Foreign Account Tax Compliance Act (FATCA).
What’s FATCA?
The Foreign Account Tax Compliance Act (FATCA) is a United States tax law adopted in March 2010 to prevent U.S. taxpayers from evading U.S. taxes by using offshore financial accounts.
Under an agreement signed between Canada and the United States in 2014, Canada committed to enacting legislation requiring Canadian financial institutions to submit to Canada Revenue Agency (CRA) reports on financial accounts held in Canada by:
U.S. citizens and residents
U.S. citizens who are also citizens or residents of Canada
This agreement is implemented through the addition of Part XVIII to the Income Tax Act (ITA).
Every year, information on reportable accounts is transmitted by the CRA to the Internal Revenue Service (IRS) according to the provisions of the convention between Canada and the United States of America concerning taxes on income and capital.
What’s Common Reporting Standard (CRS)?
The Common Reporting Standard (CRS) is an international standard developed by the Organization for Economic Co-operation and Development at the request of the G8 and G20 countries in 2014.
It aims to combat tax evasion and promote voluntary compliance with tax laws through the automatic exchange of financial account information between participating countries. Along with more than 100 countries, Canada has committed to implementing this standard.
The CRS was implemented by the addition of Part XIX to the ITA, which came into effect on July 1, 2017. This resulted in Canadian financial institutions having to implement procedures to document tax residence and report to the CRA the financial accounts they maintain for residents of participating jurisdictions or for certain entities controlled by residents of those jurisdictions.
Following that, the CRA exchanges the reportable information with the jurisdictions that it has signed agreements under the CRS.
Protection of privacy.
The data exchanged under FATCA and CRS are subject to the privacy laws applicable to each jurisdiction.
Relevant information is provided to the CRA in the same way as the tax information returns that financial institutions already provide to the CRA about their clients. The information is confidential and may only be used to apply the terms of the ITA.
Laurentian Bank and Laurentian Bank Securities’ commitment.
At Laurentian Bank, we’re required to have procedures in place to document the tax residency of our account holders and to report the required information to the CRA. We’ve put the required measures in place to ensure compliance with FATCA regulations, while minimizing impact on client service.