Canada’s federal government, in a notice on 28 June 2024, announced it authorised the implementation of a digital services tax (DST),which received royal assent on 20 June, 2024.
The government states that the implementation of the Digital Services Tax protects the interests of Canadians by ensuring that digital companies pay their fair share of taxes in the absence of timely implementation of an international, multilateral system.
The DST will apply at a rate of 3% to certain revenue earned by large businesses from certain digital services reliant on the engagement, data, and content contributions of Canadian users and to certain sales or licensing of Canadian user data.
The scope of DST includes online marketplace services revenue, online advertising services revenue, social media services revenue, and user data revenue.
The provision for the implementation of the DST was included in the Fall Economic Statement Implementation Act, 2023 (Bill C-59) drafted by Canada’s Ministry of Finance.
Thresholds
The DST will apply to large businesses, both foreign and domestic, that meet both of the two revenue thresholds. If a taxpayer is a member of a consolidated group, these thresholds will be calculated on a group basis.
- Total Revenue Threshold: If a taxpayer or, if applicable, its consolidated group earns total revenue from all sources of EUR 750,000,000 or more in a fiscal year of the taxpayer or group that ends in a particular calendar year, the taxpayer or group will meet this threshold for the subsequent calendar year. Additionally, if a taxpayer joins a group that meets the EUR 750,000,000 threshold, the taxpayer will meet this threshold as of the date of joining the group.
- Canadian In-Scope Revenue Threshold: A taxpayer will meet this threshold for a calendar year if the taxpayer (or the taxpayer’s consolidated group, if applicable) earns greater than CAD 20,000,000 of Canadian in-scope revenue in the calendar year.
