FATCA compliant foreign financial institutions (FFIs), including Canadian banks and investment houses, are required to close “recalictrant” accounts or collect 30 percent Withholdable Payments made to Recalcitrant Account Holders or noncompliant FFIs.
Closing accounts would entail freezing them until arrangements are made for the disposition of the account, be it transfer or whatever, at which point 30 percent of the assets would be withheld and given to the IRS.
Now, I make the observation that FATCA is US, not Canadian, law, and that FATCA compliance is voluntary. In effect the FATCA compliant Canadian bank or other institution is purchasing access to US financial markets with the assets of account holders.
On the face of it, this appears to me actionable and would lead to perhaps the largest class-action law suits in Canadian history.
I wonder whether anyone has any thoughts on this.
@rivka88 @omghe’sstillanamerican
My canadian income tax return is easier than this.
@ tim @KalC
My apologies I misread the instructions
I’ve been up since 02:00
time to get some shuteye
goodnight
@rivka88
I’m going straight out. Since time is running out on me, for I must work tomorrow.
I would like to speak to you. We being in the same region it would reassure me and I might be able to understand better.
Can this be done.
@Greenwood
I live in CDN just off Blvd CDN
good access to transit
Maybe we can meet for coffee at a McDonalds
Regarding the rumored magic of 1986 and U.S. citizenship:
(1) See 1986 in the Sundberg doc attachment to
http://isaacbrocksociety.com/2012/02/27/who-is-a-us-citizen/
(2) At U.S. Dept of State
http://www.state.gov/m/a/dir/regs/fam/07fam/c22713.htm
get the pdf for 1210 Introduction and look at 7 FAM 1214(b)(4)
I cant make out CDN. I wil ask around.
I’m near quartier 10-30.
I’ve made out CDN. I have some mobility problems and cannot take public transit and drive very very little downtown. We will come to a solution.
@rivka88 As I wrote I made out the CDN.
Read the above posr at 9:57.
Other solution: could go through Petros to exchange phone numbers if he wants to.
Hope to read you tomorrow.
Well, I certainly found the comments in this thread to be informative about the banking situation in Canada! For me it is almost surreal that you can open an account there without the bank having any idea what your citizenship status is or where you were born. Each time that I have opened an account in an EU country I have had to show a passport, proof of registration of address at the local town council to show that I am resident, normally proof of income or a work contract, and in some countries, like Italy, I also have to show a fiscal code number (Italian national insurance). A driving licence isn’t considered ID outside of the UK in the EU (and those show place of birth here as well, so it would be pointless to try to do that anyway!)
@Northern Shrike @Don Pomodoro
This reply is a repost of the reply I just made to the Canadian Bankers Association thread (http://isaacbrocksociety.com/2012/03/04/reply-from-canadian-bankers-association/#comment-8057) my reply probably belongs better in the present thread:
There have been some recent posts on Isaac Brock that suggest that the 30% witholding from recalcitrant account holders would pertain to the entire balance in an account. It was my understanding that this only pertained to US-source income. So, if the foreign account only contained proceeds of foreign salary or foreign investments, the 30% witholding would not apply (according to FATCA). However, it is possible that some banks may interpret the 30% more globally. Imagine finding that your account is closed and that your last salary has been docked 30% and you cannot pay your bills.
This brings up the points (again) of possible suit under civil and criminal non-discrimination statutes in the foreign country (for account closure), data protection violations, suit for obstruction of property or illegal misappropriation/conversion of the client’s funds to pay the 30%, or similar causes of action (depending upon the local laws in the foreign jurisdiction). Everyone should be making a list of these possible causes of action and trying to scope them out before 2013, especially if one wishes not to comply. Anonymous calls to banks and local tax authorities might be one way (mask your phone number– most phone systems have a prefix code to dial). Discussions with local lawyers might also be a solution (tell them that you want to stick to your position that double-taxation and reporting is unconstitutional, against international principles, etc. and that you are looking for local legal means to block the application of FATCA.
I have been trying to obtain information as to how individual banks in Europe might be planning to interpret FATCA, and the only somewhat complete paper I have found on this comes from the State Bank of Bern (BCBE): http://www.bekb.ch/en/informationen_zu_fatca.pdf. This bank has stated on its website since well over a year that they will open no accounts with US Citizens. I am not sure what happens in the case of dual-nationals.
I posted the following on the renounce or relinquish thread, but I’m cross posting it here because it seems to relate to some of this discussion:
Petros posted information in another thread a few weeks ago about possible alternative ways to confirm to banks that we are not “US persons:
http://isaacbrocksociety.com/2012/02/11/is-a-certificate-of-loss-of-nationality-really-necessary-new-fatca-regulations-are-in-gobbledygook/
This includes the following from IRS:
A withholding agent may also treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent obtains a non-U.S. passport or other government-issued identification evidence of citizenship in a country other than the United States and either a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, or a reasonable explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth.
The way I read this is those of us who are citizens of other countries can provide a non-US passport or other “government-issued identification evidence in a country other than the United States” and either a CLN or “reasonable explanation of the account holder’s renunciation of US citizenship…” as confirmation we are not “US persons,”
I am assuming a “withholding agent” may be our bank which could be required to withhold funds from our accounts, but I admit I am not certain of that.
Other government issued ID would address Tim’s concern that not everyone has a passport. This would seem to mean documents such as a citizenship certificate. This, of course, will be of no help to those who have not taken out citizenship of the country where they are living.
I will continue to fight that, under Canadian law, I am not and should not be required to provide any information about my place of birth to my financial institution. But, the possibility that other confirmation than a CLN may be accepted could mean I can stay as far away from Consulate as I can.
To go back to the original topic of this thread, yes, I think a class action lawsuit may eventually be needed. I just wish our government would get with it and tell Canadian banks they are required to comply with Canadian laws.
@Blaze
After reading an interesting submission by the Australian Bankers Association they seem to indicate that under the law FATCA applies to government payment such as OAS and CPP. I wonder how seniors will enjoy getting their OAS/CPP witheld thirty percent.(No I am not trying to scare people. Its the law the US passed)
@Tim
The Canadian government is not a FFI. If OAS and CPP is paid by cheque, it is only a matter of cashing it. As long as you don’t mind stashing your money beneath the bed…
@ Don Pomodoro
On the fate of recalcitrant accounts… The FATCA compliant institution may either withhold 30 percent on all payouts from the account, payable to IRS, or close the account. My understanding is that indeed 30 percent would be withheld if the funds from a closed account are transferred from a compliant to a non-compliant institution. The language of the legislation is not clear to me, but common sense tells me that there wouldn’t be much point to FATCA is you could simply move the account from a compliant to a non-compliant institution penalty-free.
In a second comment, you asked about this happening right now, not in 2013. Sorry if I misused verb tense. This is my understanding of what will happend when FATCA comes into force. However, I don’t know whether you can count on there being any non-compliant institutions, even credit unions.
@
I guess my reading is a compliant FFI when presented with a Government of Canada check by a recaltitrant person would be required to deduct thirty percent payable to IRS. I am not trying to scare people its just something I have always suspected and from the submission of the Australia Bankers Association it appears to be something at the very least ABA is concerned with. Just to note this would not come into effect until January 1st 2017.
On credit unions:
Some authors/commentators have raised the question of moving accounts from banks or whatever to a credit union.
Even if the credit union is not FATCA compliant, it may be a very limited option. It’s fine if it is just a chequing account or a savings account. The fees and interest relative to these will not be very different in a bank or a credit union. However, for investment accounts or pensions it is a different story. Suppose you have a pension or RRSP with an investment house, earning 5 percent. If you move it to a credit union and now get 2 percent deposit interest, you have just taken a 60 percent drop in income. Makes a 30 percent hit from IRS look good. The credit union might have some mutual funds that would do better, but the selection would be very limited. And it is partly because they deal in mutual funds that credit unions may decide they must be FATCA compliant.
@ Tim
I agree with your reading of the situation per you 5:37 comment above.
@Northern Strike
It would seem then that the only way to avoid the 30% penalty is to close the account and take everything out in cash (assuming that this is reasonable and the account in question isn’t enormous), unless there is a provision in FATCA that automatically withholds 30% of all closures even under these circumstances…(wouldn’t surprise me if there were!)
@Everyone
To let everyone know oustide of Canada CPP is the equivilent of US Social Security whereas OAS is a senior’s benefit for middle and low income seniors and GIS or Guaranteed Income Supplement is for low income seniors(as Canadian commentator once put the poorest of the poor)
I opened an account at TD this morning
and was told If you hold Cdn citizenship
they had no reporting obligations under FATCA
rivka: I’m glad you got an account at TD. Did you have problems with an account before because of US place of birth?
It would be great if what they told you would be true, but that is not what Canadian Bankers Association said in their reply to Schubert and me last Friday. It is also not what my TD branch was telling me a few weeks ago.
I hope Petros will be able to provide some tech support to post the pdf which CBA sent to us so others can read their full report.
The frustrating thing is we’re all getting different answers to the same questions from different sources. That’s probably because not even the professionals can decipher the the 72,000 Tax Code.
@Blaze
I was reading through the response from the Australian Bankes Association today. Much more detailed than what the CBA gave. FATCA is essentially a violation of the Australian Anti Discrimination Act of 1975. Against Australian privacy law to demand a form W-9 or 1099 as these are “foreign” reporting forms. Cannot close a recaltricrant account holder(basically racial discrimination under Australian law).
@Blaze
I wanted to have a post-renunciation account and will be closing my RBC account. I have been with RBC since 1979, accounts were opened before I became a Cdn Citizenship, Moved my family from Toronto, but returned from working six months in Colorado. I do not know what stray data remains in RBC computer files, will not take any chances.
My OAS application arrived at my correct address, and correct SIN but addressed to a name that had not used for 25 over years. This when have filed tax returns, and held passports under current name since early 1980’s I needed to prove who I was to get benefits the person I am now
@Tim: Have you had a chance to read the CBA actual submission to Treasury and IRS in pdf? It is much more comprehensive than their reply and links in that reply.
The submission outlines some of the challenges in gathering information about place of birth or citizenship in the provision of banking services and the legalities of doing so, but it does not address the discrimination issue as the ABA seems to do. That is why I am hoping to learn more from the Charter/HR lawyer which you suggested.
The submission also outlines concerns about RRSPs, RESPs, RDSPs, TFSAs, etc.
Hopefully, Petros will be able to post the pdf in a form on this thread and on the CBA thread that everyone can access.
I’m still waiting for Flaherty and others to say quite clearly to the banks, to Treasury and IRS that Canadian banks cannot violate Canadian laws to meet the demands of a foreign government.
I know diplomacy takes time, but it shouldn’t be done at the cost of eroding rights of Canadian citizens in Canada. A statement from Flaherty or others saying that would help to alleviate a lot of anxiety, sleepless nights and health challenges relating to this.
With that said, I’ve had enough for today. I’m going to try to Get A Life for the evening so I can get a decent night’s sleep.
I just did. I’ll post some of the Australian ones later. Basically the Australian Bankers Association is saying not just that FATCA is a violation the Australian Racial Discrimination act of 1976 but a violation of International Convention on the Elimination of all Forms of Racial Discrimination that Australia, New Zealand, Canada and many other countries are signatories to.