The push by an industry association to approve a federal bill, which would ease the impact of the U.S. Foreign Account Tax Compliance Act on Canada’s investment industry is right on track, suggests one advisor.
Investment Industry Association of Canada’s (IIAC) President and CEO, Ian Russell, appeared before the House of Commons Standing Committee on Finance via video
conference on Tuesday urging The House to act now and approve Bill C-31, which is necessary to implement key provisions for dealing with FATCA.
“We believe this package of legislation embeds the best possible tax-reporting framework for Canadian investors and their investment dealers, and should be passed expeditiously,” Russell told the Committee.
Russell warned of the ‘serious consequences’ delaying the bill’s approval – and failing to comply with the FATCA legislation – could have on Canada’s investment industry, its financial institutions and their clients. Penalties and sanctions imposed by the U.S could include “punitive U.S. withholding taxes and possible closure of Canadian financial accounts.”
“Simply put, deferral of a Canadian legislative package this close to the July 1, 2014 implementation deadline would place a more costly and difficult compliance burden on Canada’s investment industry and expose Canadian financial institutions and investors to penalties and sanctions that would severely impede access to the U.S. marketplace,” Russell said.
Montreal advisor and CEO of MCA Cross Border Advisors, Matt Altro – whose clientele includes a large percentage of Snowbirds – couldn’t agree more, emphasizing the urgency for wealth professionals across the board to take FATCA seriously. If you haven’t already, he advises, start making the necessary client inquiries, adjustments and referrals.
"Advisors can look at this as a wake-up call. It's why they need to find out whether their clients are U.S. citizens or not," says Altro. "I suggest advisors communicate directly with their clients ... so they can at least inform them of their obligations or refer them to someone who can."
In coordination with financial institutions and associations, the U.S. Treasury and IRS, and Canadian authorities, IIAC was behind an agreement established between the U.S. and Canada in February, which exempts Canadian financial institutions from reporting obligations for registered accounts considered low risk of tax evasion (such as RRSPs, RRIFs, TFSAs, RESPs and RDSPs); phased-in reporting rules; and an over-arching inter-governmental arrangement.
“It is definitely a good thing that Canadian financial institutions don’t have to carry this burden …,” says Altro. “As far as the individual – U.S. citizens in Canada – it is another step in the direction that this is happening. The net result is that the IRS has access to their information.”
Relax! FATCA's off your back!
Watch out! FATCA's on your doorstep, warns Toronto advisor