FATCA – Foreign Account Tax Compliance Act


1. What is FATCA?
A. The Foreign Account Tax Compliance Act ("FATCA") is a legislation that was passed in the United States in 2010. FATCA is intended to detect "US persons" who are evading U.S. tax using financial accounts held outside of the United States. Under FATCA, non-U.S. financial institutions would be required to report relevant information to the U.S. tax authorities, the Internal Revenue Service ("IRS"), about financial accounts held by identified U.S. persons.
2. What is the intergovernmental agreement ("IGA")?
A. On February 5, 2014, the Canadian government had entered into an intergovernmental agreement with the U.S. government under the existing Canada-U.S. Tax Convention. The IGA will provide an alternative means of meeting the U.S. objectives under the Foreign Account Tax Compliance Act by relying on existing provisions for information exchange under the Canada-U.S. Tax Treaty. The Agreement requires Canadian financial institutions to identify financial accounts held by U.S. residents and U.S. citizens or by entities that are organized in the U.S. or controlled by certain U.S. persons and to report that information to the CRA. The U.S. will provide Canada with enhanced and increased information on certain accounts of Canadian residents held at U.S. financial institutions.
3. When will the Agreement take effect?
A. Canadian financial institutions will have to start collecting information about new client accounts in July 2014 and will report information collected in 2014 on their existing and new U.S. account holders to the Canada Revenue Agency ("CRA") starting in 2015. From then, accounts will be reported annually for the prior year.
4. Will Industrial and Commercial Bank of China (Canada) ("ICBK") ("we") participate?
A. ICBK is a participating financial institution and will comply with FATCA.
5. I am not a U.S. person. What does IGA mean for me?
A. The majority of Canadians are not U.S. persons and for them, the IGA will have no impact. If you have an existing account and there is an indication that you may be U.S. person or if you are opening a new account, you may be asked to provide additional information or documentation to demonstrate that you are not a U.S. person.
However, if you choose not to provide this additional documentation upon request, we may be required by Canadian law to report your account information to the CRA.
6. I am a U.S. person. What does IGA mean for me?
A. If you are a U.S. person, we may be required to share information about the account and the account holder to the CRA. Information that could be transmitted includes name and address and certain financial information about the account.
7. Does the IGA apply to businesses or just individuals?
A. If you are opening a business account or you have an existing business account, we will have to identify certain account holders that are U.S. entities or certain non-U.S. entities in which U.S. residents or U.S. citizens have an interest. We may also rely on information that we already have or that is publicly available, or you may be asked to provide a certification to declare whether you are a U.S. person under U.S. tax law. You may also be asked to identify the type of business in which you are engaged because there may be different requirements for different types of businesses.
8. What if I only spend the winter months in the U.S.?
A. Many Canadians spend a significant amount of time in the U.S. to attend school, to live during the winter, or for other reasons, but many of them are neither citizens nor residents of the U.S. Under the Agreement, these people could be considered as potentially being U.S. account holders because of information associated with their account, such as U.S. address or telephone number. You may be asked to provide documents showing that you are not U.S. residents or U.S. citizens.
9. How does my citizenship affect my tax residency?
A. Canada and virtually all other countries do not tax on the basis of citizenship. The citizenship you hold is generally not relevant in determining your residency for tax purposes.
The U.S. tax system is different from most countries in that it treats all U.S. citizens as U.S. residents for tax purposes no matter where in the world they reside. Therefore, if you are a U.S. citizen, you are a resident of the U.S. for tax purposes even if you hold another citizenship or reside in Canada or any other country.
10. Am I obliged to provide the information?
A. Canadian financial institutions have a legal responsibility to know where you reside for tax purposes and we are entitled to ask you for that information.
If you refuse to cooperate, we may treat the account as a U.S. reportable account and report your account to the CRA.
11. Will the new reporting requirement change how I interact with my Canadian financial institution?
A. You might be asked about your tax residency status in connection with your existing accounts (if there is information associated with your account that suggests you may be a U.S. person) or when you open a new account. You might also be asked to provide certain evidence (such as a driver’s license) to support a claim that you are not a U.S. person if information associated with your account otherwise suggests that you may be a U.S. person. We need this information to satisfy our obligations under Canadian law and to determine whether we have certain tax reporting obligations to the CRA.
12. On what form will I have to provide the information?
A. The CRA has not issued a form for Canadian financial institutions to use. You might be asked to fill out a form solely for this purpose or complete a comprehensive account opening form or document.
13. What types of accounts will be reported?
A. Canadian financial institutions will have to report accounts which include most bank accounts, mutual funds, brokerage accounts, and custodial accounts, annuity contracts (including segregated fund contracts), and some life insurance policies with a cash value.
An account is not reportable if it falls within an exempt category such as the following government-registered plans:
? Registered retirement savings plans
? Registered retirement income funds
? Pooled registered pension plans
? Registered pension plans
? Tax-free savings accounts
? Registered disability savings plans
? Registered education savings plans
? Deferred profit-sharing plans
14. What type of information will be reported to the U.S.?
A. Canadian financial institutions will generally have to report the following type of information:
? Identifying information about the account holder (name and address)
? Account number
? Account balance or value at end of the year
? Certain amounts paid or credited to the account
15. Do I have to provide my U.S. Taxpayer Identification Number?
A. Canadian financial institutions have legal responsibility to ask for your U.S. TIN in connection with certain accounts. If you are a U.S. resident or U.S. citizen, you have to provide your U.S. TIN to us when asked.
16. I am not a U.S. person, but I have a joint account with a U.S. person. How does the Agreement affect me?
A. If we identify an account as a reportable account and the account is a joint account, we will report the full value of the account to the CRA. Identifying information (name, address, Taxpayer Identification Number) associated with joint account holders who are not U.S. persons will not be reported.
17. I am a Canadian resident and I hold accounts in the U.S. How does the Agreement affect me?
A. If an account hold by a Canadian resident is identified as a reportable account by a U.S. financial institution, then the account will be reported on by the financial institution to the IRS, which will transmit the information to the CRA.
18. If I have several financial accounts, how will they be reported?
A. If you are identified as a U.S. person, we will report your accounts individually to the CRA.
19. Does my Canadian financial institution have to notify me if information on my accounts is being reported to the CRA?
A. Canadian financial institutions must be open about their policies and procedures for complying with the Agreement and must be prepared to make this information available to anyone who asks about them. Although there will be no obligation for financial institutions to automatically notify their account holders about reporting to the CRA under the Agreement, financial institutions must, upon request, allow account holders to have access to the personal information that has been reported.
20. Does the Agreement require Canadian financial institutions to report to the CRA on any individuals who were told that they relinquished their U.S. citizenship when they became Canadian citizens?
A. The Agreement does not require Canadian financial institutions to report on any individual who have relinquished their U.S. citizenship and are not residents of the U.S.
Individuals who have relinquished their U.S. citizenship may be asked by their financial institution for documentation to this effect.
21. Under the Agreement, how will financial institutions identify accounts held by U.S. residents and U.S. citizens? What will the financial institutions do with this information?
A. Canadian financial institutions will be required to identify account holders that are U.S. person, including U.S. residents and U.S. citizens, by following the due diligence procedures of the intergovernmental Agreement. The due diligence procedures vary depending on whether the account holder is an individual or an entity and whether the account was opened on or before, or after, June 30, 2014. In certain circumstances, the due diligence procedures are more intensive for accounts with a value of more than US$1,000,000. There are also a number of exemptions from due diligence available for accounts that have a low value and for certain specified types of accounts, such as federally registered savings products (for example, RRSPs and TFSAs).
Canadian financial institutions will report information on their U.S. account holders to the CRA annually starting in 2015. Canadian financial institutions will also be required to report on account holders that fail to respond to their financial institution when contacted with a request for documentation to clarify whether they are a U.S. resident or U.S. citizen, in a manner similar to the reporting on U.S. account holder.
The above information serves as a general guidance only. You are encouraged to contact your tax adviser on any tax issues or concern. You may also find additional information on FATCA from the Canadian Bankers Association web-site www.cba.ca and Canada Revenue Agency website www.cra-arc.gc.ca .