FATCA agreement between Canada and the United States
| Agreement Between the Government of the United States of America and the Government of Canada to Improve International Tax Compliance through Enhanced Exchange of Information under the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital | |
|---|---|
| Signed | 5 February 2014 |
| Location | Ottawa, Canada |
| Effective | 27 June 2014; under litigation since 11 August 2014 |
| Condition | Notification of Canada it has completed its internal procedures |
| Signatories | Canada and the United States |
| Languages | English and French |
The FATCA agreement is an international agreement signed between Canada and the United States that allows the implementation of the Foreign Account Tax Compliance Act (an Act of the U.S. Congress) in Canada. It is one of 30 intergovernmental agreements the US has concluded with other countries to implement the FATCA.
FATCA requires United States persons, including individuals who live outside the United States, and financial institutions outside the United States, to report the principal amount held in their financial accounts outside of the United States to the Internal Revenue Service (IRS).
According to the Canadian Broadcasting Corporation (CBC) there are about one million American citizens living in Canada. This treaty also affects their spouses, children, or anyone with whom they own property, share a business connection, or hold a joint financial account.
The agreement exempts Tax-Free Savings Accounts, Registered Disability Savings Plans and Registered Education Savings Plans.
Canadian banks say they expect compliance costs to be "enormous".
According to Bloomberg, Revenue Canada minister Kerry-Lynne Findlay promised that this treaty will not impose any U.S. taxes or penalties on people holding accounts in Canada.
While anticipating the agreement but before it was signed, Scotia Bank, one of Canada’s large banks, spent almost $100 million, implementing a system to report to the United States the account holdings of Canadians of American origin, and their Canadian born spouses in order to comply with FATCA. According to the Financial Post FATCA requires Canadian banks to provide information to the United States including total assets, account balances, account numbers, transactions and more, and includes assets held jointly with Canadian-born spouses and other family members.
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