Canadian Construction Invoice & Holdback Requirements (2026)

Canadian construction invoices must satisfy provincial "proper invoice" requirements before payment obligations are triggered under statutory prompt payment regimes. In Ontario, the Construction Act prescribes seven mandatory data fields that every proper invoice must contain. Alberta's prompt payment framework requires eight. Across both provinces, a 10% statutory holdback applies to every payment in the construction chain, and Ontario's January 2026 amendments now mandate annual release of holdback funds on a fixed statutory schedule. For AP teams, subcontractors, and the accountants advising them, understanding these construction invoice requirements Canada-wide is no longer optional; it is a baseline compliance function.

This guide covers the specific topics your team needs to act on:

Ontario's January 2026 Construction Act amendments and what changed for invoice submission and holdback release
Proper invoice field requirements by province, with a field-by-field walkthrough of what Ontario, Alberta, and BC each mandate
Statutory holdback rules and release procedures, including percentages, timelines, and the conditions for release
How holdback flows through the construction payment chain, with worked numerical examples showing the cascade from owner to general contractor to subcontractor
A cross-provincial comparison of Ontario, Alberta, and BC, highlighting where the rules diverge and where they align

Every section is written from the accounts payable and document processing perspective rather than the legal perspective, focusing on the data fields, validation checks, and procedural steps that finance teams handle day to day. If your organization processes Canadian construction invoice requirements across multiple provinces, the comparison tables and field checklists ahead are built for your workflow.

Ontario's January 2026 Construction Act Amendments

Ontario's Construction Act, formerly known as the Construction Lien Act, underwent significant amendments that took effect on January 1, 2026. These changes reshape how construction invoices must be prepared, validated, and paid across the province. For AP teams and finance departments processing construction invoices, three changes demand immediate attention.

A strengthened "proper invoice" definition. The Act now prescribes specific data fields that a construction invoice must contain to qualify as a "proper invoice." This is not a soft guideline. If an invoice lacks any required field, the owner or general contractor can issue a deficiency notice, and the prompt payment clock does not start until a compliant invoice is resubmitted. An invoice missing a single prescribed element is, under the Act, not yet a proper invoice, and no payment obligation is triggered.

A 7-day deficiency notice window. After receiving a construction invoice, the payer has exactly 7 calendar days to issue a written deficiency notice identifying what fields or information are missing. If no deficiency notice is issued within that 7-day window, the invoice is automatically "deemed" a proper invoice regardless of its actual completeness, and the prompt payment timeline begins. The implication for AP teams is stark: every incoming construction invoice must be reviewed against the prescribed field list within 7 days, or the right to challenge its compliance is forfeited entirely. On a busy month where an AP team receives 40 construction invoices, every one must be field-verified within the same 7-day window. A single invoice that slips through unchecked is deemed proper by default, potentially obligating payment on a non-compliant submission.

Mandatory annual holdback release. Previously, holdback funds (10% of each progress payment) were released only upon substantial performance of the contract, which could lock up significant capital for the duration of multi-year projects. The 2026 amendments introduce a mandatory annual holdback release mechanism. Holdback accumulated over the previous year must now be released on an annual cycle, subject to applicable lien claim windows. For subcontractors and trades, this represents a material improvement in cash flow predictability.

The practical consequence of these Ontario Construction Act 2026 changes is clear: an invoice that does not meet "proper invoice" requirements can be challenged via a deficiency notice, which resets the entire prompt payment timeline. Getting invoice data fields right is not administrative housekeeping. It directly determines when payment is legally required.

The scale of late payment in Canadian construction underscores why construction prompt payment Canada reforms carry real weight. According to a regulatory impact analysis published in the Canada Gazette, a Canadian Construction Association survey found that approximately $46 billion in construction payments remained unpaid past the conventional 30-day period, representing about 16% of the estimated $285 billion in construction contracts across Canada. Prompt payment legislation exists to address exactly this problem, and the strengthened proper invoice definition is the enforcement mechanism that makes it work.

That strengthened definition raises a practical question: exactly which data fields must a construction invoice contain to qualify? The next section walks through the mandatory fields province by province.

Proper Invoice Field Requirements by Province

Getting the invoice content right is the single most important compliance step in Canadian construction payment. A proper invoice that meets provincial statutory requirements triggers the payment clock. An invoice missing even one prescribed field can be rejected through a deficiency notice, resetting that clock and delaying payment by weeks. What follows is a field-by-field breakdown of what Ontario, Alberta, and BC require on a construction invoice.

Ontario: Seven Mandatory Fields Under the Construction Act

Section 6.1 of Ontario's Construction Act defines the proper invoice that construction contractors in Ontario must submit to start the 28-day payment timeline. Each of the seven prescribed fields must be present:

The first three fields are straightforward identifiers: contractor's or subcontractor's name and address (the invoicing party, typically in the header or "Bill From" block), date of the invoice (which anchors the entire payment timeline), and project name and project address or location (tying the invoice to a specific job site, critical when a contractor runs multiple concurrent projects).

The remaining four fields are where compliance issues most often arise:

4. Description of the services or materials supplied. This must be specific enough for the payer to verify what work was actually performed. Line-item detail is ideal. Vague descriptions like "construction services" or "work performed on site" can trigger a deficiency notice because they do not allow the payer to validate the claim against the contract scope.

5. Amount payable, including applicable taxes. The total owing must include GST/HST and any provincial sales tax broken out as separate line items. This figure drives both the payment amount and the holdback calculation. For guidance on tax-related formatting, see Canadian GST/HST invoice compliance requirements.

6. Period covered by the invoice. The billing period or service dates (e.g., "January 1 - January 31, 2026"). This field prevents duplicate billing for the same work period and is especially important on projects with monthly progress billing, where overlapping date ranges between invoices create disputes.

7. Contract or purchase order reference number. Without a clear link back to the governing contract or PO, the payer has no way to validate the invoice against contractual terms. On projects with change orders, the reference should specify which contract version or amendment applies.

If any of these seven fields is missing, the owner or general contractor can issue a deficiency notice within 7 days. That notice identifies what is missing, and the payment clock does not start until the contractor resubmits a corrected invoice containing all required information.

Alberta: Eight Mandatory Components Under the Prompt Payment and Construction Lien Act

Alberta's framework closely mirrors Ontario's but adds one critical requirement. The Prompt Payment and Construction Lien Act prescribes eight components for a proper invoice:

1. Contractor or subcontractor name and address. Same function as Ontario's first field.

2. Date of the invoice.

3. Project name and location.

4. Description of the work performed or materials supplied.

5. Amount payable.

6. Period the invoice covers.

7. Contract or subcontract reference.

8. Statement of amounts previously paid and the outstanding balance. This is Alberta's distinguishing requirement. The invoice must include a cumulative record of prior payments received on the contract and the remaining balance owing. In practice, this takes the form of a summary table or running account showing each prior progress payment date, amount paid, and the resulting outstanding contract balance. This adds a progress-billing dimension that Ontario does not mandate in the same way, forcing each invoice to function as both a payment request and a running account summary.

That eighth field means Alberta construction invoices carry more financial context than their Ontario equivalents. For AP teams processing Alberta invoices, verifying the cumulative payment statement against internal payment records becomes a standard validation step on every progress claim.

BC: Builders Lien Act and Contract-Driven Requirements

British Columbia takes a different approach. The Builders Lien Act does not prescribe a formal proper invoice definition with enumerated fields in the way Ontario and Alberta do. BC's prompt payment provisions, introduced more recently, focus on payment timelines and the adjudication process rather than specifying exact invoice content.

In BC, invoice adequacy is determined by contract terms and industry practice rather than statute. This means the parties' contract governs what constitutes a sufficient invoice. In practice, BC construction invoices should still include standard identifying information: the names and addresses of both parties, the project name and location, amounts owing with tax breakdowns, dates, a description of work completed, and a contract reference. Including these fields satisfies general contractual obligations and positions the invoice to withstand any payment dispute.

Practical Takeaway

Across all three provinces, the core data fields overlap significantly: who is billing, what work was done, where the project is located, when the work occurred, how much is owed, and which contract governs the relationship. The differences are at the margins. A construction invoice that captures all seven Ontario fields plus Alberta's cumulative payment statement effectively covers the requirements across Ontario, Alberta, and BC.

Beyond the invoice content itself, each province requires a statutory holdback to be withheld from every payment, and the rules for calculating and releasing that holdback vary by jurisdiction.

Statutory Holdback Rules and Release Procedures

Every payer in the Canadian construction payment chain is legally required to retain a percentage of each progress payment as a statutory holdback. Across Ontario, Alberta, and BC, this rate is 10%. The holdback exists to protect lien rights for subcontractors and suppliers further down the payment chain, but it also creates significant cash flow implications that AP and finance teams must manage with precision.

Ontario's Two-Type Holdback Structure

The Ontario Construction Act establishes two distinct holdback categories, each with its own trigger and release timeline.

Basic holdback (10%) is retained from every progress payment issued before the contract reaches substantial performance. Once substantial performance is achieved and published in the Ontario Construction Report, a 60-day lien period begins. If no construction lien claims are registered during that window, the accumulated basic holdback must be released to the payee.

Finishing holdback (10%) applies to payments made after substantial performance, covering work completed during the finishing period. This holdback is released after the 60-day lien period that follows completion of the contract, again provided no lien claims have been filed.

For invoice processing purposes, this means your AP system must track two separate holdback pools per contract and apply different release timelines to each.

Annual Holdback Release: A 2026 Change With Major Cash Flow Impact

One of the most consequential changes under Ontario's January 2026 amendments is the mandatory annual holdback release. Under the previous framework, holdback funds on large, multi-year construction projects remained locked for the entire project duration. On a five-year infrastructure project, this meant subcontractors and trades could have years of accumulated holdback sitting in trust with no access to those funds until substantial performance of the overall contract.

The annual holdback release mechanism addresses this directly. Holdback accumulated over the prior year must now be released on an annual cycle, subject to the applicable lien claim window. This provides periodic liquidity to contractors and trades working on long-duration projects while preserving the lien protection that holdback is designed to provide.

For finance teams managing Canadian construction holdback rules, the annual release introduces a new calendar obligation. You must track holdback accumulation periods, calculate annual release amounts, verify that no outstanding lien claims block release, and process payments on schedule.

Holdback Trust Obligations

Holdback funds are not simply payables sitting on a balance sheet. Under the Ontario Construction Act and equivalent provincial statutes, holdback monies must be held in trust. The payer acts as trustee of these funds on behalf of the parties with potential lien rights.

This trust obligation carries real consequences. Misappropriation of holdback funds, including using them for general operating expenses or applying them to other projects, can result in personal liability for directors and officers. Construction holdback requirements in Canada demand that these funds remain segregated and available for release when the statutory conditions are met.

If a construction lien claim is registered during the holdback period, the holdback (or the portion attributable to the lien claimant) remains frozen until the lien is discharged, vacated, or resolved through adjudication or court proceedings. The payer cannot release that portion of holdback while a valid lien is registered, even if the lien period has otherwise expired.

Provincial Variations in Holdback and Release

While the 10% holdback rate is consistent across the three largest provincial construction markets, the release mechanisms differ.

Alberta requires a 10% holdback under the Prompt Payment and Construction Lien Act. Release occurs after the lien period, typically 60 days from substantial performance. Alberta does not currently have an annual holdback release mechanism, so holdback on multi-year projects remains retained until the applicable lien period expires.

British Columbia mandates a 10% holdback under the Builders Lien Act. The lien filing period in BC is 55 days from the date of substantial completion for owner claims, or from contract completion for subcontractor claims. Once this period expires without a registered lien, the holdback becomes eligible for release.

These differences in lien periods (60 days in Ontario and Alberta versus 55 days in BC) and release triggers directly affect how your construction holdback invoice processing calendars should be configured for cross-provincial operations.

Holdback obligations apply at every tier of the construction payment chain, from owner to general contractor to subcontractor to sub-subcontractor. Understanding how the 10% holdback cascades through each level is critical for accurate progress billing, which is where the flow of funds through the payment chain becomes essential to map correctly.

How Holdback Flows Through the Construction Payment Chain

Construction projects rarely involve just two parties. A typical payment chain runs from the project owner down through the general contractor (GC), subcontractors, sub-subcontractors, and material suppliers. At every level of this chain, the payer is legally obligated to retain the statutory holdback percentage before releasing funds downstream. Understanding how this cascade works in practice is essential for anyone managing construction progress billing Canada-wide.

The Payment Chain Structure

The flow follows a consistent pattern:

The owner receives a progress claim from the GC and withholds 10% before paying.
The GC receives invoices from subcontractors and withholds 10% from each before paying.
Each subcontractor receiving invoices from sub-subcontractors or suppliers withholds 10% before paying.

Each party in the chain holds its own independent holdback obligation. The holdback retained by the owner does not "cover" the holdback the GC must retain from subcontractors. These are separate, parallel obligations arising from separate contracts.

Worked Example: $100,000 Invoice Cascade

Consider a subcontractor who completes $100,000 of electrical work on a commercial project. Here is how the holdback flows through the chain:

GC to Subcontractor: The subcontractor invoices the GC for $100,000. The GC retains 10% ($10,000) as statutory holdback and releases $90,000 to the subcontractor.

Owner to GC: The GC includes this electrical work in its progress claim to the owner, either as a standalone line item or bundled into a larger monthly billing. The owner withholds 10% holdback from the GC's total progress claim before releasing payment. If the GC's full progress claim is $500,000 that month, the owner retains $50,000 and pays $450,000.

Subcontractor to Sub-Subcontractor: The subcontractor used a sub-subcontractor for $40,000 of the electrical rough-in. When the sub-sub invoices for $40,000, the subcontractor withholds 10% ($4,000) and pays $36,000.

The result across this single scope of work:

The owner holds $10,000 in holdback (10% of the $100,000 portion of the GC's claim attributable to this work)
The GC holds $10,000 in holdback from the subcontractor's invoice
The subcontractor holds $4,000 in holdback from the sub-subcontractor's invoice

Three separate parties each carry their own holdback balance, governed by their own contracts and their own lien period timelines. None of these obligations net against each other.

The Timing Dimension

Progress billing on construction projects typically follows a monthly cycle. Each progress invoice generates its own holdback calculation with its own lien period start date. On a two-year project where a subcontractor submits 18 to 24 progress invoices, the accumulated holdback grows substantially. For a subcontractor billing $100,000 monthly, the GC's holdback account for that single subcontract reaches $180,000 to $240,000 before any releases occur.

This accumulation is precisely why Ontario's new annual holdback release mechanism was introduced. Without periodic releases, holdback balances can strain cash flow across every tier of the payment chain for years.

The Data Management Challenge

Each party in the chain must track holdback amounts per invoice, per contract, and know the exact date each lien period expires to process holdback releases on time. A GC managing 15 subcontractors across three active projects could be tracking hundreds of individual holdback line items, each with its own expiry date and release conditions.

This is as much a data management problem as a financial one. Firms that rely on spreadsheets or manual tracking risk releasing holdback too early (creating lien exposure) or too late (violating prompt payment obligations). The combination of construction invoice processing challenges and automation becomes critical at scale, where the volume of invoices and holdback entries exceeds what manual processes can reliably handle.

The multi-tier payment structure also means that structured invoice approval workflows are not optional. When an owner's payment to the GC depends on verified subcontractor progress, and the subcontractor's payment to the sub-sub depends on confirmed deliverables, each level requires its own validation before funds move down the chain.

While these holdback mechanics follow the same 10% principle across Canada, the timelines for lien periods, the procedures for holdback release, and the dispute resolution processes differ meaningfully between provinces. A cross-provincial comparison clarifies what construction firms operating in multiple jurisdictions need to track.

Cross-Provincial Comparison: Ontario, Alberta, and BC

Construction firms working across provincial borders face three distinct regulatory frameworks governing invoicing, holdbacks, and payment timelines. While Ontario, Alberta, and BC have moved toward aligned prompt payment structures, the differences in specific requirements can trip up AP teams processing invoices under multiple jurisdictions.

The following table provides a side-by-side reference across all critical compliance dimensions.

Dimension	Ontario	Alberta	BC
Governing legislation	Construction Act (revised January 2026)	Prompt Payment and Construction Lien Act (2021)	Builders Lien Act (with prompt payment amendments)
Holdback percentage	10%	10%	10%
Proper invoice definition	7 prescribed fields	8 prescribed components	Contractual terms (no legislated field list)
Payment timeline (owner to GC)	28 days from receipt of proper invoice	28 days	28 days (for prescribed contracts)
Payment timeline (GC to sub)	7 days after GC receives payment	7 days	7 days
Deficiency notice window	7 days	14 days	Varies by contract
Holdback release trigger	60 days after substantial performance (plus annual release from 2026)	60 days after substantial performance	55 days after substantial completion
Dispute resolution	Mandatory adjudication	Mandatory adjudication	Adjudication (for prescribed contracts)

Several differences in this comparison deserve closer attention.

Deficiency notice timelines create the widest gap. Ontario gives payers just 7 days to issue a notice of non-payment after receiving a proper invoice, while Alberta construction prompt payment rules allow 14 days. BC leaves this timeline to contractual negotiation entirely. For firms operating in both Ontario and Alberta, this means AP workflows must flag Ontario invoices for faster review or risk triggering automatic payment obligations.

BC takes a fundamentally different approach to invoice definitions. Where Ontario and Alberta legislate specific field requirements for a proper invoice, the BC Builders Lien Act defers to contractual terms. This gives parties more flexibility but also means that what constitutes a "proper" invoice can vary from project to project. AP teams handling BC projects must review each contract individually to determine invoice acceptance criteria, rather than applying a single provincial checklist.

The BC builders lien holdback release timeline is shorter by five days. BC triggers release at 55 days after substantial completion, compared to 60 days in Ontario and Alberta. While five days may seem minor, it affects cash flow forecasting for subcontractors waiting on holdback funds and requires separate tracking calendars per province.

All three provinces now mandate adjudication for payment disputes, marking a clear convergence in how the construction industry resolves conflicts outside of court. This shared mechanism means that firms can expect a similar dispute process regardless of province, though BC limits adjudication to prescribed contract categories.

The broader trend is unmistakable: these three provinces are converging toward aligned prompt payment and holdback frameworks. Yet the remaining differences in deficiency notice windows, holdback release triggers, and the granularity of proper invoice field definitions are precisely the details that cause compliance failures. With specific field requirements now legislated in Ontario and Alberta, construction firms need practical systems to verify that every invoice meets these requirements before submission or payment.

Ensuring Your Construction Invoices Meet Compliance Requirements

The provincial proper invoice rules, holdback obligations, and payment timelines covered throughout this guide create a multi-layered compliance burden for construction AP teams. Turning that knowledge into repeatable processes is what separates firms that trigger prompt payment protections from those that face disputed invoices and delayed holdback releases. The following steps translate each compliance area into concrete action items.

Build a province-specific invoice validation checklist. Ontario mandates seven prescribed fields. Alberta requires eight components. BC's requirements are contract-driven. Create a written checklist for each province where your firm operates, listing every required field: contractor legal name, invoice date, project description or reference, service period covered, itemized amounts with tax breakdowns, contract or purchase order number, and any province-specific additions such as Alberta's cumulative payment statement. Review every outgoing invoice against that checklist before submission, and screen every incoming invoice against it before processing payment. For detailed guidance on building effective checklists, refer to invoice field validation best practices that apply across document types and industries.

Implement a 7-day review process for incoming invoices. Ontario's Construction Act gives owners and general contractors exactly seven calendar days to issue a deficiency notice after receiving an invoice. If no notice is sent within that window, the invoice is deemed proper regardless of whether required fields are missing. This means AP teams need a documented intake workflow: log the received date immediately, assign a reviewer, and complete field-by-field verification within five business days to leave a buffer for issuing deficiency notices. Calendar alerts tied to the received date prevent the window from closing unnoticed.

Track holdback by contract and by invoice. Each progress payment generates its own holdback calculation, and each holdback amount follows its own lien period timeline. Maintain a holdback ledger for every active contract that records the amount withheld per invoice, the date each lien period begins, the expected lien expiry date, and release eligibility. Under Ontario's 2026 amendments, annual holdback release provisions add another date to track. A spreadsheet works for a handful of contracts, but firms managing dozens of active projects across provinces need a structured tracking system that flags upcoming release dates automatically.

Verify GST/HST compliance separately. The Construction Act's "proper invoice" definition addresses payment timing fields, not tax compliance. But every construction invoice in Canada must also satisfy GST/HST requirements: a valid registration number, correct tax rate application (13% HST in Ontario, 5% GST in Alberta and BC), and clear tax line-item breakdowns. Missing or incorrect tax information creates problems with input tax credit claims and CRA audits that are entirely separate from construction lien act obligations. Treat tax field verification as a parallel checklist item, not a subset of the proper invoice review.

Automate field extraction and validation. For firms processing high volumes of construction draw packages, manually checking each invoice against provincial field requirements before the deficiency notice window closes is both time-consuming and error-prone. A single missed field on one invoice in a 30-draw package can trigger payment disputes or unintended deemed-proper status. Automated extraction tools address this by pulling the prescribed fields directly from invoice PDFs and flagging gaps before the seven-day clock runs out. Firms managing multiple projects across provinces can automate construction invoice data extraction to standardize validation against each province's specific field requirements.

Platforms like Invoice Data Extraction can process construction invoice PDFs, including multi-page draw packages containing invoices alongside statutory declarations and clearance certificates, and extract the prescribed data fields based on configurable prompts that match your provincial proper invoice checklist. Batch processing across multiple active projects keeps validation consistent even at high invoice volumes.

Construction invoice compliance in Canada is no longer a matter of informal billing practices. The proper invoice requirements now carry statutory weight that directly affects payment timelines, holdback release schedules, and lien rights. Firms that build province-specific validation checklists, enforce the seven-day review window, maintain per-contract holdback ledgers, and automate field-level verification position themselves to meet these obligations consistently, even as provincial rules continue to evolve.