The Canadian government has just announced the upcoming abolition of the Digital Services Tax (DST), with the aim of resuming bilateral trade negotiations with the United States and laying the foundations for a new economic and security partnership.
A Recent but Controversial Tax
The Digital Services Tax Act received royal assent on 20 June 2024 and came into force on 28 June 2024.
It imposed a 3% levy on revenues generated in Canada by certain large foreign technology companies in the areas of online advertising, digital commerce, social media, and the monetisation of personal data.
Although it was a temporary response to the lack of international tax regulation, the DST targeted American digital giants such as Google, Amazon, Meta, Apple, and Microsoft, accused of exploiting the intangible nature of their activities to reduce their tax liability in Canada.
A Strategic Reversal in 2025
As part of a broader diplomatic strategy, the Minister of Finance, François-Philippe Champagne, announced on 29 June 2025 the immediate suspension of payments related to the DST and the imminent tabling of a bill aimed at repealing the legislation.
This announcement aims to create an environment conducive to a trade agreement with the United States, expected by 21 July 2025.
Prime Minister Mark Carney and President Donald Trump have agreed to resume discussions, interrupted a few days earlier, focusing on a multilateral rather than unilateral solution.
What Should Affected Businesses Do?
The abolition of the DST has several immediate consequences for businesses:
- Need to review tax policies and planned declarations;
- Monitoring the ongoing work of the OECD
- Monitoring bilateral negotiations to anticipate a future common framework.
For more information on the subject or to determine the application of a reduced rate on your operations, please contact our experts!
Source: Gouvernement du Canada
