Important Changes to US Tax Bill

Peter Bowen, Fidelity Vice President of Tax and Retirement Research, explains what the removal of section 899 - the section that would have increased withholding tax rates on certain US securities - means for Canadian investors.

The U.S. tax bill, referred to as the "Big, Beautiful Bill," initially included Section 899, a provision known as the "revenge tax." This measure would have imposed higher withholding taxes on investment income, such as dividends, interest, and royalties, for foreign investors, including Canadians, from countries deemed to have "unfair" taxes on U.S. companies, like Canada's digital services tax. Estimates suggested it could cost Canadian investors up to $81 billion over seven years and increase withholding tax rates from 15% to as high as 35%.

Following negotiations with G7 countries, U.S. Treasury Secretary Scott Bessent reached an agreement exempting U.S. companies from certain foreign taxes (though not explicitly Canada’s digital services tax). On June 26, 2025, Bessent requested Congress remove Section 899, citing concerns from Wall Street and international business groups that it would deter foreign investment and harm the U.S. economy. Congressional Republicans, including Senate Finance Committee Chairman Mike Crapo and House Ways and Means Committee Chairman Jason Smith, agreed to scrap the provision.

The removal was welcomed by Canadian officials, including Finance Minister François-Philippe Champagne, and investors, as it prevented significant tax hikes and preserved economic stability for Canadian investments in U.S. securities