Application of GST to Legal Fees

You are required to charge and collect the 5% GST on all legal fees, except for:

    • – Exempt supplies, which include legal services that are wholly provided outside Canada. (A supply is deemed to be made in Canada if the service is performed in whole or in part in Canada.) You are not entitled to claim an input tax credit for any GST paid by you on purchases that relate to an exempt supply.
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    • – ‘Exports’ of services that are zero-rated. Zero-rated means that the service is taxable, but at a 0% rate.
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    • Input tax credits can still be claimed for any GST paid by you on purchases that relate to the making of zero-rated supplies. In terms of legal services, there are essentially two types of zero-rated supplies: (1) residence services, which is a supply to a recipient who is a non-resident of Canada of an advisory, consulting, or research service that is intended to assist the person in taking up residence or establishing a business venture in Canada; or (2) professional services, which is a supply of an advisory, professional, or consulting service made to a recipient who is a non-resident of Canada that is not in connection with criminal, civil or administrative litigation or in respect of real property or tangible personal property ordinarily situate or to be delivered in Canada.
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    • For more information on zero-rated supplies, see GST/HST Memorandum 4.5.3 – Exports – Services and Intellectual Property.
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    • ​​- Services rendered to certain provincial governments. Only the provincial governments of Ontario, Nova Scotia, New Brunswick, and Newfoundland & Labrador have agreed to pay GST/HST on their taxable purchases. If you provide legal services to any other provincial government or provincial Crown agency that provides you with certification, you do not charge GST on your legal services. CRA will accept certification signed by an authorized official of the provincial government entity certifying that the purchase is made by the provincial government entity with Crown funds. You are responsible to keep this certification for audit purposes. You can claim an input tax credit for any GST paid on purchases you made to supply the legal services.
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    • Note that you do charge GST on legal services provided to the federal government and municipalities.
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    • If you provide services to representatives of foreign governments – like consular officers and diplomats – you must charge GST.
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    • For more information see GST/HST and information for governments and diplomats on the CRA website.
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    • – Services supplied to some First Nations peoples and bands (who fall within the meaning of s. 2 of the Indian Act (Canada)), so long as the band council has not passed its own law imposing an equivalent First Nations Goods and Services Tax. This topic is complex and beyond the purview of the module. Independent research is required, but for a start see First Nations Goods and Services Tax on the CRA website.

 

Generally, if you do not intend to charge GST for legal services, you will need some sort of documentation from the recipient to support the exemption (i.e., to establish they are indeed non-resident, member of a status Indian band etc.) in case of an audit.

 

Showing GST on Accounts

Your accounts must clearly indicate the GST portion of the total amount. The following is one acceptable example of how to show GST on an account for fees only:

No GST is imposed on interest charged on overdue accounts for either fees or disbursements because interest is a ‘financial service’ and therefore exempt from GST.