Canada – Repeal Of Digital Services Tax Still Pending 

The Federal Government introduced a Bill that, once adopted, will revoke the Digital Services Tax (DST). Digital Services Tax is a gross-revenue tax imposed on revenue generated by international digital businesses, capturing revenue from providing services, such as online advertising, digital marketplaces, monetization of user data, and social media platform services. 

Once adopted, the bill should have a retroactive effect effective as of June 20, 2024. Once enacted, the Bill will render any DST liability arising since the tax came into force on June 28, 2024, obsolete. The federal government officially announced its willingness to repeal DST on June 29, 2025, only a few hours before the first DST return was due to be filed and paid. 

The Revenue Agency shared that it will waive or cancel any penalties for late-filing of DST returns, as well as any interest on tax payable. If legislation to rescind the Act is approved by Parliament and receives Royal Assent, it will lead to many refund applications. 

Refunds on the way

Certain taxpayers have already paid the outstanding tax debt to the Revenue Agency. The repealing legislation provides that any DST payment must be refunded with interest. One option for a proper tax refund is that the Canada Revenue Agency (CRA) could propose to its “creditor” that the paid DST amount be applied to any GST/HST amount owed or to another corporate tax. This could be a valid option for the CRA to reduce its outflow of funds, given that the DST payable per business is likely in the millions of dollars. 

The repeal is still pending royal assent. At the moment, the only certainty for digital businesses in the scope of the Canada DST is that they aren’t obliged to prepare, submit, or pay outstanding DST. 

It remains to be seen whether the Assembly will adopt the Bill to revoke DST, and, if adopted, how the CRA will approach the refund procedure.