Canada: Digital Services tax 2021


A new report from the parliamentary budget officer says the government may be slightly underestimating how much revenue it could receive from taxing online services like Netflix.


Canada’s revenue from the new digital services tax is to be higher than expected as estimations show that the federal government is to gain over $1.02 Billion over the next 5 years by imposing the new GST / HST on companies selling their online products in Canada. The digital services tax’s main focus is international giants selling digital services to Canadian consumers. Companies such as Netflix, Google, Amazon prime etc.


This estimation is based on current trends and assumes that all companies will comply with this policy. At the same time many times these extra costs are being transferred directly to consumers. If consumers change their habits as a result of the higher costs from these newly taxed services they might switch to other digital products.


A brief overview of the new digital services TAX:


These changes to the tax rules relate to Ecommerce transactions effective July 1st 2021 involving short-term accommodation, digital sales & services.


  • Cross-Border Digital Products and Services. The proposed rules provide that non-resident vendors that have no physical presence in Canada and sell digital products or services to Canadian consumers would be required to register for GST/HST and collect and remit tax on taxable sales to Canadian consumers. Registration, collection, and remittance of GST/HST are currently not required by these vendors. A simplified GST/HST regime would apply to these entities.


  • Online Marketplaces and Fulfillment Warehouses. Distribution platform operators (and non-resident vendors that do not sell through a distribution platform) would be required to collect and remit GST/HST on sales to Canadian purchasers by non-registered vendors of goods shipped from a fulfillment warehouse or other location in Canada. In addition, distribution platform operators and fulfillment warehouses would be required to provide certain information to the Canada Revenue Agency (CRA) and maintain records relating to their non-resident clients.


  • Short-Term Rental Accommodation. GST/HST would apply to all platform-based short-term rental accommodation supplied in Canada. The burden of collecting and remitting GST/HST would fall on either the property owner, if registered for GST/HST, or the digital accommodation platform if the owner is not registered. A simplified GST/HST regime would be available for non-resident accommodation platform operators that are not carrying on business in Canada.


Source: Canadian Accountant



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