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|