Canada: Public Consultation on taxation of digital imports

Canada joins those countries that make efforts to tax supplies provided by non-established businesses via the Internet to Canadian residents. As recently reported in PwC’s GlobalVATOnline the Canadian government launched a public consultation as part of a 2014 Budget proposal to ensure tax fairness and invites the public to give their opinion on what actions should be taken in order to effectively collect sales taxes on e-commerce sales to residents of Canada by foreign-based vendors.

Current situation in Canada

GST is being collected by the Canada Borders Service Agency on goods at customs upon their entry into Canada. However, services and intangibles are not. The “importers” of services and intangibles are required to self-assess and pay GST unless these supplies are for consumption, use or supply exclusively in commercial activities. However, in practice these rules are found to be ineffective and difficult to enforce resulting in most B2C imported services being untaxed. The result is a commercial disadvantage for domestic e-businesses compared to foreign-based vendors.

Possible changes and next steps

One potential solution to improve the current unsatisfying situation would be to require foreign-based companies to register with the Canadian Revenue Agency and account for GST if they make e-commerce sales to residents in Canada.

Stakeholders are now invited to submit additional proposals on how to improve the current situation in Canada to the following address by 12 June 2014 at the latest:

international.tax-impot.international@fin.gc.ca or to:

International Tax Consultation
Tax Policy Branch
Department of Finance
140 O’Connor Street
Ottawa, Ontario
K1A 0G5

For further information or assistance, you can also contact Mario Seyer or Stephane Marcassa of PwC Canada.

About Andras Salanki

Manager PwC Switzerland email: andras.salanki@ch.pwc.com Office: +41587924536

Andras Salanki is an international VAT advisor with 7 years of relevant professional experience. He spent one year on secondment in California, US, where he advised US multinationals on global VAT projects and also gained experience with IT and Internet companies based in the Silicon Valley.