Relax! FATCA's off your back!

Relax! FATCA's off your back!

Relax! FATCA

The IRS will provide the CRA with information on certain accounts of Canadian residents held at U.S. financial institutions, according to the Department of Finance. 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. 

Accounts exempted from FATCA include Registered Retirement Savings Plans, Registered Retirement Income Funds, Registered Disability Savings Plans, Tax-Free Savings Accounts and smaller deposit-taking institutions, such as credit unions, with assets of less than $175 million

IIAC released a statement in response to the annoucement. "This agreement will greatly reduce the burden of compliance for financial institutions and the risk of unintended consequences to Canadians by requirements imposed under the Foreign Account Tax Compliance Act (FATCA), enacted by the U.S. in 2010," the statement said. "FATCA alone would have required Canadian financial institutions to close client accounts; could have imposed U.S. tax withholding and penalties on persons with no connection to the United States; and could have included in its scope Canadian investment vehicles which are at a low risk for tax evasion use, such as registered savings accounts ... and tax-free savings accounts (TFSAs). The agreement between Canada and the U.S. exempts these accounts from the scope of FATCA and provides a more reasonable and fair approach to addressing the important issue of crossborder tax compliance."

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2 Comments
  • Bob T 2014-02-10 12:39:37 PM
    Although this new agreement is good for the financial institutions it makes no difference for those individuals who are US citizens living in Canada and we all need to make sure that this news does not confuse them. They will still have to report all accounts on the FBAR even if their bank doesn't report the information to the CRA
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  • Terry B. 2014-02-13 12:31:18 PM
    Thanks Bob. You and I are the only two people in Canada who realize this.
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