N.B.: This raises some very good points, but note that the IGA, as written, does not require proof of parents’ birthplace or citizenship.
Thanks to TomOn for writing the following post:
Theresa Tedesco writes for the Financial Post. Her column titled “Ottawa Had Little Choice in Signing Controversial Deal with US Taxman” appeared Friday, February 7, 2014 [and in the print edition as “US Tax Deal: The New Reality” on Saturday, February 8th.] It begins,
“On Canada Day and thereafter, Canadians or anyone else living in this country who walk into a bank to open up an account, invest in a mutual fund or buy life insurance will be required to prove that they are not American.”
Imagine the new reality.
(1) You show the bank a certificate of loss of nationality (CLN), or you tell them a story explaining why you are not American.
You pass if the bank accepts your CLN or story, but what if the bank doesn’t accept your story? The Canada/U.S. intergovernmental agreement (IGA) fails to say how your conflict with the bank will be resolved. Your financial data will likely be passed on to the CRA and from there to the IRS, FBI, NSA, and so on. How well does the IGA serve these Canadian citizens/residents? Is it foolish to worry?
(2) You show the bank a Canadian passport with a Canadian birthplace.
You pass if the bank accepts your passport as sufficient proof that you are not American. But if the bank wishes to comply with U.S. law your passport is not sufficient proof. The bank will also need to know that you don’t have derivative U.S. citizenship, as you could if one or both of your parents were born in the U.S. So you will have to prove that neither parent was American. Now you have to show the bank a Canadian passport with a Canadian birthplace for each parent or show a CLN for each American parent or tell a story that explains why neither is American, a story that may or may not be accepted.
(3) You show the bank a Canadian passport with a Canadian birthplace for yourself and for each parent.
The bank will fail to comply with U.S. law if, for example, one or both of your parents, though born in Canada, were themselves a derivative American, having lived and worked for a time in the U.S. So maybe you will need to show the bank a Canadian passport with a Canadian birthplace for yourself, your parents, and all four of your grandparents.
Is it any wonder that the U.S. is outsourcing the responsibility, both financial and legal, for uncovering Americans to others? If the detectives deputized by the IRS fail to find an American accountholder, what penalties will the U.S. impose? Failure to file the Financial Bank Account Report (FBAR), which is only informational, can cost an individual taxpayer up to 50% of the value of each account for each year up to 6 years, i.e., 300% of assets. The banks and insurance companies have a lot more money than an individual taxpayer, so the take could be rich.
Is there anything in the IGA that protects Canadians from financial ruin as a result of the Canadian government agreeing to impose U.S. laws on Canadian citizens? Or anything that protects Canada itself from a similar fate as a result of our “competent authorities” signing away our country’s sovereignty?
I can already imagine the issues this is going to cost the Lottery Commissions…(Wake up Call)
“You just won $50 Million…now prove you aren’t a US Citizen…
After the news sank in, the winners were photographed holding a novelty cheque for $50 million. In the U.S., this stunt is nothing more than a promotional photo opp. If the $50 million was won by a resident of one of the 50 states, about 38 per cent (or $19 million!!) would go to the tax man. Luckily, lottery winnings are not taxable in Canada. This couple really did get $50 million to deposit into their bank account!
18. How do I claim winnings if I am a resident of the United States?
OLG ‘s lottery games are designed to be enjoyed by adult residents of Ontario. Occasionally, residents from other jurisdictions play and win OLG’s lottery games, and OLG treats everyone fairly. The same claiming procedures described in the “How do I claim a prize?” answer above apply, subject to any U.S. postal regulations. OLG cannot mail cheques into the U.S. In cases where U.S. winners are required to receive a cheque for their winnings, they must pick up their cheque in person at the OLG Prize Centre in Toronto. More information about claiming prizes is available by calling the OLG Customer Excellence Centre at 1-800-387-0098.
19. What tax implications are there for lottery winners?
Generally, Canadian tax authorities do not consider lottery winnings to be taxable for Canadian tax purposes. However, U.S. residents playing OLG lotteries should note that the Internal Revenue Service (IRS) does consider such winnings to be subject to U.S. tax. While OLG will not withhold the U.S. tax against Canadian winnings, U.S. residents must report such profits on their individual tax returns. For more information, U.S. residents should contact their local IRS office.
I have to disagree with Schubert because we know that bureaucrats can in fact go way beyond the letter of any agreement in their zeal to CYA (cover your ass). Consider the closure of accounts of US persons in Switizerland, even when they are resident in Switzerland and citizens of Switzerland. There is actually nothing in a agreement with the USA that requires Swiss banks to do this, but in their attempt at CYA, they have decided that the safest thing to do is to close the accounts of US persons and not permit US persons to open new accounts or even renew mortgages.
Consider the following:
Canadian born Johnny banks at TD in Huntsville ON. The new manager, Jim, went to High School with Johnny. Jim knows that Johnny’s father is a US citizen, while Johnny’s mother is a Canadian. Johnny lived for ten years in the US and moved back to Canada and was a new student with Jim in grade nine at a local school. Oops. Jim recognizes Johnny as his high school mate, and decides that he must call Johnny in for an inquisition. Johnny tries to prove he is not a US person, but to no avail. He has never obtained a CLN or his dog ate it. Never mind, he can’t prove to Jim that he is not a US person and he becomes an specified account holder. The change of circumstance: the manager Jim knows Johnny personally and since he is a complete dick (enough of these sort of people in every country) he turns Johnny’s account information over to the CRA as specified under FATCA, which then in turn turns over his information to the IRS.
This is not likely to happen every day, but it will happen in a country of 30 million people with as many as 1 million so-called US persons. I don’t think that this post is irresponsible. Unlikely to be sure.
Superintendent of B.O.L.L.O.C.K.S. (a new division of the IRS created by IGA’s)
BountyHunters for Overseas Licensed Lotteries OverlookedClaims Kept Secretly
—————-
The above is for humour purposes only, any resemblance to reality is purely coincidental.
serfingUSA says’
““In general, you are a U.S. person for U.S. tax purposes if you are a U.S. resident or a U.S. citizen.
A U.S. resident would not generally be expected to include a person that has economic and social ties that are closer to Canada than the U.S.”
And…
“If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.
However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
And…
“A financial institution complying with the agreement will not be required to ask its account holders about their place of birth”
Where is this located?
anyone
“In general, you are a U.S. person for U.S. tax purposes if you are a U.S. resident or a U.S. citizen.
A U.S. resident would not generally be expected to include a person that has economic and social ties that are closer to Canada than the U.S.”
And…
“If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.
However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
And…
“A financial institution complying with the agreement will not be required to ask its account holders about their place of birth.”
And…
“If you are a new client at a financial institution after June 30, 2014, your financial institution may ask you to certify whether you are a U.S. person when you open your account; it would then confirm the reasonableness of this certification based on the information you provide when you open the account. Alternatively, your financial institution may follow a process similar to that described above for existing clients, based on a review of the information you provide when you open the account.”
Where does this come from?
George3rd,
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html
ATTENTION: EM….
@ calgary411
Yep got that. I’ll be carrying it in my wallet (bubblebustin found the link for me), along with Skeptical’s suggestions on how to respond to a bank’s questions.
The link:
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html
I have to say my brain is totally clogged with IGA goo right now.
Thank Calgary 411 I threw out card over 35 years ago. I never want to ask SSN my number as they have perjury clause and make you choose if you are still a legal permanent resident or not.
This is agreement is way better than UK agreement.
No shutdown of accounts, more registered account,
@George3rd – I was getting that info from here: http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html
schubert1975 says
You posted this 2 years ago
“Canadian citizens still protected from IRS tax collection and penalties, in Canada
””
And, speaking in spite of being a life-long supporter and member of the NDP who has never voted Conservative in his life, God Bless Jim Flaherty. Our government is in fact standing on guard for its citizens. As is the NDP. Who knows what the Liberals stand for?”
http://isaacbrocksociety.ca/2012/02/13/3200/
This agreement is vastly better than what you though was coming up.
There is no shut down of account
There is no 30% withholding on US person accounts for US assets.
There a whole lot more registered accounts.
Unlike most of you, I understood the economic nuclear weapon that Obama had over are head, this is as good as an agreement as we can expect. We are not going to cutoff economic ties with USA. We trade hard to move commodities, the USA trade I phones, google etc. There is a world filled with commodities.
Tell all the millions of Canadian they can not travel to USA. (i will never cross the border myself).
Tell all the people with mortgages that interest rates may go up 1 or 2% because we can not access US capital.
In Europe they are shutting down US account. Our agreement is quite clear even recalcitrant accounts can not be shut down.
I still wish the Canadian Supreme Court will throws it out. The USA can not do anything in that case.
Thanks sefingUSA .
Em just say you are not a US person. This is what Canada allow. Those answer just arise suspicion in your case..
Of course do not cross the border
@George3rd
If u had a gc before.. with the integrated databases.. even on a passport… they supposedly will know. Someone mentioned that a gc holder left & moved back home & went to visit family in the US on a passport. Was asked if they had a gc.. it was expired & they had no clue where it was, was detained for questioning. Heard the only thing they didn’t do was shine a light in their face during the questioning. They all acted like it was criminal that they left the US to go home.
But Obama said his administration was all about kindness
“Kindness covers all of my political beliefs,” Obama told his audience of wealthy investors, high-tech donors, journalists and fellow Democrats Tuesday, only two months after he slashed at GOP legislators, calling them arsonists, nuclear blackmailers, economic wreckers, hostage-takers, obsessives and irresponsible extremists.”
http://dailycaller.com/2013/11/27/obama-says-his-policies-are-built-on-kindness/
So, all who no long hold a green card (to be turned back in with Form I-407) and who may be affected going across the border should carry with them and their Canadian passport a copy of the IGA that Canada signed with the US which says per FAQ at http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html
Calgary411
The ruling above protect us in Canada not in USA.
In Fact US Dual Citizens who can hide their indices are safe in Canada from even getting nasty letter from the IRS. But if you cross the border no protection.
If you can hide indices and do not want to give up a sizable amount of your net worth to be compliant. Throw out the nasty IRs letter and do not cross border,
The 1995 Canada USA Tax treaty is another manner signed by Trudeau chief lieutenant. This allow US citizens who are Canadian resident to be taxed, Actually it allow US tax laws apply to all Canadian resident, but CRA will not collect against Canadian citizen at time it occurred. The Revenue Rule is your protection in courts.
@ George3rd
I haven’t been across the border in nearly 20 years and vowed long before there was even a whiff of FATCA stink in the air that I would never go there. So it’s “No, I am not a U.S. person” for my Canadian credit union and then hope that I never get one of those brown envelopes from the IRS. Until the USA aborts CBT and adopts RBT I will never have complete resolution though. Such is life. I have not trusted the USA for ages, not one iota, and now I feel the same about the Harper government.
You’re probably right, unfortunately, George3rd. We have learned we can trust no one.
Because you husband just became a Canadian, I guess you can not throw the brown envelope out. Thank Chretian for 1995 USA Canada Tax treaty for that. If it is about you throw it out,
Em you do realize that in all EU countries, Switzerland, Mexico, Japan et etc You would be considered a US person. They are collecting from Green Card holder in Sweden. They are closing account in Belgium & Swiss. In Canada the worst can happen for a dual is you get nasty letters from IRS.
@ George3rd
It doesn’t make me feel lucky to be in Canada, just completely frustrated that the USA and other countries are creating a “negotiated” diaspora lottery where USPs in different countries are treated either a tad better or a tad worse depending on the terms of their IGAs. The US has barely budged an inch on any of the base details of those agreements. Nobody but nobody is being treated fairly by the USA.
“However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
…and if by chance that they should ask me…(against the rules of the Charter of Human Rights and Freedoms) my viewpoint will be to tell them to talk to my lawyer. I am a Canadian citizen born and raised to two Canadian Citizens (one born here, one naturalized (from Japan)) and the only connection that I have to the United States is through my wife (a Canadian Permanent Resident – who will be ditching her US citizenship). My response will be the middle finger and if they put my account down as recalcitrant as a result of my connection to my wife, there will be a lawsuit coming against the bank so fast it’ll make the bank executives’ heads spin faster than a spinning top. I will also be warning the CRA that if they see my account flagged and my name gets sent down to the United States, that they had better hope that they have enough in their treasury to pay for the lawsuit that I’m going to throw in their laps because I am angry enough to bankrupt this nation if they choose to mess with my banking information as a Canadian citizen (born to two legitimate Canadian citizens). They opted to throw me under the bus along with my wife and children and I’m rightfully enraged.
@ The_Animal
I love your fighting spirit. You will have no problem at your bank but your wife will need all the support she can get to plod through the ridiculous bureaucratic maze ahead of her, first to Canadian citizenship and second, to relinquishment of her American citizenship. It should not be this way. She should have been able to live and breathe free with her permanent residence status for as long as she wished. (I remember my husband’s PR cost us about $2000 at a time when we had pretty much nothing and there were enough hoops to jump through to get that. Turned out they were baby hoops compared to the past two years.) Canada should have been standing on guard for her and all of us but it didn’t. I know it’s too cliche Canadian of me to say this but, “I’m sorry.”
1. The post invites readers to imagine.
2. There are two groups of USCs: those born in the U.S. and those born outside the U.S. to U.S. citizens.
3. The imagined reality leads to the absurdity of trying to identify people born outside the U.S. as citizens. The sentiment underlying the absurdity is sympathy with the abused.
4. The post suggests that the U.S. through FATCA has found another way to shake down financial institutions. In searching for USCs the FIs are bound to miss a few, which could be costly in fines and penalties. Think of the billions already extracted from the Swiss banks and the $20 billion from J.P. Morgan alone.
5. It also points out the absence of a way to adjudicate the errors that will be made in trying to identify USCs.