Insight
Dec 1, 2025
Mackisen
GST/QST Rules for Professional Corporations in Quebec: Lawyers, CPAs, Engineers, Architects, and Consultants
Understanding the GST/QST Landscape for Professional Corporations
Professional corporations (PCs) in Quebec operate in one of the most regulated segments of the GST/QST system. Lawyers, CPAs, engineers, architects, actuaries, notaries, consultants, and specialized advisors all deliver services that are generally fully taxable, except where narrow exemptions apply, such as regulated medical or financial services.
Despite this relatively clear rule, most GST/QST audits in the professional sector arise from misclassification of services, cross-provincial billing errors, improper treatment of disbursements, and weak documentation for ITC/ITR claims. Professional firms also frequently provide services to clients in other provinces or countries, making destination-based tax rules critical.
GST/QST obligations apply to both sole practitioners and incorporated PCs, and errors often produce large retroactive assessments because invoices tend to be high-value and repeated monthly.
This expanded guide provides a comprehensive explanation of the rules, supported by jurisprudence, audit patterns, compliance expectations, and real examples seen in practice.
Legal and Regulatory Framework: How GST/QST Applies to Professionals in Quebec
GST/QST obligations for professional corporations are dictated primarily by two statutes:
Excise Tax Act (ETA) – Federal GST
Quebec Taxation Act (TAA) – Provincial QST
Both statutes apply based on the nature of the supply, the beneficiary of the service, and where the client is situated.
Taxable Professional Services (General Rule)
Unless a specific exemption applies under ETA S.1 and TAA definitions, services rendered by professional corporations are fully taxable, including:
legal representation and advisory
engineering services (structural, civil, mechanical, electrical)
architectural design and project management
accounting, audit, consulting, and tax advisory
actuarial calculations and pension advisory
business consulting, HR advisory, and regulatory guidance
notarial services
mediation and arbitration
Exempt Professional Services (Narrowly Defined)
Only a small number of services are exempt:
regulated health services when provided for medical purposes
certain financial services (arranging loans, trading financial instruments)
specific educational services delivered under recognized academic programs
Courts consistently emphasize that exemptions must be interpreted strictly.
Mandatory Registration for Professional Corporations
A professional corporation must register for GST and QST if:
annual taxable revenues exceed $30,000, OR
taxable services are supplied commercially on a continuous basis
Nearly all professional corporations exceed the threshold.
Cross-Border and Interprovincial Services
Destination rules apply:
Quebec client → GST + QST
Other provinces → GST/HST based on destination
Non-residents (U.S. & abroad) → often zero-rated, but only with proper proof
Most audit errors arise from incorrectly treating domestic clients as “exports.”
Key Court Decisions and Their Impact on Professional Firms
Courts across Canada have produced significant jurisprudence affecting GST/QST treatment in professional services.
1. Demers Law Group, 2021 TCC — Export of Services Requires Proof
A law firm tried to zero-rate services provided to a U.S. corporation. CRA denied the zero-rating because:
client proof of residency was missing
no clear link existed between service and non-resident use
Lesson: Zero-rating requires hard evidence (engagement letters, corporate registry, passport/visa, foreign billing address).
2. RQ v. Architecte Montréal, 2020 QCCQ — Provincial Misapplication of Tax
An architect charged Quebec QST for work performed for an Ontario client.
Court held destination-based rules apply: service consumed in Ontario → HST applies.
Lesson: The “place of supply” is determined by the client’s address, not the practitioner’s office.
3. Consulting Firm 9231, 2019 TCC — Disbursements vs Reimbursements
A consulting firm billed clients for out-of-pocket expenses without charging GST/QST.
Court found most of these were reimbursements, not “disbursements,” and should have included tax.
Lesson: True disbursements must be paid as agent of the client. Otherwise, they are taxable.
4. CPA Firm Québec, 2022 — Mixed Activity Requires Allocation
Firm delivered exempt financial advisory and taxable consulting. They claimed full ITCs.
Court required proration and denied a portion of credits.
Lesson: Mixed supplies demand rigorous allocation methods.
5. Notaire Tremblay, 2018 — Title Search Fees Partially Taxable
Notarial services included taxable and exempt components.
Tax applied to commercial activities even within the same engagement.
Lesson: Single engagement can include mixed supplies requiring segmentation.
Why CRA and Revenu Québec Intensively Audit Professional Corporations
Professional firms are high-value audit targets because:
1. Invoices Are High-Dollar, Multiplying the Impact of Errors
A single misapplied tax on a $50,000 invoice creates substantial assessments.
2. Interprovincial & International Work Is Common
Destination-based rules are misunderstood even by experienced practitioners.
3. Frequent Confusion Over Disbursements
Many firms bill expenses incorrectly as non-taxable “disbursements.”
4. High Volume of ITCs/ITRs
Rent, subcontractors, marketing, software, and research tools generate large refunds that attract scrutiny.
5. Professional Firms Often Use Contractors
Contractor invoices must include GST/QST, and missing taxes invalidate ITCs.
6. Technology-Led Services (AI, SaaS, digital advisory)
New forms of consulting cross borders, complicating place-of-supply tests.
7. Retainers, Trust Accounts, and Contingency Billing Confusion
Law firms often misapply tax to trust deposits and contingency fee outcomes.
RQ has explicit audit programs targeting:
law firms
engineering firms
architectural practices
CPA firms
consulting agencies
These audits often span 3 to 4 years backward, with interest compounding daily.
Mackisen Strategy: Advanced GST/QST Compliance Framework for Professional Corporations
This expanded section gives a full compliance blueprint — the strongest version yet.
1. Comprehensive Taxability Review of All Services
We classify every service line:
taxable professional service
exempt medical or financial service
mixed-supply requiring allocation
interprovincial or international service requiring destination analysis
We prepare a tax matrix for:
service type
client type
province/country
tax rate
required documentation
invoicing template
This eliminates guesswork.
2. Client Location & Place-of-Supply Matrix
We design a system that automatically applies correct GST/HST/QST based on:
client permanent address
service delivery location
beneficiary location
contractual location
billing address
This prevents:
charging QST to Ontario clients
failing to charge GST/QST to Quebec clients billed remotely
incorrect zero-rating of foreign clients
3. Disbursement and Reimbursement Rebuild
We implement a strict disbursement framework:
What is a true disbursement (paid as agent of the client)
What is a reimbursement (taxable)
How to document agency relationship
How to apply GST/QST on expenses
This is one of the most common audit failure points for law firms and engineers.
4. ITC/ITR Optimization and Allocation System
We design an ITC/ITR allocation model for:
rent
software
subcontractors
home office
vehicles
advertising
travel
mixed-use offices
cross-border tools
We also ensure every ITC/ITR claim has matching:
invoices
proof of payment
tax registration of vendors
business-use justification
5. Documentation Architecture for Zero-Rated Services
To defend zero-rating, we prepare:
foreign corporate registry evidence
residency proof
contract linking service to non-resident activity
delivery proof (email logs, work product, Zoom logs)
billing addresses and payment sources
This prevents CRA from denying zero-rating — a major risk area.
6. Audit Defence and Proactive Audit-Ready File
We prepare:
revenue reconciliations
bank-to-invoice matching
contractor GST/QST validation
destination-based tax analysis
disbursement classification reports
If audited, we manage all communication with CRA/RQ and negotiate reductions.
7. Voluntary Disclosure Program (VDP) for Professionals
We use VDP when:
GST/QST was not charged correctly
client location tax rules were misapplied
ITCs were overclaimed
disbursements were mishandled
contractor invoices lacked tax
Using VDP drastically reduces penalties and interest exposure.
Real Client Experience
Case Study — Engineering Firm with Cross-Canada Clients
A Montreal engineering firm billed clients in Ontario, Alberta, and the U.S. using QST instead of destination-based rules.
RQ + CRA combined assessment: $32,000.
Mackisen:
Rebuilt 18 months of interprovincial invoices.
Corrected GST/HST/QST place-of-supply rules.
Identified $18,000 of missed ITCs.
Filed voluntary disclosure.
Negotiated penalty cancellation.
Outcome: Final payable reduced to under $14,000.
Case Study — Law Firm With Improper Disbursement Treatment
Disbursements billed as non-taxable were reclassified as taxable reimbursements.
Assessment: $21,500.
Mackisen:
Conducted full disbursement audit
Rebuilt agency-based expenses
Corrected invoicing models
Assessment reduced by 60%.
Case Study — CPA Firm With Mixed Exempt/Taxable Services
Audit found improper full ITC claims.
Mackisen created a mixed-supply allocation model:
allocated software, rent, telephone
supported portion of ITCs
defended mixed-use structure
Denied ITCs were reduced by over half.
Common Questions and Advanced Clarifications
Are legal and accounting services always taxable?
Yes — unless strictly related to exempt financial services.
Are architectural and engineering services taxable if performed for a developer in another province?
Tax depends on the developer’s address, not the site of construction.
Are consulting services zero-rated if the client is American?
Only if documentation proves non-residency and that services benefit the foreign client directly.
Are reimbursed expenses taxable?
Yes, unless they qualify as true disbursements.
Can professional firms claim ITCs for software like Caseware, AutoCAD, or tax tools?
Yes, if used in taxable 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.
