What is Goods and Services Tax (GST) on Digital Products?

The Goods and Services Tax (GST) is a tax on digital goods and services sold to Canadian customers. If you are a non-resident business providing digital products to Canadian customers, you may be obliged to register for GST, collect it from your sales, and return it to the government. 

The federal GST rate is normally 5%, however it may be higher in provinces with a Harmonized Sales Tax (HST). The restrictions also differ between Business-to-Business (B2B) sales, which are exempt under specific situations, and Business-to-Consumer (B2C) sales.

Yes, GST/HST is generally applicable. 

Recent regulatory changes specifically require non-resident vendors selling digital products and services to Canadian consumers to register for and collect GST/HST on those sales. 

This seeks to treat domestic and foreign suppliers in a consistent manner. Sellers must determine if they meet the registration threshold to avoid penalties.

A digital product is essentially any product that is delivered electronically over the internet or a similar network.  The item is provided to the customer in a digital format instead of a physical format.

Beispiele hierfür sind: 

• E-Books 
• Digital music
• Software downloads 
• Online subscriptions 

A wide range of digital services provided to Canadian consumers is subject to GST. The 2021 regulatory changes expanded these rules, requiring non-resident businesses to register and collect GST if they exceed the $30,000 CAD threshold. 

Examples of taxable digital services include: 

• Software downloads
• Digital content streaming
• Online-Werbung
• Access to digital platforms (e.g., online gaming)
• Cloud storage services

The federal GST rate in Canada is 5%. However, numerous provinces have implemented a Harmonized Sales Tax (HST), which combines the federal GST with a provincial Umsatzsteuer. HST rates vary by province, so it is critical to apply the correct rate according to the customer’s location to prevent legal complications.

Digital products are subject to GST/HST. Non-resident suppliers selling to Canadian consumers must register for GST/HST and collect the tax if their sales reach the small supplier threshold.

For example, a corporation situated in the United States that sells SaaS subscriptions to Canadians must collect and return GST/HST. 

The GST registration threshold is $30,000 CAD in taxable sales every four-quarter period. If a non-resident business selling digital goods crosses this threshold, it must register for GST/HST. 

 Once registered, the company can lawfully collect GST/HST on sales to Canadian clients and must submit the proceeds to the Canadian government. While the federal threshold is $30,000, certain provinces may have different laws for their own sales taxes, so be sure to check provincial legislation as well.