants, offices, warehouses, clinics, beauty salons, gyms, e-commerce, medical professionals, and service businesses.

Mackisen Strategy

We provide complete GST/QST compliance for both landlords and tenants.

1. Lease Agreement Review

We examine:

• GST/QST clauses

• Additional rent definitions

• Parking and storage fees

• Mixed-use allocations

• Landlord vs tenant tax obligations

2. Registration & Remittance

We determine:

• Whether the landlord must register

• Effective registration date

• Taxable components of rent

• Correct invoicing and remittance cycles

3. ITC/ITR Optimization for Tenants

We review:

• Monthly rent invoices

• Additional rent breakdown

• Invoice compliance

• Allocation for mixed-use tenants

4. Commercial Building Allocation

For buildings with both residential and commercial tenants, we calculate:

• Square footage allocations

• Expense proration

• Eligible credits only for commercial activity

5. Audit Defence

If a landlord or tenant is audited, we prepare:

• Corrected invoices

• Allocation schedules

• Legal arguments referencing ETA/QSTA

• Complete representation before Revenu Québec

Real Client Experience

A landlord leased office space for five years but never charged GST/QST on rent. Revenu Québec audited and assessed over $27,000 in uncollected tax, interest, and penalties.
Mackisen reviewed the leases, reissued compliant invoices, corrected remittances, and negotiated a payment arrangement — reducing penalties significantly.
This case highlights the importance of charging GST/QST correctly from day one.

Common Questions

1. Is commercial rent always taxable?
Yes, unless a specific exemption applies (rare).

2. Do tenants get to claim GST/QST back?
Yes, if the space is used for commercial activity.

3. Are CAM fees and municipal taxes taxable?
Yes — they are considered additional rent.

4. Do leases need a GST/QST clause?
Yes. If missing, the landlord is still responsible for remitting tax.

5. Can mixed-use buildings claim ITCs/ITRs?
Only for the portion relating to taxable commercial rentals.

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 a landlord structuring a new commercial lease or a tenant claiming credits, our expert team ensures precision, transparency, and protection from audit risk.

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Learn how GST/QST applies to commercial leases in Quebec. Mackisen CPA Montreal explains taxable rent, additional rent, ITCs/ITRs for tenants, and how to avoid Revenu Québec reassessments.