Canada Quebec B2C digital services sales tax

Quebec is to become the first Canadian province to levy its consumption tax, Quebec Sales Tax (QST),  on non-resident providers of digital services to Quebec-resident consumers. This measure is targeting foreign digital services providers such as Netflix, Amazon Prime, Google Play, Apple Music and Skype. QST is currently levied at 9.975%.

In September 2017, the Canadian federal government declined to levy its 5% Goods & Services Tax (GST) on such services. Instead, Canadian consumers should self-assess and pay GST through their personal income tax returns. Compliance for this requirement is considered very low.

The extension of the tax net is aimed at levelling the playing field for Quebec-resident providers which have to levy QST on local sales to consumers. The reform also reflects the international (OECD) consensus on sales tax for the digital economy. The European Union, Norway, Russia, Australia, New Zealand, Japan, Taiwan, South Korea and South Africa have in the past five years imposed similar, equal sales tax liabilities on resident and non-resident digital services providers.

From 1 January 2019, Quebec Canadian providers of e-services and intangible services to consumers must for the first time charge QST to Quebec consumers. Non-Canadian providers will have the same requirement from 1 September 2019. There will be an annual registration threshold of C$30,000.

In order to validate a consumer’s normal place of residence in Quebec, providers will need to capture at least two pieces of non-conflicting evidence such as billing address, IP address or telephone number. The measure was announced in the 2018/19 budget last week. It is expected to raise C$270m per annum.

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