Canada: Digital services tax legislative proposal; other tax measures in 2021 fall economic update

Draft legislation to implement a digital services tax and other tax measures in 2021 fall economic update

Digital services tax legislative proposal; other tax measures in 2021 fall economic update

Canada’s Finance Minister on 14 December 2021 delivered the government’s 2021 fall economic update.

Finance released draft legislation to implement a digital services tax. This interim measure (announced in the 2021 federal budget) would impose a digital services tax at a rate of 3% on revenue earned by “large businesses” from certain digital services that rely on data and content contributions from Canadian users. The tax would be imposed as of 1 January 2024, but only if the OECD/G20 Inclusive Framework’s multilateral approach has not come into force by that time. In that event, the digital services tax would be payable as of 2024 for revenues earned as of 1 January 2022.

The 2021 fall economic update does not propose corporate income tax or individual income tax rate changes. Among the tax-related measures associated with the economic update are items that would:

  • Introduce a tax credit for small businesses that undertake certain expenditures for air quality improvements
  • Provide a refundable tax credit for farmers
  • Extend home office expense relief
  • Provide a new exemption for the annual 1% tax on non-resident, non-Canadian-owned residential real estate in Canada that is considered to be vacant or underused

Read a December 2021 report [PDF 206 KB] prepared by the KPMG member firm in Canada


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