The Canadian government has announced that it will propose a new tax on multinationals that provide digital services to Canadian residents that will take effect in 2022 only if global efforts to reach an agreement on a coordinated approach fail.
In addition, the Canadian government intends to propose measures effective in 2021 that would make more non-resident businesses subject to Canada’s Goods and Services Tax/Harmonized Sales Tax (GST/HST) registration and collection laws.
Canada digital services tax
The proposed new tax on digital services, revealed November 30 in the government’s Fall Economic Statement, would be enacted on a provisional basis, ceasing to apply once an acceptable common global approach comes into effect.
Canada is among 137 nations negotiating coordinated revisions to the international tax system to better account for new digital business models in an OECD-led process. The goal is to reach an agreement on a new approach to international taxation by mid-2021.
The Canadian government states that it is concerned that a delay in reaching consensus could affect Canada’s tax base and is thus proposing the digital tax.
The new tax would raise CAD 3.4 billion (approx. USD 2.6 billion) of additional tax over 5 years, the government said. Further details about the tax will be disclosed in Budget 2021.
GST/HST amendments
The Canadian government further proposes to require foreign-based vendors selling digital products or services to Canadian consumers to register for, collect, and remit the GST/HST.
This proposal would apply to items such as mobile apps, online video gaming, and video and music streaming and would increase federal revenues by CAD 1.2 billion (approx. USD 940 million ) over 5 years, the government said.
The requirement to collect the GST/HST would also be extended to all sales to Canadians of goods that are located in Canadian fulfillment warehouses, including those supplied by foreign vendors. Under this proposal, the GST/HST must be collected and remitted by either the foreign-based vendor or a digital platform that facilitates the sale.
Finally, the government proposes to extend the obligation to collect and remit GST/HST to sellers of short term accommodation rentals or to the digital platform used to facilitate the sale. The provision, which appears to target Airbnb and similar businesses, should add CAD 360 million (approx. USD 271 million) to Canadian revenues over 5 years, the government said.
-Editors note: this article was edited on 12/12/2020 to correct currency conversion errors.
Good morning,
It seems that there is another much more effective solution by adapting the new law decision take in the “Wayfair Inc.” trial by the SCOTUS in June 2018 in US. The principle, in full agreement with the principles of the OECD Pillar 1&2, consists in requesting, as in US, the return of sale taxes applied on e-commerce from foreign marketplaces.
We all know that American laws always end up applying everywhere, so why not start directly by enforcing a law in agreement with the United States and the OECD, law which will finish by an application over the world.
The original version DAGTVA proposed is in French. Canadians will have the chance to access it in its original version, the English version is being translated, some pages not already translated are taking in account by the automatic Google Translator.
The DAGTVA proposal is currently being studied at the Directorate General for European Taxation.
It is at this address in the English version, the access of the French version is on the internal links: https://bit.ly/2Jodl5A
Best regards,
That might indeed be a solution. See my comparable idea here: https://www.khpplc.co.uk/client-area/review/1394/ECTJ-Vol189-Tax-and-the-Digital-Economy-Will-Pillar-One-be-the-Solution-Professor-Dr-Hans-van-den-Hurk-16320