Introduction

Whether starting a solo practice, joining a small firm, or operating as a professional corporation, many lawyers ask the same early accounting question:

“Do I need to charge GST/HST on my legal services?”

Variations of this question appear frequently on Reddit and legal forums, often phrased as:

• “Do lawyers automatically need to register for GST/HST?”
• “Are all legal services taxable?”
• “Do I wait until I earn $30,000?”
• “Are retainers taxed?”
• “Do contingency fees require GST/HST?”

The rules are straightforward in principle, but the application can feel confusing when billing retainers, disbursements, trust transactions, contingency outcomes, or cross-border legal work.

This guide explains how GST/HST applies to lawyers in Canada, when registration becomes mandatory, and how to stay compliant as your practice grows.

Key Takeaways

• Most legal services in Canada are taxable supplies and require GST/HST.
• You must register once your annual worldwide taxable revenue exceeds $30,000 unless you choose to register earlier.
• GST/HST generally applies to retainers, hourly billing, flat-fee work, and contingency fees.
• Certain disbursements may be exempt or zero-rated depending on how they are billed.
• Proper tracking and invoicing prevents CRA penalties, reassessments, and trust reconciliation issues.

Are Legal Services Taxable in Canada?

In most cases, yes.

According to the CRA, legal services are considered taxable supplies and are generally subject to GST/HST.

(Source: CRA, “GST/HST for Businesses”)

Unless an exception applies, lawyers must charge GST/HST on:

• hourly billing
• flat fee or fixed contracts
• subscription retainers
• contingency fees
• corporate and commercial legal work
• immigration, litigation, estate, and family law services

There are limited exemptions, which are discussed below.

When Lawyers Must Register for GST/HST

The requirement depends on total taxable revenue, not profit.

According to the CRA, a business must register when its taxable revenues exceed $30,000 in a single calendar quarter or over four consecutive quarters.

(Source: CRA, “When to Register for GST/HST”)

Two key points lawyers often misunderstand:

• The $30,000 threshold includes worldwide taxable sales, not just Canadian clients.
• Once you cross the threshold, registration is mandatory and must be done promptly.

Many lawyers choose to register before reaching the threshold to avoid mid-year accounting complexity and reimbursement issues.

How GST/HST Applies to Common Lawyer Billing Scenarios

1. Retainers

Retainers held in trust are not taxable at the time received. GST/HST applies only when earned and transferred from trust to operating.

2. Hourly and Flat-Fee Billing

GST/HST is charged on top of professional fees when invoiced.

3. Contingency Fees

GST/HST applies to the legal fee portion of contingency agreements when the amount becomes billable.

4. Disbursements

Whether GST/HST applies depends on whether you’re acting as agent or as principal.

(Source: CRA, “Legal Services and Disbursements” guidance)

Examples:

Disbursement TypeGST/HST Treatment

Filing fees paid directly to the court

Typically not subject to GST/HST

Courier fees, software, research costs billed by the firm

Usually taxable

Correct categorization matters for compliance.

GST/HST Rates by Province (For Lawyers Serving Clients Nationally)

If your clients reside in different provinces, the tax rate depends on the client’s province of residence, not your office location.

ProvinceRate

Ontario

13 percent

Alberta

5 percent (GST only)

BC

5 percent (GST only)

Nova Scotia

15 percent

Newfoundland and Labrador

15 percent

(Source: Government of Canada, “GST/HST Rates”)

Voluntary Registration: When It Makes Sense for Lawyers

Some lawyers register before the $30,000 threshold because:

• clients expect professionalism and standard compliance
• GST/HST collected can be offset with ITCs (input tax credits)
• software automation simplifies invoicing and remittances

For lawyers investing in:

• legal software (Clio, LEAP, Cosmolex)
• office equipment
• subcontracted professionals
• marketing or networking
• research databases

Input tax credits can create early financial benefit.

Common Mistakes Lawyers Should Avoid

• Charging GST/HST incorrectly on trust retainers
• Failing to apply the correct tax rate for out-of-province clients
• Claiming ITCs on non-business or personal use purchases
• Missing filing deadlines
• Treating disbursements incorrectly on invoices

Mistakes often surface during CRA desk reviews or trust reconciliation audits.

FAQ

Do all lawyers in Canada need to charge GST/HST?

Most do. Legal services are taxable unless specifically exempt. Registration becomes mandatory once revenue exceeds $30,000.

What if I forget to register after passing $30,000?

CRA may assess GST/HST on past billings and apply penalties and interest.

Do I charge GST/HST on contingency fees?

Yes. GST/HST applies when the fee becomes billable.

Do I charge GST/HST on retainers?

Not when received into trust. GST/HST applies once the retainer is earned.

Can US clients be exempt?

Legal services provided to non-residents may be zero-rated depending on service type and where the benefit occurs. This should be assessed case-by-case.

Get Compliance Right From the Start

GST/HST compliance for lawyers is manageable once set up correctly, but errors can impact billing, trust reconciliation, and CRA compliance. Whether you’re newly incorporated or scaling a practice with associates, the right accounting system makes billing and tax remittances seamless.

Rotaru CPA helps law firms and solo practitioners implement the right structure, software, and compliance workflow from the beginning.

📍 Book a consultation to ensure your law practice meets GST/HST requirements and operates with confidence.