I have received my (not) FATCA letter.
Background: I opened my Scotia iTrade account without providing citizenship information. I was a permanent resident of Canada at the time. I did not fill out US paperwork W-9 or W-8BEN. The trading account is inactive. I have whited-out the account number and address.
Last Friday, I received a voice message from Scotia iTrade regarding this case number. I am planning to ignore them for the moment. This will, of course, increase the cost of FATCA implementation.
Observations:
- The letter makes no mention of freezing or closing my account. But it does say I must respond to the letter or I will be subject to 30% withholdings on US income sources.
- It seems that this is a fishing expedition to obtain US status information.
- Renewal of the forms must take place every three years. This is new to me.
- Certain information is allegedly “required” to open an account–such as “driver’s license, passport, citizenship card or age of majority card”. Does this mean if you prove you are a Canadian resident, they will be satisfied?
- No mention of FATCA or new Canadian regulations conforming to FATCA appear in this letter. Instead, Scotia iTrade claims to be “a Qualified Intermediary for the Unites States Department of Treasury Internal Revenue Service (IRS)”.
“Qualified Intermediary”, or “deputy”. The hunt is on.
@Bubblebustin, “Qualified Intermediary” is a euphemism for something. Not sure what. “Agent” probably. Scotia iTrade is an IRS agent.
One more reason to avoid US source income. Lets hope everyone starts avoiding US source income from now on, so the US really starts feeling the pain. They’ve really put the last nail in their own coffin with FATCA.
I’d be curious to see if you just ignored this letter whether they’d actually remember to withhold the 30% on any US source income. I wonder what mechanisms they have in place to even track who did and who didn’t respond, which income is US source, and how they would actually do the withholding. What mechanisms do they have in place if they mistakenly withheld and had to return the 30%? Who do they give the 30% to? It’s all quite mysterious.
Also, if someone didn’t respond to this letter, would they then send ALL your other account information to the IRS (via the CRA of course)?
I dont think that this has anything to do with FATCA.
The requirement for a W8 or face withholdings has been around for years. Some, but not all, investments in the US financial markets are tax free to “non resident aliens”. The W8 form is just a way of documenting that you are “non resident alien” and therefore are not subject to withholding on your US investment income.
Citizenship cards do not have place of birth on them as far as I know so there’s that. I am going in to Scotia bank today with a check from my mother’s estate. 32 percent was with held for taxes off the top before I got this check so it is already much less than I would have had tax not been with held at a high rate off the top. I will get some back after taxes are done in April as I am sure I did not owe that much. It will be interesting to see if Scotiabank asks me about this as they have not in the past and I am no longer a U.S. citizen. I find it really offensive that I or you may need to discuss tax matters with my banker. I am sure I know more than they do about what I may or may not end up owing. I think this is leaving the door wide open for some very ugly misunderstandings at our banks. Deputy is right. Canadian bankers are now working for a foreign country. Proceed accordingly. Some of them will handle this professionally and others may decide they are the Barney Fife of the bank and treat Canadians less than professionally if they have ever had any U.S. ties “You look suspicious to me.” “Prove to the banks satisfaction that you are not a criminal” because they can, and that’s what this really is.
We’re taking steps right now to move our mortgage out of our bank and every other account too. It is not that easy as the way our accounts are structured ties most of them to the mortgage in exchange for a very low interest rate. By very low I mean one point two percent on everything including credit cards. We are trying to find a similar product elsewhere. I haven’t got any FATCA letter yet nor been asked to fill out a W-8 Ben excepting last year when my mother’s estate was in process. In fact they had given me the wrong form when a W-9 was called for not a W-8. Things have changed substancially since then. Scotiabank was one of the first on the band wagon. Is this a comfortable TD type experience for you?
We no longer need to move accounts as a necessity. We want to do it, I don’t appreciate having a relationship with my banker where the bank is a deputy for a foreign country. My trust in my banker is at zero and can never be what it once was.
Phil Hodgen said at meeting in Toronto that the US-based inheritence of non-US person gets wired to their account, end of story. Did they know you were not US person, Atticus?
Atticus, I had previously posted about my experience with Scotia. this fall, while in for other tasks, I attempted to provide my CLN to them. my personal banker brought up a screen showing I was not identified as a US person, and they didn’t want my CLN. That’s on the personal banking side, with various credit products tied to mortgage, savings accounts, some reg. accounts. FWIW
Does anyone know how this QI program works???
It sounds like if you’re a US person they (IRS or Treasury?) take off 30% from your US dividends. Do you get that back when you file your US income tax? IF you’re not a US person do they take off zero or 15%?? How does a non-USP get that back?
Just wondering. I believe my hubbie has some US securities and has never ever been asked to sign a W8 or W9.
Wow…qualified intermediary of US Treasury/IRS. Something FI’s should be ashamed of. I would agree with staying far away from any US source income as well as staying out of the big banks.
@Just a Canadian
Usually the w8 is signed if the funds are held in the US because the renewal is for every 3 yrs… I have never signed one for any of my investments in Canada with a Canadian investment firm… they are preparing their paperwork as they work for the IRS. The net is opening to start the catch… people not knowing any of this nonsense would just fill it out without thought…. I know I would cause I would think… whatever… I don’t live in the US… From this point on… whatever u sign anything for banks… investments… whatever… really look at it… cause some are starting to slide in wording for… giving up your privacy if u sign this…
This is my understanding:
If a W-8BEN has been filed with the FI, 15% is taken off.
If neither a W-9 nor W-8BEN have been filed, 30% is taken off.
If a W-9 has been filed, nothing is taken off.
I believe that Canada will not give you more than 15% credit for money withheld; which makes sense since the maximum taken off should be 15% (i.e., you’re expected to avail yourself of at least the 15% rate which I think is tax treaty specified).
Is the above correct?
I don’t know if a non-USP can or can not get back tax withheld. I do know that you can get a credit for it (15%) on your Canadian taxes.
They can not claim to be an “agent” of the IRS since they are not even in the same country, and it would be illegal to claim to do so. Consequently, they have had their legal team conjure up the term “Qualified Intermediary” which means quite simply that they have no authority, only to pass information around once it is gathered. The most disturbing part of the entire FATCA (compliance under THREAT OF SANCTIONS from the US Government of 30% withholding) and it’s supposed legislation is that it lacks legal authority for enforcement outside of the US and most people do not realize this. Further, identity theft problems will occur, IRS makes mistakes (Personal Experience) and lives will be ruined. Has the US Government set forth security protocols for the data storage and transfer of data for their “US Persons”? How will this affect “US Persons” especially those living in sensitive areas such as Qatar, Saudi Arabia, Israel?
In Summary, this is why the Charter Challenge Must prevail, as I believe it will, as Murray Rankin also believes it will. http://murrayrankin.ndp.ca/fatca-in-canada Joe Arvay and Murray Rankin should be hailed as National Hero’s in Canada once this is all wrapped up in Ottawa.
@Just A Canadian, you are correct. This 30% off the top has been in place a long time, in the case of US securities that are not open to (i.e., not tax-free for) non-resident aliens. Depending on the bank (anywhere in the world), they will take the 30% off of the interest or dividends at the time of investment. Let’s say you invest in preferred shares (which pay quarterly) and you have not signed a W8-BEN. The bank will automatically deduct that 30% at the start of the quarter, while you wait to get the rest of the interest owed to you at the end of the quarter. (The US gets ‘their’ money up front).
@Marie, @tdott, If you are a US taxpayer, you can supposedly get that 30% back or counted toward your taxes that year. But I don’t know how easy or difficult it is as I myself have never had experience with this. Please consult a CPA.
@Petros, the wording from Scotia is very creepy. I’ve heard them say they’re supposedly a very private bank — more private than any bank in the US. (Would this mean more private than TD?) But they’ve also reiterated that they ARE concerned with liabilities/fallout from harbouring potential USPs… Indeed, this appears to be their bottom line: are you or are you not a USP? See, for example, my previous account of what happened to my friend who is not a USP but lost his passport in Florida and was reissued a new one at his consulate. He now has a potential USP mark and the insurance arm of Scotia flagged it right away. I know at least one Scotia branch (outside Canada) who won’t touch a USP. Neither will their international investment dept. w/in Canada. They surely are alienating customers by telling them that the bank is a “Qualified Intermediary” of the USG. But they likely mean that THEY will take that 30% cut off the top and pass it along to Treasury. As noted, banks already have that mechanism in place although the excessive/menacing paperwork is new courtesy of F%t%. I would second US_Foreign_Person’s caution: going forward read carefully what you sign.
I hope those who attended Sunday’s meeting in Toronto had a nice visit with Phil Hodgen.
@Petros, any chance the notes on his visit will be posted here soon? Many thanks in advance.
Odd that a Canadaian driving licence is sufficient for them. I have a BC licence, and I’m only here on a work permit! Or perhaps they just want tobe sure you’re legally resident in Canada.
The Qualified Intermediary term has been around for at least 10 years. I’m pretty sure than any FFI that offers the ability to trade US listed shares must be a Qualified Intermediary.
As I understand it, the W-8 is kept on file by the FFI. It isn’t sent to the IRS. Any dividend payment goes through several intermediaries before it reaches your account. The company paying the dividend gives the money to the registrar who then pays the custodian who then pays your FFI who then credits your account. The W-8 may need to be shown back up the chain of payment so the registrar knows how much to pay to the custodian and how much to pay to US Treasury.
@tdott – I think you can reclaim the difference between the 30% withheld and the 15% credited on your local return as a foreign tax credit by filing an NRA return in the US. The 15% is, generally, the rate in double taxation treaties with the US. I vaguely remember from doing my final year dual status return that I had about $2.00 due to me on the NRA portion of the year because my US account was subject to backup withholding. It’s a menace to complete the paperwork and best of luck trying to cash the check from US Treasury unless you have a US account.
Incidentally, there are many countries that have high dividend withholding rates if the dividend leaves the country. Ireland, Switzerland and France come to mind. Generally, you have to fill out paperwork to prove that you a) paid tax in your home country on the full amount of the dividend, b) were not a resident of the country that withheld on the dividend and c) that the amount you are claiming was indeed withheld. I don’t know the timescales but I doubt it is quick.
@Petros, yes my bank did know I was a U.S. person. I do not drive and so for years had used my U.S. passport as I.D.!!! No more. Today, I gave them a copy of my CLN and they removed any record of U.S. I.D. while I was standing there.
Secondly, they seem to have some odd system going. They only agreed to take a copy of my CLN and Canadian passport for now. They are sending it to the centralized section dealing with FATCA for Scotiabank who then sends me a FATCA letter and then I will send them a copy or they can obtain one from the bank which filed a copy for me today. The local branch wasn’t dealing with this at all. My experience was the same as your’s The Mom, they didn’t really want my CLN but, I insisted it be dealt with right now, today. The teller had zero knowledge of it and the manager had to make an appearance. She knew some but, had some facts wrong too. Peachy. The manager was pleasant but, still seemed to act like this was supposedly business as usual. I insisted that after today if one single digit of our information went to the U.S. where we are not citizens that my husband would be in to see our banker and it would not be pretty. I said that he was livid at this situation as it was. I said it very, very quietly and calmly and they were doe eyed. I said we really didn’t appreciate being treated as suspected criminals and that was the reason I renounced so I want ZERO information going to anyone I do not authorize to have it. She pulled up a screen and removed my U.S. I.D. from my accounts.
She said they are scanning for 1.) U.S. passport used for I.D. 2.) U.S. address as in the case of Snowbirds 3.) U.S. holdings or trades 4.) U.S. birth place on other documents. So that is how they are flagging *Her word flagging* the accounts starting now. She said some snowbirds had found themselves in dire situations just at my local branch.
Another thing she told me was that our son was NOT a U.S. person if born in Canada. She’s wrong about that but, she seemed to be implying that at least at our branch for now they are not going to scan deeper for kids born to one U.S. person and especially not if that parent has a CLN presented to the bank. She insisted my son was not American in such a way as to indicate that they had no intention of taking things that far. I didn’t bring that up but, he is linked on one of our accounts so we can help him with school expenses.
The manager seemed none too happy about this situation and they have one on one been dealing with contacting people. She seemed to indicate that some Canadians were having a rock and hard place wake up to this at the branch. She commented that it was “good you know about this as most people do not.” So, I really think as far as Brock, the law suit and the OMG moments are concerned, we’ve really only just seen the tip of the iceberg. She said I was the first person that knew about this ahead of time. :S That is frightening indeed. I replied “Not only do I know about it but, I was on CBC morning with Anna Maria Tremonte and you can go and listen to what I had to say if you like.” there was a delicious moment of stunned silence by both the teller and the manager. They looked shocked I tell you, shocked!! Well, jimmy crack corn and I do not care. They bent over backwards after I said that to be nice to me… I did not mention any other media I had done as I wanted to pick the one they would be most familiar with…they were..”this one will go to the media!!” I thanked them and waltzed out of the bank. One thing the manager did seem to know is “Well, you couldn’t get that document *CLN* without being up to date on U.S. taxes” I thought “Not that it’s any of your business.” but, didn’t say it.
I would venture “Qualified Intermediary” has no legal standing whatsoever. Qualified by whom precisely? At any rate, I’m not sure this is a FATCA thing; I’ve had withholding tax deducted years ago on US income.
How do they become “qualified” what training is provided. Judging from the info I got today, lots of mistakes are going to be made. Local branches are flagging the accounts, then the information is going to the FATCA department who sends out the letters. So local branches, some tellers and managers really do not know what they are doing making them “unqualified”
I really can’t wait till this ramps up more because Canadians who had no idea are going to be bringing out the pitch forks when they start getting those letters and having to go into those meetings. I mentioned today at the bank about how much time and money this was costing Canadian banks. What worries me is that the manager mentioned people coming in and having meetings at the bank! They could easily get a ton of misinformation that way and be told to do things they should not do. This really is quite a mess.
@Atticus
Most people I have talked to about it have never heard of it. As the banks start squeezing, the tentacles of this thing will become more apparent. The staff at bank branches are clueless about FATCA, as is our Finance Minister. Oliver constantly focuses on what the banks might have faced if not for the IGA, and completely fails to address Charter Rights and privacy laws. One is left with the impression that Joe Oliver & Co really have no clue as to the ramifications of this travesty they have implemented. You are right, it is a total mess.
I just find it bizarre that bank managers are having these meetings with people who never heard of FATCA right in their OMG moment. They are going to be directed to do things a certain way and may not have any idea of their rights at all. I feel this is taking advantage of people because the bank is going to tell them what the BANK needs them to do, not what THEY need to do to protect themselves. I wonder if they are even going to suggest a list of tax preparers the people can go to? I think I will start keeping track of whether or not the banks in any way invest in, or end up getting some sort of money off the backs of the people they are “advising” I see all kinds of ways customers can be taken advantage of with the way the bankers have it structured.
@AtticusinCanada
Problem is that people will believe that the banks or whatever financials are trying to help them without realizing…. they will be taken advantage of by them… we no longer have canadian institutions… we have US reps working against us…. and the sad part… no matter how they put it… they put a sold sign on Canada… this is not the country I grew up in… where we were proud to be canadians… now all of us are considered criminals until we can prove we are *real* canadians without any taint…
Atticus,
Just think, our major banks could have their own new divisions devoted to this — just like their insurance divisions, etc. One-stop shopping; just go up two floors to our US compliance department and our friendly staff person there will be glad to set up an appointment with our IRS office of this bank. We want your customer experience to be easy and convenient.
I wish the media would really take it as their job to advise Canadians (or other country persons) who could be US-defined *US Persons* on better alternatives for what they can do to protect themselves. But then, ‘you can lead a horse to water but you can’t make him drink’ applies. So many will not be prepared and their OMG moment will be too late.
@Atticus, thanks for that further Scotia info.
Guys and Dolls it’s quite simple and has nothing to do with FATCA,
Say I’m lucky enough to own shares of Apple and Microsoft and Verizon. Through my broker they all pay me dividends quarterly.
If my broker thinks I am American, I fill in a W 9 , taxes are deducted at source from my dividends and I may get some of it back by filing my US tax return.
If my broker thinks I’m Canadian , I fill in a W8 Ben, only 15% is deducted at source and I claim that as a foreign tax credit on my Canadian tax return.
If I refuse to fill in a W8 Ben, 30%will be deducted at source.
No biggie.