Quebec to tax Netflix, foreign digital companies

In its 2018 budget, the province also laid out plans to boost funding for the cultural sector and open tax credits to digital-only projects.
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Quebec finance minister Carlos Leitão has followed through on a pledge to begin collecting sales tax on foreign-based digital services.

The provincial budget for 2018/19, announced March 27, says the measure will come into effect starting Jan. 1, 2019.

“Foreign suppliers whose business income from providing taxable supplies, intangibles and services in Québec including online provision of digital content (music or film, for example) to Québec consumers exceeds $30,000 per year will be obliged to register for the QST system and will be required to collect QST and remit it to Revenu Québec,” read the budget document, which added that Quebec’s is the “first government in Canada to tackle this challenge.”

In recent months, the Quebec government has grown increasingly critical of the federal government’s reluctance to tax digital companies headquartered outside of Canada. In November, Quebec finance minister Carlos Leitao sent a letter to federal finance minister Bill Morneau saying that “Quebec will have no choice but to act alone” if the federal government did not come to an arrangement to collect sales tax on foreign-based digital firms.

The provincial move to tax digital giants, including Netflix, Amazon and Facebook, was applauded by some members of the local industry. In a statement issued following the budget’s unveiling, Quebecor president and CEO Pierre Karl Péladeau, who has been vocal on the subject, welcomed the decision and called out the federal government for refusing to tax foreign-based digital companies.

Hélène Messier, president and CEO of the Quebec Association of Media Production (AQPM), also welcomed the move, saying it would help restore a certain equity between Quebec companies and foreign-based digital businesses operating in the same space.

In other budget news, the provincial government also pledged $509 million by 2022-2023 to implement a number of new cultural policy objectives.

Of that $509 million, the 2018 budget earmarked $116.3 million over the next five years to invest in Québec culture in the digital environment, including a significant change in the provincial tax credits. Going forward, screen-based projects destined only for digital platforms are now also eligible for a rebate (previously, digital projects were eligible only when they were also broadcast on television or screened in a movie theatre). The boost will see $11.6 million added to the total tax-credit pot over the next five years. The move also brings Quebec’s provincial tax credit into line with federal ones, after CAVCO last year altered its guidelines to make projects distributed solely via online platforms eligible for the credit.

“Extending the tax credit is an update required for the new reality of the audiovisual market that will better support Québec artists and creators,” read the budget document.

In addition, the province increased its tax credit for film dubbing by $3 million over five years. 

Also included in the $116.3 million funding boost earmarked for supporting digital growth, the government pledged $40 million to “support cultural enterprises with the digital shift” (with more details to be announced by the Minister of Culture and Communications at a later date) and $64.7 million to implement a tax credit to support the digital transformation of print media companies.

As well, the budget also increased the funding for SODEC (Société de développement des entreprises culturelles) and CALQ (Conseil des arts et des lettres du Québec) by a combined $100 million over five years.

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