If your online business is generating $1 million in sales, there’s a growing global risk you’ll lose $30 000 – $100 000 (or more) before you count profits. Here’s why: a wave of “Digital Services Taxes” (DSTs) is sweeping across the globe — and while some parts of the story are changing fast (see Canada’s recent volte‑face), the model remains highly relevant for ambitious digital businesses.
What is a Digital Services Tax (DST)?
Unlike traditional corporate taxes, which are levied on profits (revenue minus costs), a DST is imposed on gross digital services revenue arising in a particular jurisdiction.
Typically:
A threshold for global revenue (e.g., the company’s group must have global turnover of € 750 million+)
A threshold for local digital services revenue (e.g., CAD 20 million+ for Canada in the draft)
A flat tax rate on the portion of local digital revenue above the threshold (e.g., 3%)
Covers services like online advertising, user‑data monetization, social‑media platforms, digital marketplace intermediation.
Thus: If your business clears the thresholds and generates, say, CAD 30 million in targeted “Canadian‑digital‑services” revenue, a 3% DST would hit the amount above CAD 20 million, i.e. CAD 10 million × 3% = CAD 300 000.
How many countries?
As of April 2024, 18 countries have implemented unilateral DSTs.
These include several European states (France, Italy, Spain, Austria, Poland, Portugal, Switzerland, Turkey, United Kingdom) and others.
Why such a tax?
Digital business models allow revenue generation without a physical presence in a country. Traditional tax systems struggle to capture this value. DSTs let governments tax digital revenue based on where customers or users are located.
The risk to digital businesses
Even unprofitable or low-margin businesses may owe tax on gross revenue.
Revenue-based taxation can erode margins quickly.
Global revenue thresholds often apply, but local thresholds can also trigger the tax.
Some regimes apply retroactively to past years.
What about Canada? (Latest update)
Canada had drafted a DST via Bill C‑59, set to apply retroactively from Jan 1 2022 at a 3% rate on Canadian digital revenue above CAD 20 million for companies with global turnover over €750 million.
On June 29 2025, Canada announced it will rescind the DST and cancel the June 30 2025 payment deadline, aligning with U.S. trade and security negotiations. Legislation to formally repeal the law is expected. Although enacted in June 2024, collection is now suspended. Still, DSTs remain active in many other countries.
Swap Without MEV
Protect your swaps from MEV. CoW Swap stops bots from jumping your order, reducing slippage and failed transactions. Keep more of what you trade with execution you can trust. Trade smarter.
What you need to do
Check your thresholds: Are you over the global/local revenue lines?
Know your business model: Are you monetizing user data, running a marketplace, or selling digital ads?
Calculate your exposure: A 3% tax on $10M revenue is $300K—before expenses.
Adjust your pricing and margins accordingly.
Stay updated: DST regimes are in flux and politically charged.
Speak with advisors to avoid compliance risks or double taxation.
The world of digital taxation is shifting from taxing where you are to where your users are. If your revenue is global, your tax risks are too. Even low-margin businesses may be liable for substantial DST bills. Canada might have blinked, but many other governments haven’t.
Stay sharp. Stay compliant. And don’t let your top-line become a tax liability.
Follow @thefreedom.brief on Instagram for daily insights and the latest on tax, regulation, and strategy for digital entrepreneurs.
Paid Placement — The Global Vault by Remoove