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Netflix, PlayStation and Other Digital Services to Start Charging Tax on July 1

Netflix, PlayStation and Other Digital Services to Start Charging Tax on July 1

By Simon Hung

Digital services in Canada will cost more than usual starting next month, as the Government of Canada is set to enact new legislation that will require companies to charge sales tax on digital goods.

The new legislation will take effect on Thursday, July 1 and impact several well-known companies including Airbnb, Disney+, Netflix, PlayStation, Spotify and others.

In the past, foreign-based companies without a physical presence in Canada were not required to charge sales tax on digital goods and services. As a result, digital products like Netflix subscriptions and PlayStation Store video games were tax-free to most Canadians, as both companies operated in the United States. This loophole did not apply to companies like Apple and Microsoft, who have physical business operations in Canada and therefore required to charge sales tax on digital purchases.

The new federal legislation was first proposed by the Liberal Party in 2019 and finalized in their 2020 Fall Economic Statement (Section 4.8). The initial proposal called for a launch timetable of 2022, but that was fast-tracked to 2021 due to the rise of digital sales during the COVID-19 pandemic.

According to the federal government, the new measures are designed to "level the playing field", as the loophole created an unfair advantage for foreign-based companies selling digital goods in Canada. The Department of Finance estimates that the new legislation will generate an extra $1.2 billion in revenue over the next five years starting in 2021-22.

The changes will affect nearly every Canadian province and territory, with the exception of Quebec and Saskatchewan, as those provinces had existing laws that required companies to charge provincial sales tax regardless of their operating location.

Sales tax will vary depending on the GST/HST rate in your province and we've listed the federal tax rates for all 13 Canadian provinces and territories below (figures do not include provincial tax rates, where effective).

  • 5% GST – Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan and Yukon
  • 13% HST – Ontario
  • 15% HST – New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island

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Source: Government of Canada, with reports from CBC

15 Comments

    • So you need extra 3% on top already 15%hst?

      Thank you,. Offshore Tax haven is still free.
    • Report Post
    • cf7777 wrote: So you need extra 3% on top already 15%hst?
      DST is separate from GST/HST

      "The DST would apply at a rate of 3 per cent on revenue from certain digital services reliant on the engagement, data and content contributions of Canadian users. For greater certainty, revenue would not include any applicable value-added tax or sales tax amounts collected on the revenue transaction."

      "The DST would apply to businesses organized under various forms including corporations, trusts and partnerships."

      In Ontario, HST is 13%
      https://www.canada.ca/en/revenue-agency ... or.html#rt
    • Report Post
    • Canada introduced a new law that forces all companies to collect sales taxes on digital items.
      Before, if the company did not have physical servers located in Canada, no tax was collected.

      Topic here:
      canadian-government-start-collecting-ta ... 1-2425984/

      Now every company has to collect and resubmit that money to the Canadian government if they sell digital goods or services to Canadians regardless of whether or not they have physical servers located within Canada.
    • Report Post
  • zod
    • You can cut down on your provinces tax, but topping up your account with gift cards and using an AB address.

      I do really think that extra 3% tax is awful. Won't be a way around that one :(
    • Report Post
    • It's not just Netflix, the tax will most likely apply on all the major video/music streaming services. 1 way to get around it for a while would be to change to an annual subscription and pre-pay for the year now with the service.
    • Report Post
    • scoper wrote: It's not just Netflix, the tax will most likely apply on all the major video/music streaming services. 1 way to get around it for a while would be to change to an annual subscription and pre-pay for the year now with the service.
      I signed up for a year for Disney+ but you can't do that for Netflix AFAIK.
    • Report Post
    • I cancelled Netflix awhile ago.. $14.99+ tax + another tax, no thanks.

      Most of the shows & films are all junk - they have not released anything good
    • Report Post
    • desolatioN wrote: I cancelled Netflix awhile ago.. $14.99+ tax + another tax, no thanks.

      Most of the shows & films are all junk - they have not released anything good
      Shadow and Bone was very good. Queen's Gambit and Bridgerton too. In fact, I'd say Queen's Gambit is the best show I've seen all year.
    • Report Post
    • EugW wrote: Forgive me if there is already a thread on this but I didn’t find it.

      I finally got the letter: I’m getting charged HST on my Netflix account as of Canada Day.

      —-

      We hope you are enjoying your Netflix membership. Due to a recent change in Canada’s tax law, the Federal GST/HST will start to apply to your Netflix membership cost. The applicable GST/HST rate varies by province. You will see this on your next bill on or after July 1, 2021.

      Questions? Visit the Help Center to learn more or contact us. Or manage your membership anytime by visiting your Account.

      The Netflix team
      took them long enough and only makes sense. ..so now mtly is 18.99+tax for me... i'm pretty sure i pay tax for Crave since beginning ... i don't think my YT music subscription charges tax yet either... but maybe soon

      took so long, but understand it's not just netflix but the whole online services and taxes, much like how some sellers on amazon don't charge taxes while the bigger sellers do, not sure if its location or the smaller sellers don't reach threshold to collect but i doubt its that
    • Report Post
  • zod
    • EugW wrote: Shadow and Bone was very good. Queen's Gambit and Bridgerton too. In fact, I'd say Queen's Gambit is the best show I've seen all year.
      I'm hoping part of it is, is that most TV companies have struggled to film during Covid. I too thought it was odd when Netflix raised the price in the middle of Covid when barely any decent new content is coming out. I would say at the height of netflix when they had the marvel shows, trailer park boys, and other shows I like, there' would be at least 1 new show a month I found worth watching (sometimes 2). Now it's a season of a tv show every couple of month. A new season of a TV show isn't worth 50 bucks. They need to step up their game.

      Part of the problem for me is their business model. It's not easy finding a new show that you like. Netflix shows don't usually go the distance, so it's continually having to try to find another one worthwhile to watch.
    • Report Post
    • damn... just saw the email myself yesterday.
    • Report Post
    • cf7777 wrote: So you need extra 3% on top already 15%hst?

      Thank you,. Offshore Tax haven is still free.
      The 3% Digital Services Tax is a corporate tax paid by companies doing over $750 million a year. It's intended to ensure that international companies do not profit tax-free from their Canadian operations. This is *not* a consumption tax like GST/PST/HST.
    • Report Post
    • EugW wrote: I signed up for a year for Disney+ but you can't do that for Netflix AFAIK.
      You're right, just tried and I don't see a way to change my NF subscription to annual like you can do with other streaming services, Oh well...
    • Report Post