Updated legislative proposal for DST comes into effect if no agreement on OECD tax reforms
Canada has issued revised legislation for the introduction of a 3% Digital Services Tax (DST) on large companies from 2024. It would apply retrospectively for in-scope income from 1 January 2022 onwards.
Interested parties may comment of the proposed legislation until 8 September 2023.
Canada was one of the few countries to decline freezing the introduction of its proposed DST following the recent agreement to a 1-year freeze pending a successful Pillar 1 of the OECD talks. 138 countries agreed to the pause; only five, including Canada declined. Canada has indicated that it would not proceed with the tax if Pillar 1 talks reach a successful conclusion by 31 December 2023.
The new tax on large companies’ income from data and content contribution by Canadian users would become liable from 1 January 2022. This would include digital advertising, online marketplaces, social media and the sale/licensing of user data. The new version of the proposed legislation includes an option to elect for a simplified calculation for 2023-23 as businesses adjust to the new tax.
The thresholds for having to start collecting the taxes would be:
- Global revenues above €750m as per the OECD’s model; and
- Canadian revenues above CAD20m
This comes as Canada imposed 5% GST on digital services sales to consumers from 1 January 2021. Check VAT Calc’s Global Digital Services Tax Tracker to see which other countries have proposed and implemented such tax.
Americas Digital Services Taxes (DST)
| Country | Status | Rate | Annual sales threshold | Scope | |
| In-country income | Global income | ||||
| Argentina | Dec 2020 | 5%, 10%, 15% | Online gambling | ||
| Brazil - 1 | Proposed | 1-5% | BRL 100m | BRL 3bn | Advertising; user data; interfaces; |
| Brazil - 2 | Proposed | 3% on COFINS | BRL 78m | $240m | Advertising; platform services for selling goods and services |
| Brazil - 3 | Proposed | 3% | BRL 4.5bn | Advertising; platform interaction services; data | |
| Brazil - 4 | Proposed | 3% - 10% | BRL 100m | Media; apps; gaming; gambling (10%); software | |
| Brazil - 5 | Proposed | 3% | Advertising; user data; payment platforms; media | ||
| Canada | Jan 2024 | 3% | CAD 20m | €750m | Advertising, online marketplaces, social media and the sale/licensing of user data. |
| Colombia | 2023 | 5% | US$ 264k | - | Advertising; streaming or download media; user data; e-learning - Significant Economic Presence test |
| Costa Rica | Nov 2019 | Tourist accommodation rentals | |||
| Paraguay | Jan 2021 | 4.5% | Non-resident: media; gaming; data processing; advertising; gambling; software | ||
| Uruguay | Jan 2018 | 12% | Digital services Non-residents | ||
