Federal Government Imposes New Digital Services Tax

On April 19, 2021, Deputy Prime Minister and Finance Minister Chrystia Freeland tabled in the House of Commons the Liberal Government’s first federal budget in more than two years, A Recovery Plan for Jobs, Growth, and Resilience (“Budget 2021”).  As announced in the November 2020 Fall Economic Statement, Budget 2021 proposes a new digital services tax (“DST”) at a rate of 3 percent on revenues from certain digital services earned by large corporations from their online engagement with Canadians.  These services include: matching sellers of goods and services to potential buyers, facilitating the interaction between users and user-generated content, placing online advertisements that are targeted based on data gathered from users of an online platform, and selling or licensing the data gathered from users of an online platform.  The DST applies as of January 1, 2022 and is intended to be an interim measure that would be replaced by a multilateral measure, developed by the OECD under the project on Base Erosion and Profit Sharing.  For a discussion of these tax measures as well as others in Budget 2021, please see McCarthy Tétrault's Budget 2021 Commentary.

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