Digital Services Tax Act (S.C. 2024, c. 15, s. 96)

Marginal note:Continuity of consolidated group

6 For the purposes of this Act, a consolidated group, at any time, is the same consolidated group at another time if at both times, and all times between those times, the ultimate parent entity of the group is the same.

Marginal note:Mergers

7 If, in a calendar year, there is a merger or combination of two or more corporations (referred to in this section as the “predecessor corporations”) to form one corporate entity (referred to in this section as the “new corporation”),

• (a) for the purposes of this Act, subject to paragraphs (b) and (c), the new corporation is deemed to be a separate person from each of the predecessor corporations;

• (b) for the purposes of Part 6, the new corporation is deemed to be the same corporation as and a continuation of each predecessor corporation; and

• (c) for the purposes of section 6,

  • (i) if only one of the predecessor corporations is an ultimate parent entity of a consolidated group, the new corporation is deemed to be the same corporation as the ultimate parent entity, and

  • (ii) if two or more of the predecessor corporations are each an ultimate parent entity of a consolidated group, the new corporation is deemed to be the same corporation as the ultimate parent entity of the consolidated group that had the greatest amount of total consolidated group revenue for a fiscal year of the group that ended in the immediately preceding calendar year.

Marginal note:Arm’s length

• 8 (1) For the purposes of this Act,

  • (a) related persons are deemed not to deal with each other at arm’s length; and

  • (b) it is a question of fact whether persons not related to each other are, at any time, dealing with each other at arm’s length.

• Marginal note:Related persons

  (2) For the purposes of this Act, persons are related to each other if they are related persons within the meaning of subsection 6(2) of the Excise Act, 2001.

Marginal note:His Majesty

9 This Act is binding on His Majesty in right of Canada or a province.

PART 2Liability for Tax

Marginal note:Tax payable

• 10 (1) Every taxpayer must pay a tax in respect of a particular calendar year (other than the first year of application) equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the particular calendar year if

  • (a) the taxpayer

    • (i) had total revenue equal to or greater than the global revenue threshold during a fiscal year of the taxpayer that ended in the immediately preceding calendar year,

    • (ii) was, at any time in the immediately preceding calendar year, a constituent entity of a consolidated group that had total consolidated group revenue equal to or greater than the global revenue threshold during a fiscal year of the group that ended in that immediately preceding calendar year, or

    • (iii) is, at any time in the particular calendar year, a constituent entity of a consolidated group that had total consolidated group revenue equal to or greater than the global revenue threshold during a fiscal year of the group that ended in the immediately preceding calendar year; and

  • (b) at least one of the following conditions is met:

    • (i) the Canadian digital services revenue of the taxpayer for the particular calendar year is greater than the in-scope revenue threshold, and

    • (ii) in respect of any consolidated group of which the taxpayer is a constituent entity at any time in the particular calendar year, the total of all amounts — each of which is the Canadian digital services revenue for the particular calendar year of an entity that is a constituent entity of the group at any time in the particular calendar year — is greater than the in-scope revenue threshold.

• Marginal note:Tax payable for first year of application

  (2) A taxpayer must pay, in respect of the first year of application, a tax equal to the amount determined by the formula

  A + B

  where

  A

  is

  • (a) 3% of the taxpayer’s taxable Canadian digital services revenue for the first year of application, if the taxpayer satisfies the conditions set out in paragraphs (1)(a) and (b) in respect of that year, and

  • (b) nil, in any other case; and

  B

  is

  • (a) the amount determined by multiplying the rate prescribed by regulation in respect of the taxpayer by the total of all amounts each of which is the taxpayer’s taxable Canadian digital services revenue for a calendar year

    • (i) for which the taxpayer satisfies the conditions set out in paragraphs (1)(a) and (b), and

    • (ii) that is after 2021 and before the first year of application, and

  • (b) nil, if no calendar year meets the conditions set out in subparagraphs (a)(i) and (ii).

PART 3Canadian Digital Services Revenue

Marginal note:Definitions

11 The following definitions apply in this Part.

user located in Canada

user located in Canada, at any time, means a user in respect of which it is reasonable to conclude — based on the taxpayer’s user data associated with the user (including any of the billing, delivery or shipping address, or the phone number area code, most recently provided by the user, global navigation satellite systems data and Internet Protocol address data) — that the user is 

• (a) located in Canada at that time, in the case of

  • (i) online advertising services revenue that is in respect of an online targeted advertisement for which the targeting is based on the real-time location of users, and

  • (ii) user data revenue that is based on the real-time location of users; and

• (b) normally located in Canada at that time, in any other case. (utilisateur situé au Canada)

user located outside Canada

user located outside Canada, at any time, means a user (other than a user located in Canada) in respect of which it is reasonable to conclude — based on the taxpayer’s user data associated with the user (including any of the billing, delivery or shipping address, or the phone number area code, most recently provided by the user, global navigation satellite systems data and Internet Protocol address data) — that the user is 

• (a) located outside Canada at that time, in the case of

  • (i) online advertising services revenue that is in respect of an online targeted advertisement for which the targeting is based on the real-time location of users, and

  • (ii) user data revenue that is based on the real-time location of users; and

• (b) normally located outside Canada at that time, in any other case. (utilisateur situé à l’extérieur du Canada)

user of determinable location

user of determinable location, at any time, means a user that is, at that time, a user located in Canada or a user located outside Canada. (utilisateur dont l’emplacement est déterminable)

Marginal note:Basic rule

• 12 (1) A taxpayer’s Canadian digital services revenue for a calendar year is the amount determined by the formula

  A + B + C + D

  where

  A

  is the taxpayer’s Canadian online marketplace services revenue for the calendar year as determined in accordance with Division A of this Part;

  B

  is the taxpayer’s Canadian online advertising services revenue for the calendar year as determined in accordance with Division B of this Part;

  C

  is the taxpayer’s Canadian social media services revenue for the calendar year as determined in accordance with Division C of this Part; and

  D

  is the taxpayer’s Canadian user data revenue for the calendar year as determined in accordance with Division D of this Part.

• Marginal note:Election

  (2) Despite subsection (1), a taxpayer may elect in respect of a particular calendar year that is before the first year of application (by making an election on or before June 30 of the calendar year following the first year of application in the form and manner, and containing the information, prescribed by the Minister) that subsection (1) not to apply in respect of the particular calendar year, and that the taxpayer’s Canadian digital services revenue for the particular calendar year to be determined by the formula

  A ÷ B × C

  where

  A

  is the taxpayer’s Canadian digital services revenue for the first year of application;

  B

  is the taxpayer’s total revenue for the first year of application; and

  C

  is the taxpayer’s total revenue for the particular calendar year.

• Marginal note:Election — restriction

  (3) A taxpayer is not permitted to elect under subsection (2) in respect of a particular calendar year after 2022 if the taxpayer did not make an election under subsection (2) for a calendar year after 2021 that precedes the particular calendar year and for which the conditions set out in paragraphs 10(1)(a) and (b) are met.

DIVISION ACanadian Online Marketplace Services Revenue

Marginal note:Definition of online marketplace services revenue

• 13 (1) In this Part and Part 5 and subject to subsection (2) and Division E, online marketplace services revenue, of a taxpayer, means revenue earned by the taxpayer in respect of an online marketplace of the taxpayer (or of another constituent entity of a consolidated group of which the taxpayer is, at the time the revenue is earned, a constituent entity) from

  • (a) the provision of access to, or the use of, the online marketplace;

  • (b) commissions and other fees for the facilitation of a supply between users of the online marketplace and for services ancillary to the supply;

  • (c) the provision of premium services, preferential listing services and other optional enhancements to the basic function, or changes to the standard commercial terms, of the services provided in respect of the online marketplace; and

  • (d) sources prescribed by regulation.

• Marginal note:Interpretation — revenue exclusion

  (2) For the purpose of the definition online marketplace services revenue in subsection (1), revenue earned by a taxpayer in respect of an online marketplace does not include revenue

  • (a) from the provision of storage or shipping services, to the extent that the revenue reflects a reasonable rate of remuneration for the service;

  • (b) earned from a constituent entity of a consolidated group if, at the time the revenue is earned, the taxpayer is a constituent entity of the group; or

  • (c) from sources prescribed by regulation.

Marginal note:Canadian online marketplace services revenue

14 A taxpayer’s Canadian online marketplace services revenue for a calendar year is the amount determined by the formula

DIVISION BCanadian Online Advertising Services Revenue

Marginal note:Definition of online advertising services revenue

• 15 (1) In this Part and Part 5 and subject to subsection (2) and Division E, online advertising services revenue, of a taxpayer, means revenue earned by the taxpayer from

  • (a) the facilitation through a digital interface of the delivery of an online targeted advertisement;

  • (b) the supply of digital space for an online targeted advertisement; and

  • (c) sources prescribed by regulation in respect of online targeted advertisements.

• Marginal note:Interpretation — revenue exclusion

  (2) For the purpose of the definition online advertising services revenue in subsection (1), revenue earned by a taxpayer does not include revenue

  • (a) described in any of paragraphs 13(1)(a) to (d);

  • (b) in respect of an online targeted advertisement to the extent of any payment made by the taxpayer (or by another constituent entity of a consolidated group, if at the time the revenue is earned, the taxpayer is a constituent entity of the group) to another entity if the payment

    • (i) is in respect of the online targeted advertisement, and

    • (ii) would be online advertising services revenue of the other entity, if this section were read without reference to this paragraph or to section 21;

  • (c) earned from a constituent entity of a consolidated group if, at the time the revenue is earned, the taxpayer is a constituent entity of the group; or

  • (d) from sources prescribed by regulation.