Author Archives: Hazy2

CPAC-Finance Committee May 13th and 14th meetings

For those who want to watch the May 13th Finance committee meetings on CPAC, the May 13th meeting will be broadcast at 5 PM ET on Saturday, May 17.

The May 14th meeting will be broadcast on Saturday, May 24 at 5 PM ET

Thanks to CPAC Viewer Services for providing me with this information.

For a more permanent record of the meetings,  go to the Isaac Brock Society blog and click on the Youtube icon.



Banks must notify customers before sending information to CRA and the IRS

Just after the Canada US FATCA IGA was signed, CRA put out a list of frequently asked questions.

Among the list is item 14 which caught the attention of some: (emphasis mine)

14. Does my Canadian financial institution have to notify me if information on my accounts is being reported to the CRA?

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. 

In his testimony before the Senate Finance Committee on April 30th, Kevin Shoom mentioned that there was a change to the implementing legislation to take away the voluntary nature of informing customers that their accounts have been flagged as reportable. He cited ITA subsection 265(5), which is written in the usual almost incomprehensible language of the Income tax Act.

(5) For the purposes of paragraphs (2)(a) and (b), subparagraph (2)(c)(ii), paragraph (3)(a) andb)(ii), subparagraph B(3) of section II of Annex I to the agreement is to be read as follows 3. if any of the U.S. indicia listed in subparagraph B(1) of this section are discovered in the electronic search,or if there is a change in circumstances that results in one or more U.S. indicia being associated with the account,then the Reporting Canadian Financial Institution must  seek to obtain or review the information described in the portion of subparagraph B(4) of this section that is relevant in the circumstances and must treat the account as a U.S. Reportable Account unless one of the exceptions in subparagraph B(4) applies with respect to that account.

 I have asked Kevin to ask CRA to change their frequently asked questions to revise item 14 and he agreed to do so.Until the Charter Challenge nullifies the IGA, there’s going to be mistakes made by FIs. At least now, with this change, they will be required to contact customers before passing private information through the CRA to the IRS.

Watch out for smaller investment firms

While the emphasis here and at Brock has been primarily on the larger financial firms and their industry association, it will be interesting to watch how the smaller investment firms react to FATCA.

Here’s one item from that may illustrate what we may see:

New rules for U.S. taxpayers with mutual funds

Advisors must be more diligent in determining whether clients truly are U.S. resident taxpayers, and remind them of their obligations. For our part, we won’t open accounts until prospects provide copies of their passports and sign IRS Form W-9 (Request for Taxpayer Identification Number and Certification

In particular, the smaller firms, which number in the hundreds, if not thousands, may not get the FATCA due diligence requirements correct and ask for information that is not required and may very well be illegal.




The elephant in the room-Update 1

In my posting on an information session held recently for members of the Canadian investment industry, it was stated during the session that after the IGA was signed it had to go to Cabinet for approval. No mention was made of Parliament. I found this to be different from my understanding of the process..

After reading Blaze’s  exchange with Maura Drew-Lytle of the CBA, I contacted Maura about this matter and related what was said at another financial industry presentation. She responded fairly quickly that I would have to contact Finance.

So, I then emailed Kevin Shoom. His response was “if an agreement is reached, it would be made public and require Parliamentary approval for implementation”.

So that should settle the question of Parliamentary approval. I did notice that he used the word ‘if”. I’m not sure if that has any significance.



The elephant In the room

A recent information session was held for members of the Canadian investment industry to discuss the impact and implications of a Canadian IGA on the industry. Most of the session was technical in nature, being devoted to what may be described as “back office operations” and the relationships between Introducing and carrying brokers. However there was a general update on the status of the Canada IGA and what to expect. In the notes below, the Canadian investment industry is referred to as “industry” and individual firms are referred to as CFI.

Please note that this posting may be updated if and when new information is received.

Industry does not know when the IGA will be signed. Expectations are for signing by the end of 2013 and definitely no later than mid-March, 2014.

After signing, the IGA will be presented to cabinet for approval. 

CRA has suggested to industry that, in the meantime, the Model 1 IGA and UK guidance may be used as a template. However, there will be differences due to different Canadian laws, regulations, procedures and structures. 

Industry expects the guidance issued by CRA to be “slimmer’ than the UK guidance. Many details will have to be worked out after the first guidance is released. 

The 30% withholding on recalcitrant accounts is being eliminated. Instead, information on those accounts will be forwarded to CRA along with accounts with confirmed U.S. indicia. 

Self certification is left to each CFI and likely will not differ greatly from existing KYC/AML procedures. However self certification must address U.S. citizenship and tax residency. 

Most registered accounts will be excluded. It is not known for sure, just yet, which ones they will be. Expectations are strong that RRSPs, RESPs and TFSAs will be among the excluded accounts. 

No accounts will be closed. 

Issues with customers with U.S. indicia was described as “the elephant in the room” 

I have a few comments—

Industry expressed frustration over the lack of details they have been given so far. I would guess that actual implementation of the IGA may be delayed for some time as the kinks are worked out.

I found it interesting that there was no mention of Parliamentary approval, just cabinet approval.

This session took place just a few days after the Ottawa press conference and the 2 person protest. Mention was made of Flaherty’s remarks and the G&M article. I had the impression (my opinion only) that the comments to the G&M article were noticed, as well as comments posted elsewhere.

While our focus has been primarily on government, the entire Canadian financial industry should be made aware of our concerns. So, keep those cards and letters (comments and emails) coming.