Is Construction Arbitrage Legal in Canada?

Construction arbitrage is legal in Canada. Acting as the main contractor, subcontracting all physical work to specialist trades, and keeping the spread between what the client pays and what the subs cost you is how Canadian construction has always operated. Compliance is the real gate - and it varies significantly by province.

I run this model. Canada is one of the cleanest jurisdictions for it in terms of the core structure being recognised and permitted - but it is not a single unified market. Quebec operates under different rules from Ontario, and both differ from BC and Alberta. Here is what you actually need to know before you take a contract.

Why construction arbitrage is legal in Canada#

Construction arbitrage is standard main contracting. You hold the prime contract with the client. Specialist trades do the physical work. You keep the spread. This structure is how every major commercial build, most residential developments, and the bulk of renovation projects are delivered across Canada.

No Canadian law - federal or provincial - prohibits a main contractor from subcontracting all the physical work on a project. The obligations the law places on the prime contractor are straightforward: be responsible for the delivered result, hold the right registrations and insurance for the province where the work sits, and comply with the tax rules that apply to everyone in the construction supply chain.

The model is legitimate. What makes it legitimate is running it with the compliance stack in place.

Canada has no national contractor licence#

There is no federal general contractor licence in Canada. Construction is provincially regulated, and each province sets its own rules. The Canada Job Bank confirms the general contractor role has no national licensing requirement at the federal level.

The differences between provinces matter, especially if you plan to work across multiple markets. Start with the province where you operate and verify requirements there before expanding.

Quebec - the most regulated province#

Quebec is the outlier in Canada. The Régie du bâtiment du Québec (RBQ) requires a licence for anyone who carries out or has construction work carried out. This applies to you as the main contractor even if every trade is subcontracted out.

The RBQ explicitly recognises the model. From their own published guidance: "A general contractor need never actually do construction work. He or she may stick to organising a construction site and coordinating the work carried out by subcontractors." Permitted, but only with the licence.

Key requirements for general contractors in Quebec:

• RBQ licence - mandatory before you take any construction contract
• Security bond - $40,000 for a general contractor licence subclass
• Qualifying director - your company must have a director who meets the RBQ's competency requirements

Your subcontractors must hold their own RBQ licence in the appropriate subclass for their trade. Operating without a required RBQ licence is serious - fines run from $6,000 to $100,000 for individuals on a first offence and up to $200,000 for companies. Penalties can double on repeat offences.

Verify current requirements at rbq.gouv.qc.ca.

Ontario#

Ontario has no province-wide general contractor licence for renovation or repair work on existing homes. For most work on existing residential and commercial buildings, you can act as the main contractor without a specific provincial licence - though individual trades (electricians, plumbers, gas fitters) must hold their own licences.

The exception is new home construction. If you are building and selling a new home in Ontario, you must be licensed by the Home Construction Regulatory Authority (HCRA) under the New Home Construction Licensing Act. Initial licence fee is $3,000, with annual renewal at $500. The HCRA's competency requirements cover construction knowledge, business operations, and financial responsibility. Details at hcraontario.ca.

For renovation work on existing homes - where most construction arbitrage operators begin - no Ontario provincial contractor licence is required. Your subcontractors carry their own trade licences. You carry your business registration and insurance.

Ontario also has strong construction lien legislation under the Construction Act. As the prime contractor, you are required to retain 10% of each payment from your client as a holdback. You apply the same 10% holdback to each of your subcontractors. The holdback is released once the lien period has expired and no lien claims are outstanding.

British Columbia#

BC requires general contractors who build new residential homes to be licensed by BC Housing Licensing and Consumer Services. First-time applicants must demonstrate 24 months of experience managing or supervising residential construction, gained within the five years before applying, across seven core competency areas.

For non-residential and non-new-construction work - commercial fit-outs, renovations, industrial - no specific BC provincial general contractor licence exists. Individual licensed trades must hold their own licences for their regulated work; you confirm your subs hold the right ones.

One critical requirement in BC: WorkSafeBC clearance letters. As the main contractor, you are liable for unpaid WorkSafeBC premiums if your subcontractors are unregistered. Before any sub starts work, obtain a clearance letter from WorkSafeBC confirming their account is current and in good standing. Build this into your sub onboarding - it is not optional.

Alberta#

Alberta has no mandatory provincial general contractor licence for most construction work. Designated trades (gas fitters, electricians, plumbers) need their Certificates of Qualification; your subs manage their own.

The specific Alberta requirement to know is the Prepaid Contracting Licence. If you take a deposit or progress payment from a residential consumer before the work is fully completed, you are operating a prepaid contracting business under Alberta's Consumer Protection Act and need a licence from Service Alberta. The annual fee is $78 and requires a $10,000 bond.

The Regulation does not apply to B2B contracts between general contractors, subcontractors, and subtrades. If you are working on commercial projects or operating entirely within the contracting chain, this licence may not apply - but confirm with Service Alberta before you start taking deposits from consumers. See alberta.ca/prepaid-contracting-licence.

Other provinces and territories#

Licensing rules in the remaining provinces and territories generally fall between the Quebec and Ontario positions. No province or territory at time of writing has a rule that prohibits the construction arbitrage model. The consistent requirements across all of them:

• Business registration - register your entity before you trade
• Building permits - the general contractor's responsibility, even where no physical self-performance happens
• Workers compensation - each province has its own board; as the main contractor you are responsible for confirming your subs carry valid coverage
• Trade licences - your subs must hold the appropriate licence for their trade in that province

Always verify current provincial requirements directly with the relevant regulator before you take work in a new province.

GST/HST - the national tax obligation#

This applies everywhere in Canada. Once your total taxable revenue exceeds $30,000 in any four consecutive calendar quarters, you must register for a GST/HST account with the Canada Revenue Agency (CRA). Construction services are taxable supplies, so the threshold is easy to hit on a single mid-sized job.

Once registered:

• You charge GST (5%) or the applicable HST rate to your clients on your invoices
• Your subcontractors charge you GST/HST on their invoices; you claim this back as an input tax credit (ITC)
• The net - output tax collected minus ITCs claimed - is what you remit to CRA on your filing schedule

The CRA's RC4052 is the official reference guide for GST/HST in the home construction industry. Read it before your first invoice goes out.

T5018 - subcontractor payment reporting#

If you pay subcontractors for construction services and those payments exceed $500 per job, you must file a T5018 Statement of Contract Payments with the CRA at year end. You issue a T5018 slip to each sub and submit the summary to CRA.

This is an information return, not an additional tax. It applies to every prime contractor who pays subs - not just construction arbitrage operators. Miss it and you create a CRA compliance issue. Track sub payments through your accounting software from day one so the year-end filing is a single export rather than a scramble.

Income tax and business structure#

Your profit - the spread between what the client pays and what the subs and overheads cost you - is taxable business income. How it is taxed depends on your structure:

• Sole proprietor or partnership: business income goes on your personal T1 return, taxed at your marginal rate
• Corporation: the federal small business rate on active business income up to the small business deduction limit (currently 9% federally, plus the applicable provincial corporate rate) typically makes incorporation attractive as the business scales

Most operators working this model at any serious volume incorporate for the tax deferral advantage. Get qualified Canadian accounting advice on structuring before you take your first contract.

Insurance#

No single federal law mandates a specific insurance policy for main contractors, but you will not win commercial work without the right cover in place. The practical requirements:

• Commercial general liability (CGL) - expected on every contract. Most commercial clients require a minimum of $2 million; many set $5 million. Get this before you approach your first client.
• Workers compensation - if you have employees, register with your provincial workers' compensation board. If you use incorporated subs, they carry their own; if subs are unregistered sole proprietors, confirm with your provincial board whether you absorb liability for their premiums.
• Performance and payment bonds - mandatory on Ontario public contracts above $500,000; expected on larger commercial contracts in other provinces too.

Your subcontractors carry their own CGL. Make proof of their coverage a condition of every subcontract agreement before work starts.

What actually makes it non-compliant#

Construction arbitrage is not illegal in any Canadian province. What gets operators into trouble:

• Operating in Quebec without an RBQ licence - fines are substantial and RBQ enforcement is active
• Building and selling new homes in Ontario without HCRA licensing - illegal under the New Home Construction Licensing Act
• Missing GST/HST registration - CRA back-assesses interest and penalties from the date you should have registered
• Not filing T5018 slips - CRA compliance issue with associated penalties
• Ignoring the 10% holdback - creates personal liability to sub-subtrades and material suppliers with valid lien claims against the project
• Skipping WorkSafeBC clearance letters in BC - you absorb your unregistered subs' unpaid premiums

None of these are ambiguous. They are known requirements with known penalties and known fixes. Set the compliance stack up once before the first job and run it the same way on every project.

Canada is a genuinely good market for this model. Main contracting and subcontracting is how Canadian construction has always worked - the RBQ in Quebec even has its own written confirmation that a general contractor can sub everything. Get the provincial licensing right, register for GST/HST, file the T5018 at year end, and you have a clean, compliant business.

The next step#

The full global legality overview covers the US, UK, Australia and Canada in one place. For the licensing question across every jurisdiction, do you need a contractor licence for construction arbitrage goes into detail. And if you are building from scratch, how to start a construction arbitrage business covers the full setup sequence from entity registration to your first sub.

If you want the complete system in one place, THE FAMILY SECRET - How Construction Arbitrage Really Works is coming soon.

This is general information, not legal or tax advice. Licensing requirements, GST/HST rules, holdback provisions and insurance obligations change between provinces and over time. Verify current requirements with the relevant provincial regulator, the CRA, and a qualified Canadian accountant or construction lawyer before taking work.

Last checked: 30 June 2026.