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Archived - Annex 7:
Consultations on Other Tax Measures: Supplementary Information


This annex provides detailed information on the Digital Services Tax proposed in the Budget and invites input from stakeholders. It also provides information about the proposed Tax on Unproductive Use of Canadian Housing by Foreign Non-resident Owners, including plans for consultation.

The costing for the measures in this annex is presented in Table 1 – Cost of Proposed Tax Measures in Annex 6.

Digital Services Tax


Digital technology has resulted in the development of new business models and ways of creating value. In the digital economy, data is a key commodity and the collection, processing and monetization of data is a key commercial activity. New business models have developed involving online platforms that attract users through certain service offerings, collect data and content contributions from the users, and then monetize that data and content in order to earn a profit. Examples of such business models include:

In these business models, the users are not mere customers of the platform or passive recipients of its services. The active participation of users, in interacting with the platform and providing data and content contributions, is a key contributor to the product offering of the platform. This user participation is a key input in the platform business's production process in a way similar to labour and physical capital in a more traditional business. For example:

Current tax systems, however, were generally designed for a bricks-and-mortar economy and effectively assume that value is created only in places where physical resources, like employees, facilities and equipment, are located. Given their reliance on digital technology, businesses of this type do not require a local physical presence in order to engage with users and collect their data and content. These businesses nevertheless can reasonably be considered to be conducting this part of their value-creating activity, even if it is controlled remotely, in the location of the users. This activity, however, is not always subject to local tax under current rules.

Since user-intensive commercial activity of this kind is dominated by businesses that are multinational in scope, this issue would be best addressed multilaterally. To this end, the international community has been discussing possible approaches for a number of years. In the project on Base Erosion and Profit Shifting (BEPS) undertaken by the members of the Organisation for Economic Co-operation and Development (OECD) and the G20 from 2013 to 2015, digital economy challenges were designated as Action 1 of the 15 action items. No agreement, however, was reached under Action 1 on a common approach with respect to corporate-level tax. Intensive discussions on the challenges of digitalization re-started in 2017 through the OECD-led Inclusive Framework on BEPS (which now has 139 member jurisdictions). Due to the inability to reach consensus, however, in October 2020 the target date for agreement was deferred to mid-2021.

Canada has a strong preference for a multilateral approach and so continues to work actively toward this goal with our international partners. However, there have been delays in reaching agreement and there is uncertainty about when an eventual agreed approach will come into effect. The government therefore proposes to implement an interim measure.

Proposed Measure

As announced in the November 2020 Fall Economic Statement, Budget 2021 proposes to implement a Digital Services Tax (DST). The proposed tax is intended to ensure that revenue earned by large businesses – foreign or domestic – from engagement with online users in Canada, including through the collection, processing and monetizing of data and content contributions from those users, is subject to Canadian tax. The DST is intended to be interim in nature – it would apply as of January 1, 2022 until an acceptable multilateral approach comes into effect with respect to the implicated businesses.

The proposed tax would have the following key features.

For such entities or groups, the DST would apply only to in-scope revenue associated with Canadian users in excess of the $20 million threshold.

Coming Into Force

The DST would apply as of January 1, 2022.


The government plans to engage with the provinces and territories to discuss the implications of the DST.

The government welcomes feedback from stakeholders on the proposed approach to implementing the DST. Interested parties are invited to send written representations by June 18, 2021 to the Department of Finance Canada, Tax Policy Branch at:

It is anticipated that draft legislation for a new statute implementing the DST would be released for public comment during summer 2021, taking into account the feedback received. The legislation would subsequently be included in a bill to be introduced in Parliament.

Tax on Unproductive Use of Canadian Housing by Foreign Non-resident Owners

Budget 2021 proposes to introduce a new national 1-per-cent tax on the value of non-resident, non-Canadian owned residential real estate considered to be vacant or underused. This tax would be levied annually beginning in 2022.

Beginning in 2023, all owners of residential property in Canada, other than Canadian citizens or permanent residents of Canada, would be required to file an annual declaration for the prior calendar year with the Canada Revenue Agency in respect of each Canadian residential property they own. The requirement to file this declaration would apply irrespective of whether the owner is subject to tax in respect of the property for the year.

In a declaration in respect of a property, the owner would be required to report information such as the property address, the property value and the owner's interest in the property. The owner may also be eligible to claim in their declaration an exemption from the tax in respect of a property for the year. An exemption may be available, for instance, where a property is leased to one or more qualified tenants in relation to the owner for a minimum period in a calendar year. Where an exemption in respect of a property for the year is not available, the owner would be required to calculate the amount of tax owing and report and remit it to the Canada Revenue Agency by the filing due date.

The failure to file a declaration with respect to a property for a calendar year as and when required could result in the loss of any available exemptions in respect of the property for the calendar year. Penalties and interest would also be applicable and the assessment period would be unlimited.

In the coming months, the government will release a backgrounder to provide stakeholders with an opportunity to comment on further parameters of the proposed tax. These parameters would include, for example, the definition of residential property, the value on which the tax would apply, how the tax would apply where a property is owned by multiple individuals and/or non-individuals, potential exemptions and compliance and enforcement mechanisms. Additionally, the consultation will consider whether, how and when the proposed tax would apply in smaller, resort and tourism communities.

Notices of Ways and Means Motions

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