Something I think we need to better understand (or at least I do),
Roy Berg, director of U.S. Tax Law at Moodys Gartner Tax Law LLP, discusses concerns that Canada’s approach to FATCA may spark a dispute with the U.S. over personal trusts:
Advisor.ca, Dean DiSpalatro, March 31, 2014: “Feds bury FATCA law in Budget bill”
On Friday the Conservative government tabled legislation to implement key elements of this year’s Budget. But it contains more than tax credits.
Buried within is a revised version of draft legislation implementing the Intergovernmental Agreement (IGA) with the U.S. on FATCA. A Department of Finance press release makes no mention of this part of the bill.
…
If the trust has a Global Intermediary Identification Number (GIIN), the firm will consider it a fully compliant Foreign Financial Institution (FFI). As a result, the trust will receive the dividends in full.
If the trust doesn’t have a GIIN, the U.S. firm withholds 30% and passes it to the IRS. Berg says the same will happen with securities accounts based in the U.K., Ireland and other countries that have IGAs with the U.S. Their IGAs and guidance notes label trusts as FFIs.
How did our lives become so complicated?
There is currently an MP briefing going on right now about the FATCA IGA. Nathan Cullen is in it and said on TWITTER it is brutal.
I think it is a combination of both. We need to stay vigilent on this. The Department of Finance is doing the hard sell on why this is a good deal for Canada. It appears that the NDP and Liberals are not necessarily buying.
Thanks, Tim.
Is the briefing itself brutal or the reactions/questions of MPs and perhaps media?
http://isaacbrocksociety.ca/2014/03/28/breaking-news-tories-hide-fatca-law-in-budget-act/comment-page-6/#comment-1341033
Here is Nathan Cullen’s twitter feed. Looks like the NDP is hardening its position on FATCA.
https://twitter.com/nathancullen
They’ve got some ‘splainin to do!
http://www.cpac.ca/en/programs/question-period/episodes/90003095/ — about 12:15. Response from the new Finance Minister, Joseph Oliver, to Nathan Cullen’s question, blah, blah, blah, blah (better defined as ‘talking points’. NOTHING but the scripted statement.
@NDPHoC_NPDCdC @nathancullen No new taxes will be imposed? Well, maybe not NEW CANADIAN taxes; but the IRS will penalize duals into poverty
Wildlife Photog @pro_photog1970 31s
@NDPHoC_NPDCdC @nathancullen Understand that we are dealing with a country 17Trillion in debt and looking for money under every rock.
Wildlife Photog @pro_photog1970 1m
@NDPHoC_NPDCdC @nathancullen – considering the fact that the IRS will consider all dual citizen filing as WILFUL. #notfair
Wildlife Photog @pro_photog1970 2m
@NDPHoC_NPDCdC @nathancullen http://www.irs.gov/irm/part4/irm_04-026-016.html#d0e529 … – These are the penalties talked about for dual citizens and those born here to duals
…there is only so much I can say in 148 letters.
Good work, Animal, in your less than 148 letters per tweet.
Non US ‘foreign’ trusts of a US Person are very complex and a minefield even before FATCA which compounds the issues further. Sadly this is yet another example of the unnecessary complexity and unfairness of CBT. Ditto with the US estate tax obligations and foreign mutual funds.
I just read in the CBC news that the Charter of Rights has an override clause meaning the government can override certain clauses in the Charter. I wonder if the Federal government will use this in defense of FATCA.
I’ll bet this may lead to massive protests and possibly bloodshed….. looks like Canada is in trouble….
A KPMG submission to the Department of Finance on the draft legislation reaches the same conclusion, noting the draft “defines [Financial Institution] more narrowly than the IGA” and as a result “effectively excludes Canadian personal trusts.”
What’s this mean for clients?
Berg paints an unpleasant picture. Say your client’s trust contains a securities account with a U.S. investment firm. When it’s time to send the trust dividends the firm will ask about the account holder’s status. Your client may insist the trust doesn’t qualify as a financial institution; after all, our laws say so.”
The Canadian government is ignoring US government on this issu and you are complaining.
“But the U.S. firm will likely reach a different conclusion. It will say, citing FATCA and the IGA, the trust is a financial institution. That means one of two things.
If the trust has a Global Intermediary Identification Number (GIIN), the firm will consider it a fully compliant Foreign Financial Institution (FFI). As a result, the trust will receive the dividends in full.”
It does not effect Canadian companies Canada can not do anything about US companies.
There is only a small percentage of people with trust. All the trust company has to do if it want to avoid the withholding and supplying GIIN is own assets in Canada.
I rather have these trust ignore USA laws.
@GeorgeiII, My take is that it means if you have a personal trust make sure it has a GIIN OR don’t have a personal trust.
So, how does one go about getting a GIIN for a personal trust? A non-compliant US person should stay far, far away from personal trusts.
@GeorgeIII, Right of course, just avoid US assets and trust problem is solved. For those with existing trusts holding US assets, better get a move on – either getting a GIIN or get rid of US assets pronto.
Re this comment in the article: Some may take pride in what appears to be a case of Canada standing up to its more powerful neighbour. “There’s a perception among Canadians that this is a good thing,” says Berg. “IRS is trying to force [FATCA] down our throats and people are glad CRA and Finance are standing up to them. That is absolutely wrong.”
Does this mean that our government just did not WANT to deal with the hassle of treating personal trusts as FI’s and instead is leaving the hot potato in hands of the individual trust owner to deal with?
Awwww…and just when some of us thought that MAYBE, just MAYBE, our government actually gave a tiny shit about us, and was secretly thumbing the USA. Oh well. I can dream.
Once again, presuming I am understanding the issue of ‘personal trusts’ being excluded from the IGA, THE BANKS GET PROTECTED (and CRA does the data passing), but INDIVIDUALS ARE ON THEIR OWN.
Post from Maple Sandbox: http://maplesandbox.ca/2014/fatca-law-kind-of-a-mess/, with another legal firm article on the trust issue.
@ Small
If would be unprecedented and major news if the Harper gov’t had to defend FATCA using the Notwithstanding Clause of the Charter (Section 33). Imagine the uproar if they had to go this far to make a US law Canadian law. Furthermore this clause has a 5 year renewal condition. It’s not going to happen. Harper wants this done by stealth, without media attention. That’s why he tried to hide the FATCA enabling legislation in an Omnibus Bill.
http://www.parl.gc.ca/content/lop/researchpublications/bp194-e.htm
Professor Peter Hogg has said re: Section 33:
“Presumably, the exercise of the power would normally attract such political opposition that it would rarely be invoked…
…the necessity of re-enactment every five years will force periodic reconsideration of each exercise of the override power, at intervals which (in some jurisdictions at least) will often yield a change of government. This reinforces the already powerful political safeguards against an ill-considered use of the power.”
Remember that RRSP, LIRA, TFSA, RDSP are all “trusts” for US purposes… hence the concern about the legislation
@NC
“I’ll bet this may lead to massive protests and possibly bloodshed….. looks like Canada is in trouble….”
***
“When the Americans invaded Upper Canada on July 12, 1812, Brock was ready. He’d already recruited a force of citizens and forged First Nations alliances. Fort Detroit fell to the British army and Brock was hailed as a hero.”
Part of our strategy for July 1-4 should be to cut off the borders, and all points of entry, communications, steal their horses (or shoot them) or if they are using cars shut of their engines by remote control. If that doesn’t work we can do an ad somewhere warning them that we have the backing of the Government of Kazakhstan, the best country in the world who has promised to support our cause until they get invaded by Putin. Anyway that will put the fear of Good in them. So, let us go bravely on Canada day shouting Surgite! Surgite! Surgite! as we watch the floats go by (but don’t yell anything when the Falun Gong band goes by as they are cool) and wave our Kazakhstan flags. We need a theme song for us so here is my suggestion:
@Roy Berg
I guess those carve-outs that were such a great coup on the part of our government aren’t?
@Em
I also read somewhere that the FATCA IGA wasn’t included in the budget press release. How coy.
@ bubblebustin
Yes indeed FATCA was stowed in a very hidden compartment on that omnibus. Harper doesn’t want to megaphone anything about its existence. BTW, my last comment at http://isaacbrocksociety.ca/media-and-blog-articles-open-for-comments should be of interest to you.