A Brocker recently received this letter from her MP with regard to the IGA.
I shared your concerns about the U.S. Foreign Accounts Tax Compliance Act
(FATCA). I am thrilled to report that on February 5, 2014, Canada and the
United States signed an inter-governmental agreement under the longstanding
Canada-U.S. Tax Convention. This agreement brings a series of lengthy
negotiations to a conclusion which, I believe, will be of great benefit to
dual citizens and Americans living in Canada.
A number of constituents contacted me with their concerns during the
negotiation-process. As a New York-licensed lawyer who practiced
international law prior to entering public life, I took the initiative
among Government Caucus members to contact and consolidate information from
a circle of top US lawyers and accountants. I contacted them in an attempt
to provide our Finance Minister, the Honourable Jim Flaherty, with their
insights as people who advise Canadians with IRS reporting obligations. I
believe – especially after this announcement – that Minister Flaherty took
our concerns forward effectively.
Among other things, I also arranged for prominent U.S. tax attorney Mark
Matthews to come to Ottawa on May 30, 2012 to brief Caucus members
concerning these matters. Mr. Matthews not only works with Canadians who
have U.S. tax problems, but he also served previously as Deputy
Commissioner at the IRS.
As you know, the underlying objective of FATCA is to combat tax evasion.
However, the Canadian Government was concerned that FATCA would impose
significant compliance obligations on Canadian financial institutions, and
raise significant privacy concerns for Canadians. Canada is not a tax
this legislation are honest, hardworking and law-abiding citizens who have
dutifully paid their Canadian taxes.
FATCA would require non-U.S. financial institutions to report to the U.S.
Internal Revenue Service (IRS) accounts held by U.S. taxpayers. A key
would compel Canadian financial institutions to report on account holders
who are U.S. residents and U.S. citizens (including U.S. citizens who are
residents or citizens of Canada) directly to the IRS – thus potentially
violating Canadian privacy laws.
Under the agreement on February 5, financial institutions in Canada will
not report any information directly to the IRS. Rather, relevant
information on Canadian accounts held by U.S. residents and U.S. citizens
(including U.S. citizens who are residents or citizens of Canada) will be
reported to the Canada Revenue Agency (CRA). The CRA will then exchange the
information with the IRS through existing provisions and safeguards of the
Canada-U.S. Tax Convention. This is consistent with Canada’s privacy laws.
There are a number of exemptions you should know about. Registered
Retirement Savings Plans, Registered Retirement Income Funds, Registered
Disability Savings Plans, and Tax-Free Savings Accounts will not be
reported to the IRS. In addition, smaller deposit-taking institutions -
such as credit unions – with assets of less than $175 million will be
exempt from FATCA.
The 30 percent FATCA withholding tax will not apply to clients of
Canadian financial institutions, and can apply to a Canadian financial
institution only if the financial institution is in significant and
long-term non-compliance with its obligations under the agreement.
I encourage you to seek advice on your specific circumstances from an
independent tax advisory with appropriate experience.
With best regards,
John Weston, M.P.