FATCA

What is FATCA?

FATCA stands for the Foreign Account Tax Compliance Act. It is a new piece of legislation to help counter tax evasion in the US.

The purpose of FATCA is to encourage better tax compliance by preventing US persons from using foreign banks and other financial organizations to avoid US taxation on their income and assets.

A significant number of countries worldwide have either signed or are expected to sign inter-governmental agreements (IGAs) relating to FATCA compliance with US government. 

What is the intergovernmental agreement (IGA)?

The Canadian government had entered into an intergovernmental agreement with the U.S. government under the existing Canada-U.S. Tax Convention. The requirements of the IGA will be reflected in changes to the Income Tax Act (Canada) and financial institutions in Canada are required to comply with the changes under Canadian law.

Under the IGA, financial institutions in Canada will report relevant information on accounts of U.S. persons to the Canada Revenue Agency (CRA) rather than directly to the IRS. The CRA will then exchange the information with the IRS through the provisions in the existing Canada-U.S. Tax Convention.

More information on the IGA can be found on the federal Department of Finance and CRA websites at these links:

How do I know if I am affected?

FATCA legislation will affect both personal and business customers who are treated as a ‘US person’ for U.S. tax purposes. The FATCA legislation will also affect certain types of businesses with U.S. owners.

The term US person includes the following (but is not limited to):

A citizen of the U.S., including an individual born in the U.S. but resident in another country (who has not given up their U.S. citizenship)
A person residing in the U.S., including US Green Card holders
Certain persons who spend a significant number of days in the U.S. each year
U.S. corporations, U.S. partnerships, U.S. estates and U.S. trusts.

For more information regarding how FATCA may affect you please contact your tax professional.

When will the FATCA legislation becomes effective?

The FATCA legislation comes into force on July 1, 2014. Alterna has worked to ensure it is compliant with the requirements of FATCA and the IGA.

What are my obligations?

Please contact your tax professional to determine your status under FATCA.

Will financial institutions have to disclose information about registered plans?

The following registered plans will be exempt from reporting:

  • Registered Retirement Savings Plans (RRSPs) 
  • Tax Free Savings Accounts (TFSAs) 
  • Registered Disability Savings Plans (RDSPs) 
  • Registered Pension Plans (RPPs) 
  • Registered Retirement Income Funds (RRIFs) 
  • Pooled Registered Pension Plans (PRPPs) 
  • Registered Education Savings Plans (RESPs) 
  • AgriInvest Accounts 
  • Deferred Profit-Sharing Plans