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Real Estate Referral Fees in Canada: Rules, Tax, and the 25% Convention

How referral fees work between Canadian real estate agents — the typical 25% convention, HST on referrals, provincial rules, and how to calculate net commission after paying a referral.

Real Estate Referral Fees in Canada: Rules, Tax, and the 25% Convention

Referral fees are a standard part of the Canadian real estate industry — agents compensate each other for sending clients. Whether you're receiving a referral or paying one out, the tax and regulatory implications are often misunderstood.

The 25% Referral Convention

While no law mandates a specific referral fee percentage, 25% of the referring agent's commission is the widely understood industry standard in Canada. The exact amount is always negotiable and should be documented in writing before the transaction closes.

Example:

  • Sale price: $800,000
  • Buyer agent commission: 2.5% = $20,000
  • Referral fee: 25% of $20,000 = $5,000 paid to referring agent
  • Receiving agent nets: $20,000 − $5,000 = $15,000 (before brokerage split)

HST on Referral Fees

Referral fees between registrants are a taxable supply — HST applies. If the referring agent is registered for HST, they charge HST on the referral fee and the receiving agent can claim it as an input tax credit (ITC).

In Ontario:

  • Referral fee: $5,000
  • HST at 13%: $650
  • Receiving agent pays: $5,650 total
  • Receiving agent's ITC: $650 (recoverable on their HST return)

Provincial Rules: Who Can Receive a Referral?

In most provinces, referral fees can only be paid to licensed real estate professionals. Paying a referral to an unlicensed individual (friend, mortgage broker, lawyer) is typically prohibited under the provincial real estate act.

Ontario (TRESA): Remuneration can only be paid to a registered salesperson, broker, or brokerage — not to unregistered persons.

BC: Similar restriction under the Real Estate Services Act — referral fees only to licensed registrants.

Referral Agreements: What to Document

A proper referral agreement should specify:

  • Names and brokerage of both agents
  • Client name (or initials for privacy)
  • Referral fee percentage or dollar amount
  • Whether fee is paid on buyer, listing, or both sides
  • HST treatment

Most provincial associations have standard referral forms. Using one protects both parties.

Out-of-Province Referrals

Agents regularly refer clients moving to another province. In most cases, you cannot trade real estate in a province where you're not licensed — but you can receive a referral fee from a licensed agent in that province. Confirm the recipient is licensed in the destination province before referring.

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→ Referral Fee Calculator

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