Canada: Digital Service Tax for foreign businesses starting July 2021

Following the trend, Canada announced that they are going to start taxing (GST/ HST) foreign suppliers of digital services starting July 2021. Actually this is nothing new for Canada as some of its provinces such as Quebec and British Columbia had already started to impose tax on digital service companies. 

The reason for this, is of course to level the playing field for the local businesses offering the same services but having to pay domestic tax at the same time, which adds to their costs of offering their services. This is a need that all countries saw with the emergence of hi-Tec Giants such as Netflix, Spotify, Google, Amazon Prime etc. This is why this tax is also known as the “Netflix tax”. As a result we see more and more countries starting to impose this tax on foreign suppliers of digital services.

“Canadians want a tax system that is fair, where everyone pays their fair share … Canada will act unilaterally, if necessary, to apply a tax on large multinational digital corporations, so they pay their fair share just like any other company operating in Canada,” finance minister Chrystia Freeland told the House of Commons in Ottawa.

Unfortunately, most likely this tax is going to be transferred to the final consumer as we already saw from some recent examples in other countries such as Google in Europe.

At any rate this digital service tax is going to give a substantial boost to the government’s tax collected revenue as it is expected to add up to CAN $3.4 Billion over a five-year period.