Today, we will take a look at a new tax in Canada that affects big companies like Apple. This tax called the “digital services tax”, applies to big tech companies that make over €750 million worldwide and have at least $20 million from Canadian users. It’s a 3% tax on money made from online services such as app stores, social media, and online ads that are used by people in Canada.
Details of the Digital Services Tax (DST)
Canada’s new digital services tax (DST) sets a 3% tax on the money earned from digital services when it’s over $20 million each year. This tax affects both Canadian and foreign companies that make at least €750 million worldwide and more than $20 million from Canadian users. It covers money made from online stores, social media, online ads, and selling or licensing user data.
The tax targets earnings related to Canadian users. For example, money from online ads is taxed based on where the Canadian viewers are. Money from online stores is taxed based on the transactions involving Canadian users. This method makes sure that the tax is applied to money made from activities involving Canadians, no matter where the company is located.
🚨 #Breaking Following several European countries, Canada is introducing a new digital services tax starting in 2024.
Which foreign tech companies (ie: Apple and Google) receive tax demands for income earned in Canada but not currently taxed there. pic.twitter.com/xNG44OGPpI
— Jason C. (@_TwistedTech) April 17, 2024
For Apple, this tax could impact how much it earns from its services in Canada like the App Store, Apple Music, and advertising. Apple will need to improve how it tracks and reports earnings from Canadians to meet the new tax rules. All companies hit by this DST need to sign up and provide detailed annual reports on their earnings from Canadian digital services. They also need to pay taxes on earnings since January 1, 2022, because the tax applies to past revenues too.
This tax change is coming at the same time as Apple is making other adjustments in Europe. For instance, with the latest update to iOS, users in the EU can download apps directly from websites, not just from the App Store.
Impact on Apple
With Canada’s new digital services tax (DST), Apple will have to rethink how it manages its digital services like the App Store, Apple Music, iCloud, and possibly advertising. This tax affects earnings over $20 million from Canadian users, which is significant given Apple’s large presence in Canada. Apple may adjust its prices and how it offers these services in Canada to deal with the tax impact.
Apple will need to improve how it gathers and analyzes data from Canadian users to accurately report earnings and comply with the DST. This includes adapting its data collection methods to meet both tax rules and privacy laws. Apple may also alter its accounting and reporting processes to handle the detailed requirements of the DST.
Given the potential effects of the DST, Apple might also start lobbying to shape the tax’s final structure or challenge parts of the tax it sees as unfair. This could involve seeking changes that benefit digital businesses or fighting against parts of the tax that could hurt its operations.
Conclusion
As Apple deals with the new digital services tax in Canada, how it manages and adapts to these rules will be important. Other tech companies will likely look at Apple’s response as a guide for handling similar tax situations around the world. Apple’s success in adjusting to these changes while keeping its strong position in the Canadian market will be crucial for its continued success there. And as always we will be there watching how things unfold, ready to tell you all about it.
