Canada reviews GST on foreign B2C digital services
- 21 January 2015 | Richard Asquith
The 2014 Canadian Federal Budget has indicated that the government is considering levying Canadian GST on purchases by consumers of digital / electronic goods from foreign internet sites such as Amazon (Kindle), Netflix, Apple i-Tunes and Google Play.
This shift would require foreign providers to GST register as non-resident traders in Canada, and charge taxes based on the Provinces of their customers. At present, customers are expected to declare and pay the taxes themselves, but this is rarely observed and is difficult to police. Bringing in foreign providers of e-services would also level the playing field for Canadian-resident providers who are required to levy GST on e-services.
Definition of electronic services for tax
The extension of the Canadian Goods & Services net would target B2C fees for cross border: streaming or downloaded films, video and music; online games; apps; web services; software as a service; e-books; journals; subscriptions to membership or dating website; and design & artwork provided electronically.
Canadian GST rates vary according the Province. There is generally a Federal Rate of 5%, plus a Provincial Rate of up to 8% on top. Some Provinces have combined the rates as a Harmonized Sales Tax.
VAT on e-services globally
Canadian, and other non-EU, providers of e-services to consumers in the EU have been compelled to register for VAT and charge local rates since 2003. The EU VAT rules on digital services changed in 2015 for local providers. Japan is to levy 8% Consumption Tax on foreign digital services to its consumers from October 2015.