Tax Guide for Construction Contractors in Quebec: GST/QST Rules, Income Reporting, and Deductible Business Expenses — CPA Firm Near You, Montreal

Introduction

Construction contractors in Quebec — including general contractors, subcontractors, renovation specialists, electricians, plumbers, roofers, and handymen — face some of the most complex tax rules in the province. CRA and Revenu Québec closely monitor this industry due to cash payments, subcontracting structures, and recurring documentation issues. This guide explains how contractors must report income, apply GST/QST correctly, claim deductions, and how a CPA firm near you in Montreal can help reduce audit risk while maximizing tax efficiency.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, contractors must report all business income from residential and commercial projects, subcontracting, consulting, and labour-only contracts. Most construction services are taxable, requiring GST and QST registration once the small-supplier threshold is exceeded. Contractors must issue invoices containing mandatory details including tax numbers, client information, project description, and tax amounts. Deductible expenses may include tools, equipment, vehicle costs, subcontractor payments, materials, safety gear, advertising, software, home office expenses, and insurance. CRA and Revenu Québec require receipts, contracts, and supporting documents for all expenses.

Key Court Decisions

Courts have ruled that contractors who cannot produce supplier invoices or receipts for subcontractor payments risk having deductions denied. Judges have denied expenses where workers claimed personal vehicle costs or undocumented payments as business expenses. Several rulings emphasize that GST/QST must be applied correctly to construction invoices, and errors can result in significant penalties. Courts also clarified that material purchases must be properly allocated between personal and business use.

Why CRA and Revenu Québec Target Contractors

Contractors are frequently audited because of:
• Cash-based transactions
• Missing receipts or undocumented subcontractor payments
• Improper GST/QST invoicing
• Large vehicle and tool deductions
• Personal-use materials claimed as business expenses
• Inconsistencies between supplier purchases and reported revenue

Auditors compare bank deposits, supplier invoices, payroll records, RBQ registration, and client contracts to detect discrepancies.

Mackisen Strategy

At Mackisen CPA Montreal, we help contractors build complete tax and accounting systems tailored to construction workflows. We ensure proper GST/QST registration and invoicing, classify subcontractor payments correctly, and optimize deductions for tools, equipment, vehicles, and materials. We set up bookkeeping systems that track job costs, profit margins, and payables. Our team prepares year-end filings, manages payroll and subcontractor slips, and ensures compliance with RBQ and tax requirements. If audited, we defend your deductions, rebuild documentation, and negotiate reassessment reductions.

Real Client Experience

A Montreal contractor claimed large vehicle and tool expenses without receipts or logs. CRA disallowed most deductions. We reconstructed expense records, analyzed job cost sheets, and identified allowable deductions, reducing the reassessment significantly. In another case, a subcontractor failed to charge GST/QST properly on invoices; we corrected past filings and implemented an invoicing system that prevented future penalties.

Common Questions

Are construction services taxable?

Yes. Most renovation and construction services require GST/QST once the revenue threshold is exceeded.

What expenses can contractors deduct?

Tools, equipment, materials, subcontractor payments, vehicle expenses, insurance, advertising, software, and home office costs may be deductible.

Do contractors need to keep receipts from suppliers?

Yes. Missing receipts are one of the main reasons for CRA and Revenu Québec reassessments.

How should subcontractor payments be documented?

Invoices, contracts, and proof of payments must be kept for all subcontractors.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps construction contractors stay compliant while maximizing deductions. Whether you’re a small subcontractor or running a large operation, our expert team ensures precision, transparency, and protection from audit risk.