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Construction Sector - Ensuring tax fairness means being fair to everyone

Source and warning

This content is an independent, unofficial reformulation of Revenu Quebec publication IN-517(2024-08).pdf. It is provided for information purposes only and does not constitute legal, tax, or professional advice. For any decision, refer to the official document.

Who this document is for​

This document is primarily intended for people who make use of services in the construction sector in Quebec, notably citizens who hire a contractor for work, including residential renovation work. It also concerns, through its content, contractors, businesses, workers in the construction sector, as well as stakeholders present on public and private construction sites in Quebec.

Context and objective​

The document aims to raise public awareness of the importance of respecting tax rules in the construction sector. Revenu Quebec presents tax evasion and off-the-books work as phenomena that cause significant losses to the government, undermine tax fairness, deprive certain people of social protection, and create unfair competition among businesses. The document also explains how citizens can help limit tax evasion when they hire a contractor, and describes the means used by Revenu Quebec to prevent, detect, and combat illegal tax practices in the construction industry. The overall objective is to remind readers that respecting tax obligations helps support a tax system considered fair for the entire Quebec population.

Complete and detailed information​

Importance of respecting tax rules​

The document states that respecting tax rules helps maintain a just and equitable system. In the construction sector in Quebec, tax evasion causes losses estimated each year at $1.5 billion.

Data on the construction sector in Quebec in 2022​

According to the data mentioned in the document, which come from the website of the Commission de la construction du Quebec (CCQ), the construction sector in Quebec represented in 2022:

IndicatorData
Construction capital expendituresNearly $73 billion
Average direct jobs per month295,700
Share of jobs in Quebec1 job in 15
Payroll$9.5 billion
Active salaried workers197,925
These figures are used to illustrate the economic importance of the construction sector in
Quebec.

Practices used to avoid paying taxes​

The document lists several ways in which some actors in the construction industry try to evade their tax obligations:

  • not filing the required returns;
  • not sending the required slips;
  • not providing the mandatory summaries;
  • reporting income or amounts lower than reality;
  • resorting to off-the-books work;
  • using false invoices.

Consequences of tax evasion and off-the-books work in construction​

Tax evasion and off-the-books work in this sector have several negative effects:

  • the government loses significant revenue;
  • the principle of tax fairness is compromised;
  • certain workers do not benefit from social protection;
  • businesses that respect their obligations face unfair competition from those that do not respect them.

How a person who hires a contractor can help fight tax evasion​

The document presents three main actions to take when a person hires the services of a contractor.

1. Verify the contractor's license​

Before hiring a contractor, it is necessary to make sure that the contractor holds a license issued by the Regie du batiment du Quebec (RBQ).

2. Require a compliant contract​

The person hiring a contractor should ask for a written and complete contract. This contract must notably contain the contractor's registration numbers for the following files:

  • GST/HST;
  • QST. These numbers show that the contractor is registered with Revenu Quebec. The document specifies that their validity can be verified on the Revenu Quebec website.

3. Ask for an invoice for each service​

An invoice should be requested for any service received. The document highlights two important reasons for keeping an invoice:

  • it makes warranty enforcement easier;
  • it makes it easier to have recourse in the event of a dispute.

Actions taken by Revenu Quebec against tax evasion and off-the-books work​

Revenu Quebec indicates that it regularly carries out prevention, audit, and investigation activities to ensure that contractors contribute fairly to the funding of public services.

These activities make it possible to recover more than $200 million each year for the benefit of the Quebec population. The document also states that these interventions can lead to:

  • convictions;
  • prison sentences.

Means used by Revenu Quebec​

Revenu Quebec mentions several intervention methods in the construction sector:

  • carry out regular visits to construction sites in Quebec;
  • conduct prevention activities;
  • carry out audit activities;
  • carry out investigations;
  • proceed with unannounced interventions with partners on construction sites;
  • also intervene on residential renovation sites;
  • exchange information with partner organizations. The partners named in the document are:
  • the Commission de la construction du Quebec (CCQ);
  • the Regie du batiment du Quebec (RBQ);
  • the Commission des normes, de l'equite, de la sante et de la securite du travail (CNESST).

Concrete actions carried out by Revenu Quebec​

Site selection​

Revenu Quebec chooses public and private sites in order to ensure a presence:

  • on all types of construction sites;
  • in all regions of Quebec.

Communication with the person responsible for the site​

When a site is targeted for follow-up, Revenu Quebec informs the person responsible for the site of its intention to monitor the project. A kickoff meeting is then organized with the main stakeholders involved.

Visits during the progress of the work​

Revenu Quebec visits sites throughout the progress of the work. These visits are carried out:

  • without notice;
  • at regular intervals.

Collection, validation, and analysis of information​

Revenu Quebec collects, verifies, and analyzes information about all stakeholders involved in a site. The information may notably come from:

  • the list of contractors;
  • the list of workers;
  • daily reports;
  • attendance registers;
  • the prevention program that CNESST requires to be implemented.

Equipment and training of audit staff​

Revenu Quebec states that its auditors must have the necessary equipment to visit construction sites. During these visits, they wear safety clothing. They also receive health and safety training.

No impact on the progress of the work​

Revenu Quebec states that its presence on sites must not hinder the progress of the work.

File follow-up​

After the visits, Revenu Quebec closely follows up on the file relating to each site visited. The organization takes action with businesses that do not respect their tax obligations.

The document mentions that Revenu Quebec also uses analyses carried out under the Wealth Indicators project. These analyses may make it possible to identify:

  • individuals who hold significant assets but do not file income tax returns;
  • individuals whose declared income appears too low to explain the value of their property or assets. These situations may lead Revenu Quebec to carry out the audits it considers necessary, with a view to fairness toward all taxpayers.

Participation in the ACCES construction committee​

Revenu Quebec participates in the committee Concerted Actions to Counter the Underground Economy in the Construction Sector, also called ACCES construction. It is an interdepartmental working group whose objective is to fight, through the exchange of information, against:

  • tax evasion;
  • off-the-books work;
  • non-compliance with legal obligations in the construction sector in Quebec.

Obligations relating to the Revenu Quebec certificate​

The document states that the obligations related to the Revenu Quebec certificate have been expanded. They apply notably to construction contracts that meet all of the following conditions:

  • the contract is entered into during a calendar year;
  • the contract is entered into between two parties;
  • the total value of the contract is equal to or greater than $25,000, before taxes;
  • the obligation applies regardless of the level of subcontracting. When these conditions are met, other contracts entered into between the same parties in the following years are also covered, if there are any. The document specifies that persons or businesses that do not comply with these obligations are exposed to penalties.

Special cases and exceptions​

Residential renovation sites​

Unannounced interventions by Revenu Quebec do not concern only large sites or commercial sites. The document specifies that residential renovation sites can also be the subject of interventions with partners.

Public and private sites​

Revenu Quebec does not limit its actions to one type of site. Public and private sites are selected in order to ensure a presence on all types of sites and in all regions of Quebec.

Subcontracting​

For obligations relating to the Revenu Quebec certificate, the level of subcontracting does not have the effect of excluding a covered contract. If the applicable criteria are met, notably the total value of $25,000 or more before taxes, the obligations apply, even when there is one or more levels of subcontracting.

Subsequent contracts between the same parties​

When a construction contract entered into between two parties during a calendar year reaches the threshold of $25,000 excluding taxes, the contracts entered into between those same parties in the following years are also subject to the obligations relating to the Revenu Quebec certificate, where applicable.

Persons whose assets appear incompatible with declared income​

The Wealth Indicators project also targets cases where a person declares income that appears insufficient to explain the value of their assets. The document distinguishes this situation from that of a person who has significant assets but does not file income tax returns.

Steps and procedures​

For a person who hires a contractor​

Before and during the carrying out of work, the person who hires the services of a contractor should follow these steps:

  1. Confirm that the contractor holds an RBQ license.

This verification makes it possible to ensure that the contractor has the authorization required by the Regie du batiment du Quebec. 2. Obtain a complete contract. The contract must be drafted in a compliant manner and contain the contractor's registration numbers for the GST/HST and QST files. 3. Check the validity of the registration numbers. The document states that these numbers can be verified on the Revenu Quebec website. 4. Require an invoice for each service provided. The invoice serves as proof and can facilitate the enforcement of warranties or recourse in the event of a dispute.

For Revenu Quebec when following up on sites​

The document describes how Revenu Quebec intervenes on sites:

  1. Select sites. Public and private sites are chosen so as to cover different types of projects and all regions of Quebec.

  2. Inform the person responsible for the site. Revenu Quebec notifies the responsible person that follow-up on the project will be carried out.

  3. Hold a kickoff meeting. A meeting is organized with the main stakeholders at the site.

  4. Visit the site during the work. Visits take place regularly and without notice.

  5. Collect information on the stakeholders. Revenu Quebec gathers information concerning contractors, workers, and other stakeholders present.

  6. Use the documents available on the site. The documents mentioned include the lists of contractors and workers, daily reports, attendance registers, and the prevention program required by CNESST.

  7. Validate and analyze the information obtained. The information collected is verified and studied in order to determine whether tax obligations are being respected.

  8. Ensure file follow-up. Each site visited is subject to sustained follow-up.

  9. Take action with non-compliant businesses. Revenu Quebec acts with businesses that do not respect their tax obligations.

Forms and documents mentioned​

No specific tax form is named by number in the document. The documents or elements mentioned are:

  • the RBQ license;
  • a compliant contract;
  • the registration numbers for the GST/HST and QST files;
  • invoices related to services rendered;
  • the list of contractors;
  • the list of workers;
  • daily reports;
  • attendance registers;
  • the prevention program requested by the CNESST;
  • the Revenu Quebec certificate.

Deadlines, periods, and frequencies mentioned​

The document mentions the following time-related elements:

  • losses linked to tax evasion in construction are estimated each year;
  • the sector data presented relate to the year 2022;
  • direct jobs are expressed on average per month;
  • Revenu Quebec recovers more than $200 million annually through its activities;
  • obligations related to the Revenu Quebec certificate may apply to contracts entered into during a calendar year;
  • contracts entered into during the following years between the same parties may also be covered;
  • site visits are carried out at a regular frequency and without notice;
  • visits may take place throughout the progress of the work.

Important warnings​

Tax evasion and off-the-books work​

The document warns against practices aimed at avoiding tax payments, including:

  • failure to file returns;
  • failure to send slips;
  • failure to file summaries;
  • underreporting;
  • off-the-books work;
  • false invoicing. These practices have major economic and social consequences, including loss of revenue for the government, harm to tax fairness, loss of social protection for workers, and unfair competition for compliant businesses.

Consequences of Revenu Quebec interventions​

Revenu Quebec's prevention, audit, and investigation activities can lead to significant results, including:

  • recovery of more than $200 million per year;
  • convictions;
  • prison sentences.

Obligations relating to the Revenu Quebec certificate​

The persons and businesses subject to the obligations relating to the Revenu Quebec certificate must comply with them. The document specifies that failure to comply with these obligations may result in penalties. The covered contracts include notably construction contracts entered into during a calendar year between two parties when their total value reaches at least $25,000 before taxes, regardless of the level of subcontracting. Contracts entered into between those same parties in the following years may also be covered.

Verification of assets and income​

Through the Wealth Indicators project, Revenu Quebec can identify persons whose asset situation raises tax questions, notably when:

  • they have significant assets without filing income tax returns;
  • their declared income appears insufficient to justify the value of their assets. These situations may lead to audits.

Informative nature of the document​

The document specifies that it is provided for information purposes only. The information it contains should not be considered a legal interpretation of the Taxation Act or any other law.

Elements not reproduced​

The original document contains a contact section for reaching Revenu Quebec. In accordance with the applicable instructions, telephone numbers, contact details, and calls to contact the government are not reproduced here.

Summary​

The construction sector represents a major economic weight in Quebec, with nearly $73 billion in capital expenditures in 2022, 295,700 average direct jobs per month, a payroll of $9.5 billion, and 197,925 active salaried workers. Tax evasion in this sector causes annual losses estimated at $1.5 billion. Problematic practices include, in particular, not filing returns, slips, or summaries, underreporting, off-the-books work, and false invoicing. A person who hires a contractor should verify the contractor's RBQ license, require a contract showing the GST/HST and QST numbers, and ask for an invoice for each service. Revenu Quebec intervenes through site visits, audits, investigations, exchanges with the CCQ, the RBQ, and the CNESST, as well as analyses related to the Wealth Indicators project. These activities make it possible to recover more than $200 million per year and may lead to convictions or prison sentences. The obligations relating to the Revenu Quebec certificate apply notably to construction contracts entered into between two parties during a calendar year when their total value reaches $25,000 or more before taxes, regardless of the level of subcontracting, and non-compliance may result in penalties. The document is informational and does not constitute a legal interpretation of the Taxation Act or any other law.