Canadian Government Reaches Agreement with US on Foreign Account Tax Compliance Act (FATCA)
Finance Minister Jim Flaherty announced earlier this week that Canada and the United States have signed an intergovernmental agreement under the Canada-U.S. Tax Convention on US access to financial accounts held by dual US-Canada citizens.
The American government enacted the FATCA in 2010 with the intent to require non-U.S. financial institutions to report to the U.S. Internal Revenue Service (IRS) accounts held by U.S. taxpayers for the purposes of taxation.
FATCA has caused unsuspecting and long standing dual citizens to fear potential repercussions of unilateral IRS access to financial accounts. Dual citizens, particularly those who have lived in Canada for decades, may not have realized that the U.S. is one of only two countries in the world that requires their citizens to file taxes no matter where they are living. Failure to comply with FATCA could subject a financial institution or its account holders to certain sanctions including special U.S. withholding taxes on payments to them from the U.S.
The issue is concerning to dual citizens, especially those who haven’t had financial ties to the US for a long time or who have never worked or earned income in the US, such as people born in Canada to parents who are US citizens.
A key concern is that the reporting obligations in respect of accounts in Canada would compel Canadian financial institutions to report information on account holders who are U.S. residents and U.S. citizens (including U.S. citizens who are residents or citizens of Canada) directly to the IRS, thereby potentially violating Canadian privacy laws.
The IRS will still have access to Canadian Financial institutions and non-exempt accounts, but under the new agreement Canadian banks will be able to provide the information to the Canada Revenue Agency instead of the IRS directly, thereby allowing Canadians who feel wrongly targeted to appeal.
Without an agreement in place, obligations to comply with FATCA would have been unilaterally and automatically imposed on Canadian financial institutions and their clients as of July 1, 2014. It is estimated one million U.S. citizens live in Canada. The rules affect each of them, their children and anyone with whom they may hold a joint account or co-own a business or property.
The new agreement provides Canadian financial institutions and many dual citizens certain protections:
- Financial institutions in Canada will not report any information directly to the IRS.
- Relevant information on accounts held by U.S. residents and U.S. citizens (including U.S. citizens who are residents or citizens of Canada) will be reported to the Canada Revenue Agency (CRA). The CRA will then exchange the information with the IRS through the existing provisions and safeguards of the Canada-U.S. Tax Convention, consistent with Canada’s privacy laws.
- Notable exemptions and relief have been obtained for dual citizens.
- Certain accounts are exempt from FATCA and will not be reportable: Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Registered Disability Savings Plans (RDSPs), Tax-Free Savings Accounts (TFSAs), and others.
- In addition, smaller deposit-taking institutions, such as credit unions, with assets of less than $175 million will be exempt.
- The 30 percent FATCA withholding tax will not apply to clients of Canadian financial institutions, and can apply to a Canadian financial institution only if the financial institution is in significant and long-term non-compliance with its obligations under the agreement.
Starting in 2011, CARP urged the federal government to work with the US government to prevent unsuspecting dual citizens of unilateral targeting by the IRS. This agreement between the Canadian and US governments may not go far enough toward protecting dual citizens from IRS incursions into their finances, but by protecting many common registered accounts and allowing the CRA to act as a buffer, the new agreement mitigates some of the concerns first presented by FATCA in 2010.
Still, many dual citizens have legitimate concerns about the financial and privacy concerns FATCA presents. CARP will continue to follow the issue and will provide readers with any official responses we receive from Minister Flaherty’s office.
Read Minster Flaherty’s letter to CARP members
Learn more about the new FATCA agreement
Reform Act 2013, an Act to Reform Parliament
Conservative MP Michael Chong introduced a Private Members Bill, Reform Act 2013, on Feb 5th to strengthen and reform Parliament by proposing three key changes in how parties are run:
- First, it would restore local control over party nomination by no longer allowing the party leader to appoint or select candidates, but rather, candidates would be selected by the riding association.
- Second, it would strengthen caucus as the decision-making body by making the party caucus chair a position elected by caucus members and not appointed by the leader. It would also rule out summary expulsion of members from caucus without a vote by caucus members.
- Third, it would reinforce the accountability of party leaders to their caucus by ensuring that the leaders term could be reviewed and terminated by caucus and a new leader elected by the party membership.
Mr. Chong mentioned CARP’s recent member poll that showed strong support for his proposed reforms. In the House of Commons, he noted that Seventy-five per cent of [CARP members polled] said they support the reform act, 72% said the proposals would significantly change Parliament, and 62% said the proposals would improve accountability.
Learn more about the bill here.
Read the full CARP mention in the House of Commons
Parliamentary Motion to Create a Pan-Canadian Palliative and End-of-life Care Strategy
NDP MP Charlie Angus has brought forward Parliamentary Motion M-456 at the end of October, 2013 to create a pan-Canadian strategy on palliative and end-of-life care that would address the current patchwork of services and lack of access to services across the country. It proposes that the federal government work with provinces and territories on an integrated model of palliative care that:
(a) takes into account the geographic, regional, and cultural diversity of urban and rural Canada;
(b) respects the cultural, spiritual, and familial needs of Canada’s First Nation, Inuit and Metis people;
(c) has the goal of ensuring all Canadians have access to high quality home-based and hospice palliative end-of-life care, providing more support for caregivers, improving the quality and consistency of home and hospice palliative end-of-life care in Canada, and encouraging Canadians to discuss and plan for end-of-life care.
Learn more about the motion here.
February 10, 2014