New Digital Services Tax in Canada: Things expats should know
The Digital Services Tax Act or DST Act has witnessed a massive modification in the last few years. The major changes took place in the Fall economic Statement of 2020 where a bunch of new factors was included.
The new Digital Services Tax act is all about a highly designed international tax system that intends to impose minimum taxes on multinational companies operating in several jurisdictions. In short, corporate houses working in more than one jurisdiction had to pay taxes for each jurisdiction so far where they operate. The new Digital Services Tax policies ensure minimum payable tax for the MNCs to avoid complications.
The new policy was released on 20th December 2021 as an intricate part of a two-pillar solution to ease tax-related issues of the digitalized economy. The rules were discussed and approved by 137 members of the OECD/ G20 Inclusive Framework in October 2021 which was set to be implemented from 2022 onwards. As a part of this program, the Canadian government has also evoked the new Digital services Tax rules which will come into effect from January 2022.
Details of the New Digital Services Tax
Firstly, as per the new rules, the minimum Effective Tax Rate (ETR) has become 15% per jurisdiction. This means MNCs are liable to pay at least 15% ETR. Now minor businesses and entrepreneurs must feel the pressure, right? Here comes a respite from the two-pillar system.
Companies which have a total revenue of over EUR 750 million in at least two out of the last four years are eligible for the new tax paying bracket. Therefore smaller enterprises with a foreign presence will be exempted from paying an ETR of 15%.
Revenues which will be calculated in the aforementioned category are classified further as:
- Social media services revenue
- Online advertising services revenue
- Online marketplace services revenue
- User data revenue
Expats will be pleased to know that the ETR will be revised if the operating jurisdictions fall under a developing country. Keeping the latent costs in mind (related to manpower, transport, and other aspects), there will be some respite for the taxpayers.
To stay tuned to the up-to-date percentages, contact the international tax consultants in Toronto today. International tax consultancy service in Toronto has an exhaustive understanding of the newly adopted DST rules and can save valuable time and money for the expats. Personal Tax consultancy service in Toronto is the suitable answer for individual expats to know more about the new Digital Services Tax.
