The deadline to register for Canada's digital services tax (DST) is approaching quickly. Even if tax is not payable under the Digital Services Tax Act (DSTA), registration under the DSTA may be required under certain conditions.

The DSTA affects large domestic and foreign businesses with a corporate group that has global consolidated revenues of at least €750m and earns Canadian digital services revenue exceeding CA$20m from providing online marketplace services, online advertising, social media services and the monetizing of user data. If a taxpayer or its consolidated group meets the required conditions, the taxpayer(s) will be required to pay a tax equal to 3% on their taxable Canadian digital services revenue exceeding CA$20m in a calendar year.¹ The DSTA entered into force on 28 June 2024, and it applies retroactively to 1 January 2022.

Notably, "Canadian" digital services revenue is not simply revenue earned from persons in Canada, but includes revenue derived from activities of persons in Canada. For example, Canadian online advertising services revenue includes the revenue earned by a consolidated group that arises as a consequence of a person in Canada viewing or interacting with an online targeted advertisement. The person paying for the advertisement may be located anywhere in the world, and the entity being paid for the advertisement may be outside of Canada, but because the revenue arose from a Canadian viewer of the ad, the revenue constitutes "Canadian online advertising services revenue" for purposes of Canada's DST.

Each entity in a consolidated group that earns Canadian digital services revenue is required to register under the DSTA if the consolidated group meets the €750m threshold and the consolidated group earns more than CA$10m of Canadian digital services revenue. Notably, the threshold required to register (CA$10m) is lower than the threshold required for taxation (CA$20m).

While each entity that earns Canadian digital services revenue is required to register, an election is available to designate a particular entity within the consolidated group to file and report Canadian DST on behalf of the group. This election must be filed by 30 June of the calendar year immediately following the reporting year.

If these thresholds apply in respect of the 2022, 2023 or 2024 calendar years, then a foreign or domestic business must apply to register for a DST program account by 31 January 2025.

Information required for registration will include the business's:

• Legal name
• Business number, if the business already has one
• Date and place of incorporation and certificate number, if the business is incorporated
• Physical address
• Mailing address, if different from the physical address
• Name and phone number of at least one officer or director

To submit its application to the DST program, a business will need to register using the following DST account registration web form: Contact information.

Implications

Businesses and consolidated groups that exceed the threshold for DST should review the DSTA requirements in close detail and take note of the following upcoming deadlines:

• Returns: Returns are due annually on or before 30 June of the following calendar year (i.e., for 2022, 2023 and 2024, the filing deadline is 30 June 2025).
• Designated entity election: If members of a consolidated group wish to designate a single entity to report DST on their collective behalf, the election must be filed by 30 June of the following calendar year.
• Payments: Payments must be made on or before 30 June of the following calendar year. Any payments that are CA$10,000 or more must be paid electronically unless the taxpayer cannot reasonably pay that amount electronically.