New Canada Digital Services Tax – FAQs
What is the Digital Services Tax Act (DST Act)?
On June 20, 2024, Bill C-59 received royal assent, enacting Canada’s Digital Services Tax Act (DST Act). The DST Act came into force on June 28, 2024, following an order by the Governor General in Council.
To whom does the DST apply?
The DST applies to large businesses, both foreign and domestic, that meet two revenue thresholds:
Total Revenue Threshold
The taxpayer or its consolidated group must earn total revenue from all sources of €750,000,000 or more in a fiscal year ending in a particular calendar year. Meeting this threshold qualifies the taxpayer or group for the DST in the subsequent calendar.
Canadian In-Scope Revenue Threshold
The taxpayer or its consolidated group must earn more than CA$20,000,000 of Canadian in-scope revenue in the calendar year. If a taxpayer earns more than CA$10,000,000 of Canadian in-scope revenue, it must register for the DST even if no DST is payable.
If the taxpayer is part of a consolidated group, these thresholds are calculated on a group basis.
What types of revenue does the DST apply to?
The DST applies to four categories of in-scope revenues:
Online Marketplace Services Revenue
Revenue from providing access to or use of an online marketplace, commissions from facilitating supplies between users, and premium services related to the online marketplace. Revenue from selling one’s own inventory is excluded.
Online Advertising Services Revenue
Revenue from facilitating the delivery of online targeted advertisements and providing digital space for such advertisements. Contextual advertisements not based on user data are excluded.
Social Media Services Revenue
Revenue from providing access to or use of a social media platform, premium services, and facilitating specific interactions between users or with user-generated content. Revenue from providing access to the platform’s own digital content is excluded.
User Data Revenue
Revenue from the sale or licensing of data gathered from users of an online marketplace, social media platform, or online search engine. Revenue from data not collected by the taxpayer or its group is excluded, as are services reliant on user data like consulting or business advisory services.
Revenue classified under multiple categories will only fall into one stream to prevent double taxation under the DST Act.
For further details, refer to the Department of Finance’s Explanatory Notes .
What is the DST rate?
The DST is levied at a rate of 3%.
When does the DST apply?
The DST is retroactively applied to in-scope revenues earned since January 1, 2022.
What must be reported?
Taxpayers meeting the DST thresholds and liable to pay the 3% DST must file annual tax returns and pay any tax owed by June 30 of the year following the calendar year in which the revenue was earned.
Final thoughts
If you have any queries on the New Canada Digital Services Tax, or Canadian tax matters more generally, then please get in touch.