On 5 February 2014, Canada and the United States signed a Foreign Account Tax Compliance Act (FATCA) Agreement.
FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of certain payments made to Foreign Financial Institutions (FFIs) who do not agree to identify and report information on U.S. account holders. Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA under U.S. Treasury Regulations or to implement FATCA by entering into one of two alternative Model IGAs with the United States.
More specifically, Canada and the United States signed a Model 1A Agreement. Under this agreement, FFIs in Canada will report the information required under FATCA about U.S. accounts to the Canadian Government, which in turn will report the information to the IRS. This agreement is reciprocal, meaning that the United States will also provide similar tax information to the Canadian Government regarding individuals and entities from Canada with accounts in the United States.
Information released by the Department of Finance indicates that the Canadian requirements under FATCA will be effective 1 July 2014 for Canadian financial institutions.Back to News
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