A couple of days ago, Tim posted the replies received from Canada Revenue Agency regarding FBAR, in response to a lengthy series of questions tabled in the House of Commons by Huong Mai MP (NDP), the NDP Finance Critic and the Vice-Chair of the House of Commons Finance Committee.
Mr. Mai had also posed a series of questions about FATCA. Today I received by email from Mr. Mai, in response to my email to him last Friday, PDF copies of the CRA and other Government of Canada replies to both series of questions. The answers concerning FBAR have already been posed on this website, but I haven’t seen the answers concerning FATCA. (Please forgive any oversight if they’ve been posted and I missed them.) So I am posting the PDF file of the replies on FATCA, below.
BTW the reply I received, from Mr. Mai’s Parliamentary Assistant, arrived in one business day (I sent my email at 14:22 on Friday and got the reply at 16:34 on Monday). That is spectacularly faster than any reply I’ve ever received from any government or MP office on anything, by email. Kudos to the NDP in general, and to Mr. Mai in particular, on this one!
The government replies aren’t especially informative. Basically all they say is that our government is aware of privacy, banking laws, and other concerns about FATCA. Our government isn’t happy about FATCA and continues discussions with the US government to try to get some mutually-acceptable changes. They don’t, and can’t, really say anything about how this will unfold until the final regulations are announced. For obvious reasons they aren’t going to publicize details of what discussions and proposals are still on the table.
However one interesting reply is the following:
“Insofar as Citizenship and Immigration Canada (CIC) is concerned, CIC does not have a list of Canadian American dual citizens and has no information regarding the Foreign Account Tax Compliance Act (FATCA).”
If CIC doesn’t have a list of dual citizens, I very much doubt any other Goverment of Canada agency does either. Which could make it rather difficult for any consistent search for dual citizens by IRS or anyone else, given the constraints of current privacy and banking legislation in this country. And I can’t imagine any Canadian government, including the present one, setting up a registry of dual citizens of Canada and any other country — for all sorts of political and legal reasons.
I wouldn’t want to be a banker or investment broker in Canada right now, facing the rock-and-hard-place choices that are going to confront them if they go foward into compliance under our current legal framework. And I wouldn’t want to be the politician, even in a majority government, that tried to change that legal framework significantly. (Even majority governments have to face voters eventually, and given the number of naturalized citizens in this country from all over the world, there are some potentially very hot-button issues here that any competant opposition party could have lots of fun with in an election campaign.) But that’s my personal take on things; read the Government’s reply to Mr. Mai’s questions for yourself.
And any mortgages are completely open with any extra payment made taken immediately right off the principal with no penalties!
@Schubert1975
Will your Canadian brokerage firm, affiliated with your credit union, have to be compliant with FATCA (when/if/how it comes in)? I was speaking to a VP Operations of a Canadian discount brokerage firm (based in Vancouver) and he said they will have to be compliant in order to offer their clients the opportunity to buy/sell U.S. securities. As the VP Operations they are presently looking at ‘compliance issues’ to become prepared for FATCA.
@tiger
My understanding is for example Alterna which is one of the biggest in the country does not offer any US investment services either directly or through affiliates. Affiliates under FATCA also have to be under “common owneship” not just a marketing and referral agreement which is what a credit union would typically have.
Another option is Peoples Trust of Vancouver which offers a saving account with cheques and pays 2.1% interest with no minimum and which is available across all of Canada. They will not be involved with FATCA.
@Tim
‘Affiliates under FATCA also have to be under “common ownership”…..’ Now it makes some sense to me. I know that on the Alterna website, they have a link to QTrade re brokerage accounts. But of course if there is not an ownership connection, it is no problem re FATCA.Thanks for mentioning that.
I have all my $ in Credit Unions and have discussed FATCA at length with 2 reps. The CU’s don’t offer US accounts and do no investing in any mutual funds, stocks, bonds and so on. They refer their clients to Credential if those options are desired. It would seem like a perfect situation. However, it appears to be a bit more complicated than we may think. I have posted this in earlier discussions about this and haven’t seen anything more current.
http://www.cucentral.ca/PAR30JUN11
“It would appear at first glance that this new legislation would have little impact on most Canadian credit unions because, although they may have U.S. accountholders, credit unions do not ordinarily have U.S. source income to which the 30% withholding tax could be applied. However, discussions with Deloitte and others in the financial services industry suggest it is not that simple. There may be implications for the credit union system in at least a couple of areas: (i) connected party rules may join credit unions and their affiliates, such as Credential, Ethical Funds and CUMIS, causing withholding tax issues for the affiliates if credit unions are not compliant; and (ii) other FFIs may require credit unions to provide evidence of compliance with FATCA in order to transact business.”
@nobledreamer
The issue with other FFI’s(i.e. the chartered banks) is they do badly want all the credit unions to comply with FATCA. Having said that as a matter of Canadian law they have no way of forcing that. That is why FATCA is such a train wreck.
The other issue is reputational. Basically will Carl Levin go on the warpath against the Canadian government if they don’t make credit unions comply. I don’t really think this latter possibility is on the table realistically but I suppose it is out there.
The US in the proposed FATCA regulations is proposing a FATCA lite program which is intended for entities such as credit unions however, I suspect there is a strong case if credit unions have no income they are going to get withheld on to just stand back from the whole thing.
Do any of these Credit Unions in Canada have their own credit cards, and that is how Carl propose to force them into compliance? They wouldn’t be accepted in America?
Some encouraging news from the World Council of Credit Unions:
http://www.woccu.org/policyadvocacy/srcs
On Feb. 8, 2012, the Internal Revenue Service (IRS), the U.S. tax authority that is a U.S. Treasury Department bureau, proposed a regulation that will affect many non-U.S. credit unions as well as U.S. credit unions when it is finalized
Current Requests for Comment
World Council Deadline: 2012-04-20
Submission Deadline: 2012-04-30
U.S. Internal Revenue Service
Tax Regulations Applicable to Non-U.S. and U.S. Credit Unions
Download Summary
“Key Provisions of the IRS FATCA Proposed Regulation for Credit Unions
Most Non-U.S. Credit Unions Can Comply By Registering with the IRS One Time as “Deemed Compliant” FFIs: As proposed, most non-U.S. credit unions would be eligible to comply with FATCA under the “deemed compliant” FFI requirements if the non-U.S. credit union:
(1) Does not have offices outside of its home country; and
(2) Has at least 98% of its accounts held by residents of the home country.
o Registered “Deemed Complaint” FFIs are Otherwise Exempt: “Deemed compliant” FFIs will likely only need to register with IRS one time, and would not likely have to engage in periodic reporting to the IRS or home country government agencies, tax collection, or “due diligence” internal reviews and audits otherwise required by the proposed rule.
o Effect of Failing to Register with the IRS: If an otherwise “deemed compliant” credit union does not register with IRS, it would likely be subject to a 30% “withholding” tax on certain “withholdable payments,” as defined below—i.e. on funds that are generally attributable to U.S. income sources—when the transaction involves: (1) a U.S.-based financial institution; and/or (2) a non-U.S. FFI that has either: (a) an individual agreement with the IRS for FATCA compliance purposes; or (b) is located in a country that has entered into a FATCA-related tax treaty with the United States.
Online Registration Process: The IRS registration process will be an online, electronic form that is proposed to be available starting on January 1, 2013.”
There is a pdf filel with more details.
Levin is capable of anything.
@nobledreamer
What they are describing is FATCA “lite” as I discussed previously and to be fair the requirement really are “lite”. However, I believe there are still some additional requirements that many Canadian credit unions will be unable to meet. Thus they will have to fall into the category of full non compliance vs “deemed compliant”.
@Just Me
There seems to be a central credit union agency that handles credit cards for the credit unions:
http://www.cuets.ca/about/ceo_message.html
“CUETS Financial delivers quality service to cardholders through our network of 375 credit unions and caisses populaires. Headquartered in Regina, Saskatchewan with a service center in Winnipeg, Manitoba and regional sales team members in Vancouver, Calgary, Toronto and Moncton, CUETS Financial values its ability to serve clients coast to coast.”
Of the three credit unions I deal with, Accelerate Financial (Crosstown Civic Credit Union), Achieva Financial (Cambrian Credit Union), and Outlook Financial (Assinboine Credit Union), only Achieva lists a MC. These companies are all in Winnipeg and consistently offer the highest rates in the RRSP/GIC groups.
http://www.redflagdeals.com/features/canadian-mortgage-gic-rrsp-savings-rate-comparison
@Tim, yep, that’s about right. Quite a thorny issue and a major reason I renounced.
@nobledreamer…
You know this statement is stunning to me…
“Most Non-U.S. Credit Unions Can Comply By Registering with the IRS One Time as “Deemed Compliant” FFIs:”
When you think about it, why should any Credit Union in another country not doing business in the US even have to bother “registering” at all?!!!!!
What business is it of America? I guess if they don’t want their credit cards to be rejected, they need to be considered compliant, but once they register, then what for the future?
I think it is implied with the words “would not likely have to”
“would not likely have to engage in periodic reporting to the IRS or home country government agencies, tax collection, or “due diligence” internal reviews and audits otherwise required by the proposed rule.”
So, that is not the same as “shall not have to” and thus, they may still be “required” under US law and regulations to engage in periodic reporting to the IRS or home country government agencies, tax collection, or “due diligence” internal reviews and audits otherwise required by the proposed rule.”
Of course, that just the World Council of Credit Union’s opinion as to what is “likely” or not, and as we see Carl Levin, may not be satisfied with this and try some other extra territorial overreach to force another countries Credit Unions to to ‘actual’ compliance and not just “deemed” compliant.
So, Canada Credit Unions beware of this “good” news! They are still up against a hard spot to register or not. I wonder if any of them have the balls not to register “one time” at all! Bets anyone?
I believe that something similar will occur here in the UK. I don’t yet know what would happen if at some point I wanted to sell off my US compliant mutual fund and transfer the proceeds into my credit union….but yesterday my first dividend payment was paid seamlessly into my credit union checking account so am reasonably optimistic that they will continue to pay into this account without the 30% withholding. And if my credit union becomes deemed compliant, should be fine to eventually pay all proceeds into it. Could be a major advantage that the Uk is one of the half dozen EU countries bending over backwards for US. Might thus make almost all accounts here deemed fatca compliant by default so less hassle for me.
@monalisa1776
I guess, I am suspicious of this “deemed” compliant category. I wonder how quickly and easily that could change, and once registered, the IRS could change the rules and then what would happen? Just be wary, is my opinion.
mvh
@Just me, fair comment but have decided to become fully compliant.
If necessary, I’ll have to open a fully compliant deposit account but at least all my assets are now in UK so the IRS will have to go through the British courts if they want to play rough…think they’ll go after lower hanging fruit, myself 😛
The USA is not Rome or the Soviet Empire and Canada is not Gaul or Hungary during the Soviet Era. There is no way that Credit Unions are going to TURN ON or TURN IN its customers. Please everybody, chill out. You are all making yourselves crazy. I know how this happens, I used to be a psychologist!
1. stay informed
2. know your rights
3. discuss your standing with your financial institution(s)
4 if you do not like their answers shop around
5. move your accounts if necessary
As I already file, I don’t have a problem with having my assets in Fatca-compliant accounts as long as I can easily access my money and not having to pay high charges compared to non-compliant institutions. Where I will get angry is if they were to withhold 30% automatically for the irs if I chose to sell my US-compliant mutual fund and transfer the proceeds to my currently non-cmiant credit union here in England.
But by the time I would need to sell it, I will be on my late 60s and would have thought that I’d be able to open a compliant deposit account. But hopefully they will have watered fatca down by then to make it more workable.
Though obviously not happy about all the reporting requirements, i am not a tax protester and will comply in spite of the inconvenience and expence.
@rivka88
Sensibly put. We should all follow that advice.
@monalisa1176. You know, I am not really a tax protester either as I am compliant, but this unilateral action, and the world rolling over to US financial imperialism does bother me. I see a world wide regime of tax data reporting created right under the noses of American citizens, and the media in the US is totally quiet. The T-party is silent, GOP candidates are saying nothing, and progressives would hardly raise a voice to complain as it comes out of the Obama administration.
I see how this limits US citizens, and increases Big Government surveillance as to the choices we make as to where they want to live. Like I have said, I am compliant too, but I don’t like the feeling it gives me. I would like to see this FATCA fail, for that reason, however, realistically I think you will see more and more countries doing like Mauritius are considering doing. Justifying to themselves why they have to rolling over, modify their privacy laws and enter into reciprocal regime like the 5 EU countries. The IRS strategy for DATCA is working.
http://bit.ly/GIbBuF
“the best way to tame the beast would probably be for Mauritius to enter into FATCA Partnerships as other jurisdictions have done.
You would be interested to know that in February last, five European countries – France, Germany, Spain, Italy and the UK – signed a deal with the US. They agreed that they would each enact legislation requiring their local FFIs to collect and report FATCA-style information to their local tax authorities. The European jurisdictions would then transfer the information to the US. Under such arrangements, the withholding on pass thru payments would generally only apply to third-country non-participating FFIs. The obligations under the agreement are reciprocal.”
Killing off DATCA is essential, it seems to me, to keep this reciprocity from working, but I don’t think it is going to happen, unless someone else sees a big move in Congress to stop it that I don’t see!
http://isaacbrocksociety.com/2012/03/17/dualing-editorials-datca-vs-fatca/
Now Joe Smith says we should chill out, and maybe he is right, but, when it comes to Credit Unions, I think you would be a fool not to consider what is happening in a Bigger Picture perspective. If you are concerned about your banking data going to be reported to the IRS, there are many mechanisms by which this could happen even though your credit Union right now is “deemed compliant’ by registering and not required to report to the IRS.
You have to consider the various scenarios that it could happen, and then make your decisions about how much of an activist you are going to be, according. Deciding to be compliant may not be a voluntary choice you will have in the future, should Canada begin to think like Mauritius, or if Carl Levin decides to add an amendment to some future legislation specifically designed to address the Credit Union loop hole or do away with IRS “deeming”. Given his mindset, and his previous actions, that is not out of the realm of possibilities. Now, if I am compliant, I guess I don’t care, but for those who have decided not to be, then you have to consider at the cost of “not chilling out”. Although Joe Smith, your point is well taken.
However, I fear that this is the new world model for FATCA is simply this…. “Complain but Comply”
Let’s face it: Obama is the Antichrist, *lol*
@monalisa
Really?
Can we all stop the name-calling and get down to what the Isaac Brock site is for?
Today’s discourse has been disappointing.