Canada Caves to FATCA

“So sorry Canada” someone in the UK just said in the subject line sending the article Canada Signs Agreement To Dull Impact Of US Crackdown on Tax Cheats.
Here’s the IGA
Here’s the proposed legislation to enable FATCA in Canada
Here’s FATCA Information from CRA
Finance Canada News Release
Canadian Bankers Association News Release
CBC: FATCA Tax Deal With U.S. Takes Some Heat Off Canadian Banks
Globe and Mail Ottawa To Give IRS Information on Americans in Canada (Read My Lips: We Are Canadians!)
Global News: Canada-US Sign FATCA Tax Deal

47 thoughts on “Canada Caves to FATCA

  1. http://www.fin.gc.ca/n14/14-018-eng.asp
    “This is strictly a tax information-sharing agreement. This agreement will not impose any U.S. taxes or penalties on U.S. citizens or U.S. residents holding accounts in Canada. The CRA does not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time the liability arose. This includes dual Canada-U.S. citizens. That will not change under this agreement.”
    – Kerry-Lynne D. Findlay, Minister of National Revenue

    1. That seems reassuring on the surface. Yet, our information is still going to be forwarded as a “tax information sharing agreement.”
      What’s the purpose of that if CRA will not collect for US?

  2. In practical terms, what does the following mean?
    “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. ”
    ARE banks going to be now allowed to ask us for a passport? For place of birth?
    The news release leaves MANY questions unanswered.

  3. Guess I’m going to have try to get my CLN, after all. I don’t have any US indicia, and I don’t have enough many in any accounts to flag in an electronic search, but I also don’t have any faith that the banks will adhere to these guidelines, nor that those guidelines won’t change. D*mn it to hell, Flaherty, you sold us out.
    4. Notwithstanding a finding of U.S. indicia under subparagraph B(1) of this
    section, a Reporting Canadian Financial Institution is not required to treat
    an account as a U.S. Reportable Account if:
    a) Where the Account Holder information unambiguously indicates a
    U.S. place of birth, the Reporting Canadian Financial Institution
    obtains, or has previously reviewed and maintains a record of:
    (1) A self-certification that the Account Holder is neither a
    U.S. citizen nor a U.S. resident for tax purposes (which
    may be on an IRS Form W-8 or other similar agreed form);
    (2) A non-U.S. passport or other government-issued
    identification evidencing the Account Holder’s citizenship
    or nationality in a country other than the United States; and
    (3) A copy of the Account Holder’s Certificate of Loss of
    Nationality of the United States or a reasonable explanation
    of:
    (a) The reason the Account Holder does not have such a
    certificate despite relinquishing U.S. citizenship; or
    (b) The reason the Account Holder did not obtain U.S.
    citizenship at birth.

  4. Outraged
    You have to tax complaint if you sign w8 ben or self certification that you are not a US person for tax purposes.

  5. “It makes me sick,” said Lynne Swanson, 62, of London, Ont., who moved to Canada in 1973 and believed she had long ago relinquished her U.S. citizenship. “I feel betrayed by the country I’ve been loyal to for 45 years.”

    Enough said. (except for the fact I moved here in 1969. It was 1973 when I became a Canadian citizen. I e-mailed that correction to Barrie.

  6. According to CRA’s statement. The signing of the agreement does not mean it has come into effect:
    “Does the IGA mean that Canada will be enforcing U.S. tax laws?
    Legislation to give effect to the provisions of the IGA will be proposed to Parliament in order to ensure that financial institutions can rely on Canadian law when implementing their procedures for complying with the IGA. The CRA, rather than the U.S., will be responsible for administering the IGA. Canadian financial institutions will report information to the CRA.”
    Now it comes down to how much backbone the opposition has to oppose this. I have yet to read the agreement, however the FAQ’s do show that all registered plans will be exempt. Now while this is definitely welcome, this leaves non-registered/cash/chequing/savings accounts open to CRA/IRS information sharing. As well, the omission of LIRA from exemption is troubling as well.
    Based on IRS Form 8938, if a US person has accounts in their country of residence the minimum reporting threshold is $200,000. Therefore as a US person your financial institution will only report you to IRS via CRA if your non-registered accounts hold a total asset value of greater than $200,000. The problem is LIRA accounts and non-registered accounts are most often used to hold a person’s ‘pension money’. For those with a very modest retirement savings of greater than $200,000 in non-reg. accts, this will expose them to IRS scrutiny and they will have to PAY an accountant to do complex reporting of assets and its distributions in US dollar values every single year forever. This significant expense will eat away at even modest retirement assets and when combined with inflation and changing asset values will erode the person’s net worth faster. Assurances that CRA will NOT impose or collect US tax liability is very welcome however:
    “The IGA will not impose any new U.S. taxes or penalties for non-compliance with U.S. tax laws on U.S. persons holding accounts at Canadian financial institutions, or provide for additional assistance in collection beyond that already permitted by the Canada-U.S. Tax Convention. The IGA is strictly an information-sharing agreement.
    The IGA also protects Canadians and Canadian financial institutions from the tax withholding provisions in FATCA.”
    The opposition must demand more revisions to the IGA. However, the real issue at the heart of this problem is citizenship based taxation. American Citizens abroad has recently begun a lobbying campaign and submitted to the senate an argument to transform US tax law towards residence based taxation. This is the only way forward to free us from the burden of US tax reporting when no tax is owed.
    There does seem to be in the IGA some preferential treatment to dual citizens. It is very likely this will initiate a wave of Canadian citzenship applications by US citizens in Canada.
    The Republican Party has recently voted at the RNC to call for the repeal of FATCA as it stands. There is growing furore over how this was slipped into law. There are reports IRS will not be able to handle the vast numbers of applications of every single financial institution and company(who has a US citizen holding more than 10% partnership) in the world. IRS budget has been recently cut and significant layoffs have happened. IRS will not be able to to handle the deluge of applications and all the US citizens submitting 5 years of tax returns. The vast amount of paper that IRS will have to go through is so staggering that I would laugh if my future wasn’t at stake.
    Some may be considering relinquishing of US Citizenship. This may impose severe tax reporting liabilities and a possible ‘expatriation tax’. Expatriation could be very very costly in the short term and should be taken very seriously and only with professional help. Because of changes made in 2008, any US person who is not a ‘covered expatriate’ must pay exit taxes on assets above $680,000. All assets must be valued as if the person sold all their assets at once on their unrealized captial gain. In other words, if you have a million dollar house in the middle of Toronto(not hard to find) you may have to pay exit taxes out of pocket.
    Becoming a Canadian citizen in my opinion is the first step in protecting your rights, and should be done by all US persons in Canada who are or will be permanent residents of Canada. Hopefully our opposition takes the government to task on this issue and we must continue to lobby for the transformation of us tax law to residence based taxation. Until that happens tax reporting liability will always be required as CRA has warned. The fight is not over.
    quoted resources:
    http://www.fin.gc.ca/afc/faq/fatca-eng.asp
    http://www.irs.gov/uac/Form-8938,-Statement-of-Foreign-Financial-Assets
    http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax
    http://americansabroad.org/issues/taxation/aca-submits-proposal-senate-finance-committee/
    http://www.thenewamerican.com/usnews/politics/item/17483-republican-party-votes-to-repeal-punitive-new-fatca-tax-regime

  7. Well that else is new our government, a sell out of the Canadian people.
    All governments are a like tax, tax, tax, they fight get the working mans money. Tell Harper and Obama this is wrong!
    Before you know it there will be a bedroom tax.

  8. Here is the proposed legislation
    http://www.fin.gc.ca/drleg-apl/2014/can-us-eu-0214l-eng.asp
    http://www.fin.gc.ca/drleg-apl/2014/can-us-eu-0214n-eng.pdf
    Especially note the following:

    Inconsistent laws — general rule
    4. (1) Subject to subsection (2), in the event of any inconsistency between the provisions of this Act or the Agreement and the provisions of any other law (other than Part XVIII of the Income Tax Act), the provisions of this Act and the Agreement prevail to the extent of the inconsistency.
    Inconsistent laws — exception
    (2) In the event of any inconsistency between the provisions of the Agreement and the provisions of the Income Tax Conventions Interpretation Act, the provisions of that Act prevail to the extent of the inconsistency.

    Lawyers tell me that means the new law supporting FATCA will override Canadian banking, privacy and human rights laws. Who would have thought such a day would ever happen in Canada?
    I hope the Opposition screams. But, with a majority government, the proposed law will likely pass.
    Our only chance now is a Charter challenge. I am in touch with Joe Arvay. We need to begin building our “war chest” to fund it.
    I think this is going to be very messy and very expensive.

  9. Thanks for that link. He also thinks a CLN for relinquishers may not be required.
    “(It’s essential that people read Annex 1 starting at page 19 of Canada FATCA IGA – particularly the rules on pre-existing accounts and the possibility of NOT needing a CLN. Feel free to post your comments on these issues.)”

  10. So who is definitely under the bus looking at the transmission?
    A Canadian citizen born in the US to Canadian parents who did nothing to become Canadian, automatic US birthplace Canadians.
    Who is being dragged along on the concrete but not under the bus?
    Canadian Citizens that relinquished US Citizenship by taking the Oath and have no other indica of USness like voting, voluntary passport use.

  11. Barrie McKenna of Globe and Mail tweeted that the NDP asked in Question Period if NDP meets Charter
    barrie mckenna @barriemckenna 2h
    NDP just asked in QP whether the #FATCA tax info sharing with the US is constitutional under charter of rights.
    Lynne Swanson @LynneBlaze 33m
    @barriemckenna @Kyla4u What was answer
    barrie mckenna @barriemckenna 32m
    @LynneBlaze @Kyla4u A deal is better than no deal. no response on constitutional question.
    Lynne Swanson @LynneBlaze 2m
    @barriemckenna @Kyla4u Real politicians don’t answer questions. Real leaders do. @JimFlaherty @PMHarper are real politicians.

  12. @Arctic: I’m in touch with constitutional lawyer Joe Arvay and CCLA lawyer Abby Deshman. Joe is reviewing the IGA and the proposed legislation and will hopefully have more information for me soon.
    We need to build a war chest to fund this. Are you in?

  13. Barrie McKenna tweeted it was Murray Rankin who asked the Charter question in QP.
    Murray is the Revenue Critic for the NDP who wrote this letter.
    He is also the former law partner of Joe Arvay (small world!)

  14. @ Blaze…….
    Even though I am retired and on a much reduced income, and even though I have renounced, which would make it easy for me to slither away and let others deal with the issue, the answer is an unequivocal YES.
    Obama signed that monstrosity into law. He takes ultimate executive responsibility for its existence. The buck stops with him. I am absolutely furious at how the CBC has given Obama such a free pass on this. There is our constitution and there is, or ought to be, our sovereignty from extra-territorial law. The CBC should be ramping up the publicity on this. We can only imagine the noise the CBC would make if Reagan, Bush, or Nixon tried to do this. Instead, like the Mainstream Media almost everywhere, the CBC almost genuflects at the mention of Obama’s name.
    Where is Obama’s FBAR for Kenya?
    Not only should we consider action in Canadian courts, we should be seeking class-action redress through American courts. Our basis for a class action in the United States could, among other things, include being treated as second class citizens for the terrible crime of choosing to live outside the United States of Arrogance. Also, FATCA could be construed as slanderous and libellous for unjustly and incorrectly labelling Canada as a tax haven.
    You have no idea how angry I am. Speaking for myself, the moment I have my COLON and I have filed my terminal 1040, I am going to send Obama a bill demanding reimbursement for all my trouble. I suggest others do the same.
    Many American states have something called the castle doctrine, which permits people to defend themselves from a home invasion. This whole thing is tantamount to a home invasion. Obama and his cohort thugs in congress are the ones forcibly breaking into our homes.

  15. Some people contacted Peter Hogg. My understanding is he was not willing to say anything because negotiations were going on. I think he told someone he would not be involved directly in a Charter Challenge.
    I don’t know if anyone has contacted him since the IGA was signed. It would be great to know his views now.

  16. Interesting……
    I spoke to my broker. I pointed out to him that asking for the information required by FATCA would violate the Supreme Law of the Land. He asked me to call him back in an hour, which I did.
    He told me that given a choice between asking whether somebody is a US person, or whether he would follow the Supreme Law of the Land, he agreed that the Constitution supersedes anything that OBungler wants from us. He said he will simply tick off all his clients as Canadian residents who are not US persons..
    Of course, now that I have renounced, he is, in my case at least, not lying.
    I looked my banker straight in the eye, and told him, before he asked me, that I am not a US person. I am not lying. I also told him that if he asked the question, he would be breaking the law. I think every banker should be told that by everybody, whether said person is a US person or not.
    I think that banks should be named as co-defendants in any class action suit.
    Thoughts from anybody?

  17. @arcticgreyling
    Sounds to me like you have a very good broker. Let’s hope there are more of them out there!
    Your recommended approach to the banks sounds good to me, especially if we can get a significant number of definitely non-US-person Canadians to join in.
    I’ll also pass on some advice that was given to an occasional visitor to this website, who was presented by his broker with a written question on a form, saying (if I recall correctly), “is there any reasons the US would consider you to be a US person?” followed by a blank space for an answer. Leaving aside for the moment the absurdity of asking that question and the range of possible irreverent answers it could generate, my recollection is that when the person asked what he should insert (the individual in question has a relinquishment CLN and I think I read that the broker knew this), the reply was “write in ‘not applicable.'”
    There is also a brokerage account on-line application form I saw a while ago, I don’t recall for certain the name of the firm so I won’t mention it, which asked “are you considered to be a US person?” Again, leaving aside the obvious replies to the passive-voice wording, or the multitude of silent interpretations one could hold in one’s mind while answering it, I noted that there was no space to tick, but a drop-down menu. The very first choice was “not applicable,” followed by the range of US indicia first of which was US birth, but no mention in any choice of having a CLN. Let’s hope that everyone who stumbles over that beauty picks the first choice that pops up on the list, not applicable.
    Note also the variety of question wordings; I’ve spotted others. Aside from the Charter issues implicit here, as a onetime specialist in survey research and large databases, I chuckle at the thought of the IRS receiving data from hundreds of institutions world-wide, containing answers coded a multitude of ways in response to a very wide range of questions dancing around the issue, and then thinking for a second that any analysis of that database is going to tell them a bloody thing worth knowing.
    This whole situation would be hilarious if it weren’t so infuriating.
    And the Americans thought the Obamacare roll-out was bad …

  18. I think the person actually wrote N/A which could mean anything. He has a CLN.
    To me, N/A would mean Not Answering.
    If that person is still around, maybe he could give us the details again.

  19. I’m not the person who mentioned this before, but I did much the same thing some months ago when I had to open new accounts to transfer a small inheritance (of Canadian money, invested with a big five Canadian bank) to my name. I can’t remember the exact wording of the question about U.S. personhood – sorry! – but I simply crossed it out and wrote N/A. I have had no problems or questions about that, even though I’m reasonably sure that at least one of the estate administrators knows my background: born in Canada with one Canadian, one American parent.
    A little more background, for what it’s worth: my family moved to the U.S. in early 1978, when I was twelve, and I moved back in the mid-80s, as soon as I could move out of my parents’ house. My mistake was assuming that the citizenship law in place when we moved, which both my parents carefully checked out, was still in force when I left – that is, that if I moved back to Canada as an adult, I would lose any claims to U.S. citizenship after three years. I had no interest in being anything but Canadian, so I abandoned any documents pertaining to U.S. nationality when I left, nearly thirty years ago, and they’ve long since disappeared. I’ve believed myself a single-citizenship Canadian my entire adult life and still do.
    I posted a couple things here when I first realized that the U.S. might think otherwise, but I decided simply to watch and wait. I will not let a foreign government claim the right to jurisdiction over me in the country of my birth and, in any real sense, sole citizenship. (I would have considerable difficulties establishing a claim to U.S. citizenship now if I wanted it.) I am not, however, prepared to stand by and let my own government erode the rights that I have as a citizen. I’ve been writing letters (though with no impact, as far as I can tell), and if there’s a class action suit or charter challenge, I’m in.

  20. Janenb: It’s good to have you back, but it’s despicable that any of us still have to deal with this.
    I hope to be posting something soon about possible next legal steps. It’s not simple and it’s not cheap.
    Are there any very angry, very wealthy “US persons” out there who want to be our benefactors? If not, we will all need to contribute what we can.

  21. It does appear that the class action suit is the last bastion left to us, now that our govt has sold us down the river. I suspect there are many like me, who do not have the money to engage the expensive lawyers and accountants to help us get out of this, or to get compliant (if that happens to be someone’s wish). It means I also don’t have a lot to contribute to a class action suit, however, I will absolutely, 100% contribute what I can. I can’t remember ever feeling so outraged, so betrayed and so frightened (and for so long). It’s worth doing without something in order to be able to contribute to a class action suit. So count me in. I’m waiting anxiously to hear what the the advice on the next step actually is.

  22. I’m not rich and never will be. That’s fine; I earn my living and pay my full share of Canadian taxes. I’d prefer not to have to participate in a legal battle to establish that a foreign government doesn’t have any claim on me or my entirely Canadian-earned income, and at least in the short term, with no U.S. ties and a Canadian birth certificate, I probably don’t have a lot to worry about. But if there is any reasonable legal prospect of overturning this assault on our sovereignty, I will happily contribute.

  23. It strikes me that under the terms of the FATCA deal, whereby Canadian banks and brokers pass on information to CRA, they would be fully compliant with Canadian law by ignoring the question with an N/A. It is non applicable under the supreme law of the land.
    That is the crux of it.
    CRA will only pass on what is reported to them. What is reported to them must be down within the framework of Canadian law. The constitution supersedes any other law out there.

  24. It strikes me that Canadian banks can still comply with FATCA by answering with N/A. That is the truth. Under Canadian law it is non-applicable.
    The banks in Canada are not reporting to the IRS. They are reporting to CRA, which in turn reports to the IRS under the existing treaty. CRA can only report information that they have. If they have nothing to report, they don’t report, and under the constitution, banks don’t have to report.
    Answering N/A is a perfectly truthful answer for every resident of Canada, whether such person is a US person or not. Under our constitution, the question does not apply.
    The constitution supersedes all.
    Question is….are banks…..and more importantly their clients, smart enough to understand the significance of the constitution?

  25. Chartered Banks as far as I know all come under Federal Jurisdiction. I believe that Credit Unions, which are not Chartered Banks, come under Provincial Jurisdiction.

  26. Sorry if this isn’t the right place to ask this. I asked it on Issaac Brock also.
    FATCA and credit cards…just wondering, is there anything about credit cards in FATCA. I wonder about keeping a positive balance in a credit card account. I do this as a practical matter as I only have one bank account transaction monthly sent to the credit card, which saves on fees. In effect, I keep cash in my credit card account before I spend it. Would that be considered a deposit account?

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