On 8 October 2021, the Organisation for Economic Co-operation and Development (OECD) announced that 136 countries, including Canada, had committed to fundamental changes to the international corporate tax system that support the OECD Inclusive Framework’s “Tax Challenges Arising from Digitalisation” project. The changes would provide new taxing rights that reallocate some portion of the profits of large multinational enterprises (MNEs) to countries where the MNE’s customers are located (“Pillar One”), and adopt a global minimum effective tax rate of 15% (“Pillar Two”). These two pillars are to generally come into effect in 2023.
Following the OECD’s announcement, Deputy Prime Minister and Minister of Finance, Chrystia Freeland, confirmed Canada’s commitment to this international agreement, and announced that Canada still intends to move ahead with legislation finalizing a digital services tax (DST) by 1 January 2022 (as announced in the federal government’s 2021 budget). However, the DST would only be imposed if the multilateral convention implementing Pillar One has not come into force by 31 December 2023. In that event, the DST would be payable as of 2024 in respect of revenues earned since 1 January 2022.
On 13 October 2021, the G20 Finance Ministers met in Washington, D.C. In their communique, the Finance Ministers endorsed the Inclusive Framework agreement and called on the OECD/G20 Inclusive Framework members to ensure that the new rules come into effect at the global level in 2023.