Canada 5% GST foreign digital services July 2021
- Dec 1, 2020 | Richard Asquith
Canada is to levy its 5% Goods and Services Tax on digital or electronic services provided by non-residents from 1 July 2021. See Avalara’s VAT on Digital Services global tracker.
The Federal GST is charged in addition to provincial sales taxe. See Canadian GST/HST rates.
The government’s intention is to level the playing field for local providers of streaming media, apps, online gaming, ebooks, membership to online membership sites, SaaS services etc. The measure will only apply to B2C sales. In the case of B2B sales, the provider must obtain and validate the local business’ GST number online. The B2B customer must self-assed the GST based on the reverse charge rules. Whilst an invoice is required, it is the simplified version with limited information on the charge, GST and net amount.
The reforms will include imposing a liability on non-resident marketplaces distributing on behalf of foreign providers, plus online accommodation sharing sites. Foreign providers will have to register with the Canadian Revenue Agency to report GST collections. However, there is a CAD$30,000 threshold for GST registration. There will be a simplified GST registration process, potentially with no ability to recover local input GST.
A number of provinces have already extended their local sales tax to digital services, including: Quebec and Saskatchewan. British Colombia is due to include it from April 2021.
