December 8, 2023
Canada's Digital Service Tax Act tabled in House of Commons
Canada is one step closer to enacting the Digital Services Tax Act (DSTA), which was included in Bill C-59, Fall Economic Statement Implementation Act, 2023, tabled in the House of Commons on 30 November 2023.1
This latest draft of the DSTA is a follow-up to the Department of Finance's revised draft legislative proposals released for public consultation on 4 August 2023. The DSTA continues to impact large Canadian domestic and foreign businesses that have a corporate group global consolidated revenues of at least €750m and that earn in excess of CA$10m in Canadian digital services revenue from providing online marketplace services, online advertising, social media services and the monetizing of user data. For an overview of the proposed legislation released on 4 August 2023, see EY Global Tax Alert, Canada moves ahead with its own digital services tax, releasing draft legislation, dated 5 September 2023
The most notable changes to the DSTA since its iteration in August are:
The earliest that the DSTA may come into force is 1 January 2024. However, the date of enactment will now be based on a date fixed by order of the Governor in Council. While Canada's Deputy Prime Minister and Minister of Finance, Chrystia Freeland, continues to give every indication that the legislation will be declared in force on 1 January 2024, by having the legislation come into effect on a date set by the federal cabinet, the government retains the flexibility to change or delay the implementation depending upon measures that other governments may take (most notably the United States) in reaction to Canada's passage of the DSTA.
With the tabling of Bill C-59, businesses and consolidated groups (both Canadian and foreign) that satisfy the €750m threshold are well advised to closely review the draft legislation and determine whether each revenue stream earned by the group is within the scope of the digital services tax. Certain provisions are broadly worded, and even businesses with a primary focus that is not digital or online services may find themselves within scope.
Key points to keep in mind include:
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP Canada (Toronto)
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
1 For more information on the measures included in Bill C-59, see EY Global Tax Alert, Canadian Bill C-59 to implement Budget 2023 and other measures receives first reading, dated 5 December 2023.