FATCA Implemented for U.S. and Canada
The U.S. Department of Treasury has announced that U.S. and Canada have signed an intergovernmental agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA). The U.S.–Canada IGA is a significant development because of the high volume of cross-border transactions between the two nations. Many Canadian citizens have accounts in U.S. financial institutions, and many U.S. citizens have accounts in Canadian financial institutions.
The IGA with Canada is a reciprocal "Model 1"-type agreement, which, the Treasury Department explained, means that Canadian financial institutions must provide information on U.S. account holders to the Canadian government, which will then forward the information to the IRS. The Model 1 procedures are designed to avoid potential violations of Canadian privacy laws that would result if Canadian financial institutions reported information directly to the IRS, the Treasury Department reported.
Under the reciprocal arrangement in the IGA, the U.S. agreed to provide tax information to Canadian authorities on Canadian individuals and entities with U.S. accounts. The Canadian government stated that the IRS will provide the Canada Revenue Authority with enhanced and increased information on certain accounts of Canadian residents held with U.S. financial institutions.
Canadian officials said in a statement that "significant exemptions and other relief were obtained." Thus far certain accounts, such as retirement, disability, and some tax-free accounts, will be exempt from the FATCA reporting requirements. In addition, smaller deposit institutions such as credit unions, with assets of less than $175 million, will be exempt from reporting.
For more information, please contact your Brown Smith Wallace Tax Advisor, or Doug Eckert, at 314.983.1268 or firstname.lastname@example.org.