Editor’s Note: Finance Minister Jim Flaherty announced earlier this month that Canada and the United States have signed an intergovernmental agreement under the Canada-U.S. Tax Convention on US access to financial accounts held by dual US-Canada citizens. Since the announcement, CARP has heard from numerous members who are dual Canada-US citizens concerned with the financial and privacy implications regarding the new Foreign Account Tax Compliance Act (FATCA) agreement. CARP has shared with Finance Minister Flaherty’s office the views expressed by our members Minister Flaherty has responded in a formal letter to CARP members. Below you will find the full contents of the letter: – See more at: http://www.carp.ca/2014/02/22/federal-minister-finances-message-carp-members-canada-won-privacy-protection-exemptions-relief-fatca/#sthash.o374vF8J.dpuf
It is true, as Finance Minister Flaherty points out, the actual requirements for US Persons to file and report (paying ‘compliance industry professionals’ if they are not capable of dealing with the complexity in fear of penalties) and to remit to the IRS actual taxes owed that are not covered by the US / Canada Tax Treaty are not within the power of Canada to change — EXCEPT there should be immediate revisions to that US / Canada Tax Treaty to REALLY EXEMPT much of what we will continue to be faced with.
…
What We WonUnder the intergovernmental agreement, financial institutions in Canada will not be forced to report any information to the IRS. Rather, only information on accounts held by U.S. residents and U.S. citizens will be reported to the Canada Revenue Agency (CRA). The CRA will then exchange the information with the IRS through the existing provisions and safeguards of the Canada-U.S. tax treaty. This approach is consistent with Canada’s privacy laws, adding a strong layer of protection that would have otherwise been absent.
Canada obtained even further exemptions and relief though.
For instance, we ensured that certain accounts are exempt from FATCA and will not be reportable at all. Many of the accounts exempted are those of special importance to seniors – like the Registered Retirement Savings Plans, Registered Retirement Income Funds, Registered Pension Plans, Tax-Free Savings Accounts, and more. Also, we further made certain that smaller financial institutions, like small credit unions, will be exempt for any reporting at all.
In addition, the 30% FATCA withholding tax will not apply to clients of Canadian financial institutions. Furthermore, we had the FATCA requirement that would have made financial institutions close accounts or refuse to offer services to certain clients removed for Canada.
What this Means for Dual Canada-U.S. Citizens
As well, this agreement is strictly a tax information-sharing agreement. It will not impose any U.S. government taxes or penalties on U.S. citizens or U.S. residents holding accounts in Canada. Furthermore, the CRA does not and will not collect the U.S. government’s taxes on Canadian citizens if the individual was a Canadian when the tax liability arose – this includes dual Canada-U.S. citizens.Our Government fully understands the separate, but important, issue of U.S. citizenship-based taxation on dual Canada-U.S. citizens. The U.S. government’s system of citizenship-based taxation is different from the residence-based approach generally followed most of the rest of the world.
This creates unique challenges for U.S. citizens who reside in other countries – especially Canada. However, as these are U.S. laws that apply to U.S. citizens, they can only be addressed by the U.S. government – not Canada. In that regard, I would encourage U.S. citizens in Canada to share their concerns with the U.S. government.
More Questions?
Rest assured, Canadian financial institutions must be open about their policies and procedures for complying with the agreement and must be prepared to make this information available to anyone. Importantly, financial institutions must allow account holders to have access to any personal information that has been reported to the Canada Revenue Agency.
If CARP members have further questions or would like more details about this issue, I welcome you to visit http://www.fin.gc.ca/n14/14-018-eng.asp, email me directly at jflaherty@fin.gc.ca, or write a letter (postage-free) to me (address it to me at House of Commons, Ottawa, ON, K1A 0A6).
Thanks for posting this Calgary. I will be sending another letter to CARP soon.
nice doublespeak. FBAR issues are penalties. Not taxes. I wonder what Obama’s lackeys in the Supreme Court will say about them.
Finance Minister Flaherty says:
Is Mr. Flaherty, then, telling “dual citizens” that they will not have to REPORT Registered Retirement Savings Plans, Registered Retirement Income Funds, Registered Pension Plans, Tax-Free Savings Accounts, and more (meaning RESPs and RDSPs and Canadian mutual funds?) — on any IRS form, including the 8938, 3520 and 3520A, as well as Foreign Bank Account Reports (FBAR)? If you are not telling dual citizens this, then you should CLEARLY state that all IRS tax return and reporting requirements are UNCHANGED for dual citizens OR only-US citizens resident in Canada. Spell it out so that every ‘US Person in Canada’ (and the MPs who represent them) know exactly what is exempt. Are these exemptions ONLY for the banks to not have to report these accounts to the CRA?
Additionally,
Will this mean that the “exempted accounts” WILL or WILL NOT be reported to the CRA? Just need clarification as that statement refers to “accounts held by U.S. residents and U.S. citizens” WILL be reported to the CRA (i.e., doesn’t mention the accounts “exempted”).
At the end,
…but some people will stop at the first statement — so very confusing when so many people are involved — of all different levels of reading comprehension. It has to be absolutely CLEAR.
Just want to get it clear, Mr. Flaherty. It almost seems even more confusing to me now. I don’t want ANY US PERSON IN CANADA to not fully understand what is now required of them. I do not want ONE US PERSON to have to go to a US tax professional to have interpreted what it is, I believe, Canada’s duty to make clear. If one MP tells one US Person in Canada that they have nothing to worry about, that is indeed dangerous and misleading. If even this explanatory letter doesn’t CLEARLY explain, that is not good enough.
Flaherty can’t play the ‘this is a US government problem so take it up with the US if you don’t like it’ card, since the Canadian government has agreed to enforce US law on Canadian territory. You can’t help to make it our problem and then say ‘sorry, it’s not our problem’.
What we won? There is no winning here! What’s with this guy Flaherty? He just doesn’t get it, so knocking on his door is pointless. We have to go after someone smarter than him who gives a damn about the Charter and Rights and Freedoms of the citizens of this country. CNN, NBC, ABC need to get the word out to Americans everywhere. The Fugative Slave Act of 1850 was abolished. The FACTA Tax Bondage Act can be abolished too. The Steam Roller starts here.
As those who have followed my comments and who know me personally know, I absolutely am no fan of Jim Flaherty or of the “Harper government.” However I think there is a legitimate question about whether this letter to CARP is an empty glass or rather whether it is a half-full, or half-empty, glass.
The letter unequivocally reiterates the Finance and CRA position that no tax liabilities (nor penalties under FBAR, not mentioned here but mentioned earlier by Flaherty, and nothing in regard to FBAR penalties has changed in the Tax Convention under which this IGA is very clearly linked and governed, read the preamble in that regard) will be collected by CRA against Canadian citizens for periods of time when they were Canadian citizens nor (under the 2007 Amendment actually signed by Flaherty himself) for ANY period of time if they were a Canadian citizen before November 8, 1995 (no idea why that date, but never mind). And that makes no distinction between birth citizens and naturalization citizens.
This isn’t new. Some of us have been saying for more than two years, if you are Canadian and stay on the “right” side of the border, none of this crap will have any financial impact on you (other than increasing banking fees that every Canadian will have to pay to finance this witch hunt by our financial institutions). Nor does it affect persons who have CLNs of whatever type; your information cannot be sent forward, you would have excellent legal grounds for suing either the bank or the CRA if they ignored this (as far as my street-legal analysis permits). And Flaherty has clarified in this letter that both the banks and the CRA are going to have to let you know (in advance, let’s hope or make damn sure with a legal challenge) what information is being forwarded and why. Which sort-of addresses the due-process issue I raised on that subject elsewhere, recently.
This is not ideal, it is certainly not a forthright assertion of Canadian sovereignty, but think carefully about whether this glass is empty, half-full, or half-empty, in your own case, and decide accordingly what you’re going to do about it. (See also the other posts today on both websites about getting a legal opinion on a Charter challenge, and the need for people to be willing to donate money for that if they’re serious about fighting this.)
Hand-wringing over these matters is now pointless IMO. Doing something is the point — what, where, how, and how much. (And remember this in the next federal Canadian election, and in the next US federal election if you’re a US citizen and remain one for that election.) Or, as another blogger keeps saving, “sauve qui peut.” Whatever that translates to in your own situation.
A little more hand-wringing for me. In putting myself into the shoes of a US Person in Canada learning about this for the first time from the Government of Canada announcements and now response through CARP, it does not adequately speak to me. I guess I will have to go to one of them thar US tax and accounting professionals to find out what I should do. I am afraid!
If you have to travel there for family it is still glass half empty. I’ve already taken the actions I needed to take. There are so many differing situations it certainly will be interesting to see how this works out for everyone.
As for the hand wringing. Well, I’m still not happy about losing my citizenship. Sorry but, at my age it’s a bit of a weird feeling to sort through and especially since I didn’t really come to that decision without some force pushing me in that direction against my will. I’lll be feeling resentful about that for a long time.
I’ll send CARP something and tell them they can share it with the U.S. and then I won’t hold my breath. It’s very clear especially after the NPR report that the U.S. knows what it is doing to people and flatly could care less.
What do we want? This likely applies to most of us the left the USA, wherever we landed/
1.) Asking place of birth where you bank is in the same category as asking what is your religion. It serves no legitimate purpose and is discriminatory
2.) Asking citizenship MAY have some legitimate purpose but the fact you may have some lingering citizenship with Eriteria, the USA or Timbuktu is not relevant. If you are a Canadian, living in Canada then thats it you are Canadian.
Bluntly, the Canadian Citizenship Act or whatever it is, needs to be amended and state that the Government of Canada does not recognize dual nationality as having any legal basis in Canada. In the eyes of the Government of Canada you are and want to be looked at as CANADIAN.
There may be some merit in writing your MPs and try to get a formal statement for the record, Does the Government of Canada recognize any other nationality held by a Canadian Citizen in dealing with the Government?
Folks, this term dual/tri/multi national has NO legal basis in any country as far as I have seen. Except maybe in the EU where we have dual nationality with the European Union and our own Country.
Caveat to my comment above, it does throw uni-USA nationals to the wolves but I hate to say it but not much you can do.
Dear Mr. Flaherty
I am responding to this CARP article. I assume those are your statements?
I have lived in Canada for 44 years and I have never seen the sheer terror in the faces of so many of our citizens gathered in one room on Saturday in downtown Vancouver to hear one of the foremost experts on FATCA. The way I see things, a hostile foreign government that thinks they can collect huge fines and destroy peoples lives as been allowed to intimidate you and some other foreign government leaders into completely surrendering our sovereignty and our financial freedoms and very freedom to enjoy life free from terrorism and persecution from foreign powers. Canada is not a tax haven but the US wants to collect huge draconian fines that would bankrupt innocent people and destroy families and their lives. I hope you can live with yourself
You didn’t “WIN” anything. You should have called their bluff and told them we have laws here and to go take a walk and go ahead and withhold 30% on US sourced income if they want Canada to break relations between the two countries. Do you REALLY think the Americans are going to upset trade and banking partnerships with their neighbor, the biggest trading partner they have? If Jean Chretien was PM or Pierre Trudeau was PM and the Americans brought this IGA nonsense with them they would have laughed, said no way and killed it right there. Had you shown you had some gonads this would be done and finished. If the Americans had followed through on their threats then you should have reciprocated and withheld 30% of any funds going to the USA. See how the business community likes that. Did you know that an American living in Europe cannot open a bank account?
But you have damaged over 6 million “US Persons” including about the 1 million Canadian citizens with hanging US citizenship. You have damaged our economy and our tax base assuming the Americans are going to pick our pockets. You are potentially damaging or Central Credit Union. You are showing honest Asians who want to invest here that their business and private affairs are now going to be exposed potentially to the US. The list goes on and on. You gave away our country without a single shot being fired.
Then there is the effect it has on Canadian citizens with US family members, business associates, business dealings abroad etc etc. Most Canadian Americans I know are on the edge of a heart attack and cannot function, sleep, enjoy life as other Canadians do because they are living in fear. This is exactly the same fear the Jews felt as their personal affairs, including financial information was used to hunt them down, confiscate their wealth and round them up and kill them. Are you also aware now that Canadian citizens being told they should not marry a person with a US person designation? So, thanks to you millions of citizens here are not even free to fall in love and marry because some of our citizens now view other citizens of us as pariahs. I’ve heard talk of suicide by some over this, people who were living a normal law abiding life one moment and then it all came crashing down. You and the PM are responsible for this air of terror in Canada now so maybe you should consider this when the word terrorism is brought up in Parliament. You have aided and abetted the biggest terrorist entity in the world and might I say the biggest tax haven on Earth.
Just so you know what leaders of other countries think about this, I recently returned from holiday from a Caribbean country where I overheard a conversation at a table next to ours .. I recognized two top government leaders and heard the wife of one of them comment on FATCA. She used the terms “extortionists and thieves” when referring to the USA and said “we get nothing out of this in return anyway”. They have yet to sign on I noticed but at least one can assume they won’t.
What have you done to Canada, the country that you say you love? Where are your principles? No, you have won nothing. You didn’t have the right to negotiate regarding a foreign power’s tax laws thereby putting a significant very large minority of Canadians at risk and singled out for special treatment as second class citizens. I don’t see how this will play out but however it does you can blame yourself for changing this country forever and destroying our charter of rights. Did you learn how to do this? Princeton University?
Lastly I resent this important issue that affects and can destroy the lives of millions here being handled by someone is has severe health issues and thereby could be taken advantage of in trying and difficult negotiations. Also I don’t believe this kind of negotiation affecting citizens here by obviously canceling their protection under the Charter of Rights should have been conducted in secrecy but rather in public by all parties equally.
xxxxxxx
I tend to agree with Schubert. I look for the half-full glass. Also, I think that Flaherty in sincere, but misguided and part of a government that has made up its mind that Canada has to have an IGA.
What surprised me was his reference to exempt credit unions. That is very close to an overt suggestion to hide one’s money there.
Calgary411 is so right about the lack of clarity. Not only is his letter to CARP too muddled and imprecise, the questions on CRA’s IGA FAQ and the original IGA text are unclear.
Here’s an excerpt of what I wrote to him, Kerry-Lynn Findlay (National Revenue) and Alice Wong (Seniors) concerning FATCA and the elderly:
“Another vulnerability for these citizens is the lack of clarity caused by the frequent use of “not required” both in the IGA and the FAQ, when referring to the institutions’ search for possible US persons among their account holders…….
Since “not required” is not the same as “should not”, the language implies that financial institutions could report all accounts, regardless of the balance, and ask all account holders for their place of birth, if they so choose, unless the implementing rules and directives that the CRA sends to financial institutions protect elderly “suspected US persons” from institutions that might find it easier to behave in such a manner.
Without meaning to be facetious, let’s suppose that Parliament were to adopt a law on euthanasia. If someone were to ask whether grandchildren will be allowed to have their grandparents put down in order to inherit sooner, we would not expect as an answer: “Grandchildren will not be required to have their grandparents euthanized.” Grandma would not be reassured.
“we had the FATCA requirement that would have made financial institutions close accounts or refuse to offer services to certain clients removed for Canada.”
For Canada?
SO FLAHERTY……WE ARE TRAPPED IN CANADA AND NOT ABLE TO MOVE AROUND THE WORLD FREELY, LIVE IN EUROPE AND OPEN ACCOUNTS THERE IF WE MOVED THERE?
STOP PERSECUTING US WITH YOUR SS OBAMA TORTURE TECHNIQUES
“What surprised me was his reference to exempt credit unions. That is very close to an overt suggestion to hide one’s money there.”
The larger Credit Unions in the various Provinces are absolutely going to go to Credit Union Central and complain about unfair discrimination. Also the more US Persons fill up the smaller credit unions the bigger the danger of the “small” threshold being passed thereby exposing its clients.
I have said for months that NOBODY here should have a bank account in a Transnational Bank but should opt for the privacy of a credit union. The Canadian Credit Union Central is NOT The Canadian Bankers Association that betrayed us. Why o Why would any US Person in Canada continue to do business with transnational bank unless it’s for equity trading? All other types of accounts should be closed right now.
If you don’t believe this then you really don’t get what’s happening around the world.
Buy GOLD
Jim Flaherty, sadly for him, is NOT competent to speak for us because he is on mind altering drugs
http://o.canada.com/news/national/concerns-on-the-rise-over-flahertys-health/
Cheers Big Ears. Insulting the Finance Minister is bound to be counter-productive. The article on his health is outdated.
The exemption will apply to credit unions that do not accept account holders not resident in Canada. CUCC ‘s Fatca page interprets the IGA that wayfor the moment.
“When asked what he thought of the support from the U.S. Democratic Party, and what it says about Harper’s relationship with the U.S. president, Trudeau replied: “You’ll have to ask Mr. Harper about that.”
http://www.ctvnews.ca/politics/stronger-environmental-laws-would-encourage-keystone-s-approval-trudeau-1.1699899
Think about it.
“atticusincanada says
February 23, 2014 at 3:17 pm
If you have to travel there for family it is still glass half empty. I’ve already taken the actions I needed to take. There are so many differing situations it certainly will be interesting to see how this works out for everyone.”
I imagine anybody that will cross the US border with a US birth place will have to be tax complaint. They do not need an IGA with Canada to do that.
Sorry, here’s the link.
http://www.cucentral.ca/MediaRoom/FATCA%20IGA%20Feb2014.pdf
It appears that credit unions with canadian resident members will have to report that this is thete official policy. There was a discussion of this on the FATC questions thread.
Very important point @serfingUSA.
We did not ask nor expect Flaherty and Harper to change a US law. It is deliberately disingenuous of him to pretend that we have, and to redirect CANADIANS to a FOREIGN government for redress.
He is a lawyer. He chooses his public communications and crafts what he says with deliberation and strategy.
If that was his prescription and best advice to us, by his deliberate stonewalling, silence and behind the scenes negotiations, and lack of ANY public consultation in Canada, he denied ALL Canadians as well as duals access to the democratic process. He and the US colluded to keep this as quiet as possible until it was a done deal. Everything that we have learned about FATCA and the status of it vis a vis Canada was for the most part hard won and hard earned – for the most part WITHOUT assistance from the ruling Conservative government and their party’s political representatives in Canada. For the most part, the information we have gleaned and compiled came from our cooperative efforts as individuals, the internet, and with some assistance from a few very knowledgeable academics like Allison Christians, a few sympathetic MPs, a few US tax and law professionals, the CCLA, etc.
WE have come this far DESPITE the best efforts of the Canadian banks, their investment cousins and the Harper Conservatives.
We are Canadian citizens and permanent residents. By suggesting that we should be speaking to the US government, Harper is knowingly and disingenuously ducking his responsibility to those born or naturalized as Canadians, and to those the government of Canada has granted legal permanent status to.
Flaherty and Harper chose to sign on to FATCA – which it is well known had no legal standing in Canada until they agreed to it – BECAUSE it is a US law. The Conservatives are the creators and implementers of the legislation that will enable it in Canada. They chose to be FATCA collaborators, and to make the CRA a reporting arm of the IRS in Canada.
It is disingenuous in the extreme for Flaherty to seek to direct those Canadian citizens and residents affected and those opposed to deal with the US government without Canadian government assistance. Did he direct Canadians of Eritrean descent to deal with Eritrea directly over their extraterritorial diaspora tax imposed and collected on Canadian soil? No, he did not.
So, are we not equally deserving of our own government to be steadfast on our behalf – regarding a law which Flaherty himself first said was unwarranted, wasteful, unecessary, etc.? And which he acknowedges is extraterritorial?
Did he tell Canadian banks to deal with the US on their own over the Volcker rule? NO. And that was an instance where the Canadian banks actually have an economic connection and interests in the US – which we as individuals resident in Canada do not. Yet, Canada was more invested in pushback on behalf of Canadian banks than on behalf Canadian individuals, seniors, children, etc. that the US claims ownership of for life and beyond.
http://www.huffingtonpost.ca/2012/02/13/vocker-rule-canada-flaherty-carney_n_1273158.html http://opinion.financialpost.com/2013/12/09/volcker-rule-release-will-be-bankings-test-for-nafta/ http://business.financialpost.com/2012/02/13/jim-flaherty-steps-up-to-object-to-u-s-banking-rule/ http://www.canadianbusiness.com/blogs-and-comment/the-volcker-rule-spares-canadian-government-bonds/
We expect that as an autonomous sovereign nation – OUR Canadian federal government represents CANADIANS in matters of foreign relations and international treaties – and that they will represent the best interests of Canadian citizens and residents – regardless of their national origin, birthplace or their parentage.
Harper and Flaherty have a fiduciary duty to safeguard the Canadian fisc, AND our Canadian made and Canadian held assets – which they have already taxed on Canada’s behalf. Even before FATCA, in the US/Canada Tax treaty, unbeknownst to most of us, the Conservatives had already knowingly left our Canadian registered accounts vulnerable and unprotected from US extraterritorial double taxation AND reporting and penalties imposed on Canadian resident individuals deemed by the US to be Canadians with a ‘US taxable person’ burden. Thus, right from the beginning of this, Flaherty knew full well that the treaty as it stood contained several significant instances of US extraterritorial taxation of Canadians, and that FATCA would make that exponentially worse. He did not acknowledge those existing significant flaws. And now he seeks to deflect us as if we are not Canadians.
Many of us are no longer US citizens, some by decades or half a century. Many of us opposed to FATCA never were US citizens, and are merely married or the parent of a Canadian so burdened.
It is laughable and despicable for a Canadian Finance Minister tasked with international tax matters to tell Canadian citizens that it is up to them to treat with a foreign nation for relief.
It is unacceptable for him to suggest that because under the IGA Canadian banks and the CRA are somehow not currently bound to report our registered accounts to the IRS that is NOT imposing US taxes on those affected. It is aiding and abetting as an accomplice to the IRS. ANY reporting of Canadian accounts and assets to the IRS – whether direct or indirect is bending over for the pillaging of our legal local assets by a foreign power.
Changing Canadian laws to accommodate the US is an unacceptable ceding of sovereignty.
Misrepresenting it to Canadians merely adds insult to the injury.
He knows that as a US domestic law, FATCA can be changed at will by the US – unilaterally. As a Finance Minister he knows full well of the savings clause and last-in-time rule. He knows that the FATCA IGA binds Canada as a treaty, in ways that it does NOT bind the US.
Flaherty knows that renouncing unwanted US status, and obtaining a CLN is onerous, and that complying with extraterritorial US tax and reporting demands comes with the potential for life altering compliance costs and potential penalties.
Yet, he chose to champion the interests of Canadian banks and ‘financial institutions’ and not Canadian citizen and resident individuals and families.
I hope this ends in the well deserved extinction of the Canadian Conservative party stranglehold on national power.
“I imagine anybody that will cross the US border with a US birth place will have to be tax complaint. They do not need an IGA with Canada to do that.”
It will be far better to have a CLN in hand whenever crossing the border than to keep paying tribute for nothing in return other than ever increasing forms, penalties and double taxation.
US citizenship ain’t what its cracked up to be.
In my haste, I sent my email ONLY to Finance Minister Flaherty. I have since forwarded it to My original post re CARP announcement and my email correspondence with Michael Nicin, Director of Policy, m.nicin@carp.ca, thanking him for addressing the FATCA issue. I also gave him the link to this post and suggested he read the comments here.
Thanks for all the additional commentary here — I hope that Mr. Flaherty and Mr. Nicin (CARP) will read them all.
FromTheWilderness says
February 23, 2014 at 7:10 pm
“I imagine anybody that will cross the US border with a US birth place will have to be tax complaint. They do not need an IGA with Canada to do that.”
It will be far better to have a CLN in hand whenever crossing the border than to keep paying tribute for nothing in return other than ever increasing forms, penalties and double taxation.
US citizenship ain’t what its cracked up to be.
US citizenship ain’t what its cracked up to be.”
The CLN will not be enough
You may need confirmation that 8854 and FBAR are done. I am certain Border agent computer screens will show, if you did all the taxes. They do not need FATCA to do that.
@badger
Excellent comments. Do you mind if I plagiarise some of them for a letter I am preparing for Minister of Revenue in NZ?