Strata corporations of townhouses and condominiums exist all over Canada to maintain and operate common interests of the owners of the individual units. Some of these strata corporations have dozens of members. It would not be uncommon for such corporations to have funds that may need to be invested in order to maintain buying power in an inflationary environment. But no more, if the following comment by Michael is true:
I’m on a board of directors for a non-profit corporation (condominium corporation). We are a Canadian corporation, Canadian-owned, and can only invest in GIC’s that are CDIC-covered. Our investment institution (our bank – as well as all other Canadian Banks as I am lead to understand) is requiring us to fill out form W-8BEN-E, which seems to make no sense whatsoever since it is impossible for us to have exposure to US withholding tax. On top of that, it appears (although the full requirements too confusing for me to understand on 1st reading) that I need to list condo owners who may fit one or more of the following requirements: US citizens, have substantial US holdings, spend a significant amount of time in the US, have substantial US dealings through their corporations, etc. In my position, I don’t believe that I can gather that information.
I don’t want to be part of this witch-hunt; but if I don’t cooperate we won’t be able to invest our money anywhere to maintain its value for the corporation.
Under Canadian Law, does the status of my condo corp exempt us from filling out this form (regardless of what the Banks may want)?
I wonder if Stephen Harper had this in mind when his government signed the IGA with the USA.
In any case, I encourage Michael to refuse to fill out the W-8BEN-E. Resistance is not futile.
See also:
Is TD Bank overzealously ferreting out US persons?
The potential hazard of the over-zealous bank inquisitor
I hate wasting my time here, I am not certain that KalC is still protecting the newbies.
first it is called controlling person and it is 25%
CRA Draft Guidance for Financial Institutions March 06 2014
http://isaacbrocksociety.ca/2014/03/24/cra-bootleg-draft-guidance-for-financial-institutions-re-implementation-iga/
“10.40 Financial institutions can give effect to this definition by reference to the PCMLTFA and related regulations. As such, whether an individual is a controlling person is generally determined by reference to the 25% ownership threshold set out therein.”
@Tricia Moon – in the real life example I described above there are 6 owners of units … the shares associated with the units vary from 10 to 20 % per unit depending on size. So EVERY unit potentially meets or exceeds the 10% cut off. Yet I do not know (and do not want to know) the US connectedness of the various owners other than those of the family I mentioned who collectively own 50% of the unit shares. Why should those who have NO US connectedness suffer the extra costs and harassment of getting data for those who might be so connected … or should the Board even be asking these private questions at all …
As for those where no individual owners exceed 10% ownership … what if a group of same exceeded the 10% collectively …..
Seems to me that the way to go is to BAN all persons with US connectedness from participating in any such project / condo.
@Eric
“short version: Washington has basically made it illegal for a U.S. Person to own a unit in a 10-units-or-fewer condo outside of the Homeland.”
Washington has basically made it illegal for a US Person to live anywhere other than a jail cell outside of the Homeland.
People do not read or get original documents
first it is called controlling person and it is 25% I assume this would a for profit company
CRA Draft Guidance for Financial Institutions March 06 2014
http://isaacbrocksociety.ca/2014/03/24/cra-bootleg-draft-guidance-for-financial-institutions-re-implementation-iga/
“10.40 Financial institutions can give effect to this definition by reference to the PCMLTFA and related regulations. As such, whether an individual is a controlling person is generally determined by reference to the 25% ownership threshold set out therein.”
@nervousinvestor: “U.S. Shareholder” under the CFC rules only means 10%+ US owners and only a company majority-owned by those “U.S. Shareholders” is a CFC. So as I understand it, e.g. 11 US owners with 9.09% each = not a CFC.
There are rules for grouping related owners if they’re both U.S. persons (e.g. a husband & wife who are both U.S. persons and own 5% each will be treated as a single 10% owner). But these won’t apply to unrelated owners (e.g. you and your U.S. Person neighbour each own 5% doesn’t mean you get treated as a single 10% owner), nor to related owners where one is not a U.S. person (U.S. person wife owns 5% and non-U.S. person husband owns 5% will not be treated as a single 10% owner). More details in Treas. Reg. 1.958(d).
@George III
We are talking about the way the US defines the ownership of a corporation. The standard is 10%.
Less than 10%, = not a controlling interest.
another typo
People do not read or get original documents
first it is called controlling person and it is 25%. I assume this would be for a for profit company
I believe it was the Clinton Administration that invented all this CFC and PFIC garbage?
Trica
the guidelines from CRA to Canadian financial institution is 25% according to
http://isaacbrocksociety.ca/2014/03/24/cra-bootleg-draft-guidance-for-financial-institutions-re-implementation-iga/
“10.40 Financial institutions can give effect to this definition by reference to the PCMLTFA and related regulations. As such, whether an individual is a controlling person is generally determined by reference to the 25% ownership threshold set out therein.”
Yet another round of “Whose Law is it Anyway?”
Are we having fun yet?
(/sarcasm)
Again from draft regulation”C. Entity type/character
pg 115
(Complete this section unless the entity is a U.S. person or a financial institution)
1) Check any that apply to the entity:
□ active trade or business – Less than 50% of the entity’s gross income is passive income and less than 50% of its assets produce passive income
□ a registered charity, or a club, association or arrangement in Canada operated exclusively for cultural, athletic or educational purposes
□ a corporation with shares that regularly trade on an established securities market
□ a government or international organization (or agency thereof)
If no category applies, see instructions and indicate whether the entity is:
□ an active NFFE
□ a passive NFFE
2) If the entity is a passive NFFE, does any individual directly or indirectly own 25% or more of the entity? □ yes □ no
If “yes”, provide the name, address and U.S. TIN of each individual who directly or indirectly owns 25% or more of the entity and who is a U.S. person.
(list of individuals complete with required details)
I declare that the information provided on this form is, to the best of my knowledge and belief, correct and complete.
Name: ___________________ Title: _______________
Signature: _________________ Date: _______________ ”
Under item 1 a condo receives most of it income from condo fees so it would be considered an active NFFE. and only then is the Canadian goverment considering the 25% rule.
I think Roy Berg complained that the Canadian government is ignoring part of FATCA
http://www.advisor.ca/tax/tax-news/cra-may-ignore-fatca-trust-rules-147928
They also have on their websites
“I hold a U.S. green card. How does this affect my tax residency?
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.”
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html
Typo
Under item 1 a condo receives most of it income from condo fees so it would be considered an active NFFE. it is off the hook. The Canadian government only consider passive NFFE that have more than 25% ownership.
Now if Issac Brock published a fake copy of guidelines that is a problem
I think this discussion is doing a lot more harm than good. There are two aspects to it.
1. Can FATCA be used to hunt for U.S. Persons – Remember this is a reporting issue – If you are being hunted because of FATCA, then you call the human rights commission and let them deal with it. Full stop. If a condo board member persists, they you tell him to resign and stop making his problems your problems. If a bank sends more forms then you change banks.
2. Does the fact that Condominiums are run by a corporation have any tax or reporting consequences under U.S. tax law?
Do NOT manufacture trouble. There are no tax consequences and if there is a reporting requirement, then you use the “reasonable cause” defence.
Possible Tax and Reporting Consequences
First, the default is that the structure of the corporation will be determined according to local law. (It could be redefined according to U.S. law, but start with local law.)
So, for example in Ontario we look to the Condominium Act which says:
Presumably the owners of the units are the members of the condominium corporation.
Now assuming that this is a corporation under U.S. law (and I would investigate this), the issue becomes:
What if a member has “U.S.ness”? It’s irrelevant to the corporation, but “U.S.ness” is a “disability” and may trigger special reporting obligations and tax obligations. What are these?
Reporting – A 5471 is required for any “U.S.ness” person who owns more than 10% of the shares.
Taxes –
If “U.S. Persons” collectively own more than 50% then it is a controlled Foreign Corporation CFC and the Subpart F income rules apply (meaning that any passive income earned by the corporation would be attributed to the individual shareholder with “U.S.ness”.)
PFIC issues:
1. If it is a CFC it is NOT a PFIC.
2. If it is a PFIC then there has to be distribution to the U.S. shareholder for there to be a tax issue. There is never a distribution, so there is never a tax issue. But, could it be a PFIC to begin with?
Here is the general definition of a PFIC as per S. 1297:
(a) In general
Bear in mind that there is NO share capital. Hence, I would argue that there is “investment capital” and therefore it is not a Passive Foreign INVESTMENT corporation. But, in any case. Even if it were a PFIC there is no income to the shareholder. so ….
Bottom line, no tax issues. If there are reporting issues, you use the “reasonable cause” defense.
FATCA – Look at it this way. There is no disclosure requirement for foreign real estate. The truth is that people see condominium ownership as a way of owning real estate. The IRS agrees. Forget the technicalities.
Here is another way to view this. See the following:
http://www.andersentax.com/pressroom/irs-rules-mexican-fideicomiso-is-not-a-trust-no-form-3520-a-form-3520-repor
The issue here was whether a Mexican Fideisomiso was a “Foreign Trust” or real estate. The IRS decided that it was really real estate and not a foreign trust. This is not an exact analogy, but really, let some common sense prevail. At the end of the day there is no way that something as common as condominium ownership will be captured by all these stupid rules – unless you make the decision yourself that you want to play “Form Ball”.
If you are a condo owner who receives a FATCA letter from your board of directors? Tell them to F off. Then call the human rights commission and tell them that are being discriminated against. Then write a letter to the local paper, naming the person who is harassing you.
Good night. Sleep tight and ignore this. I guarantee you that this is going to become an issue only if you decide to make it one.
@USCitizenAbroad – Thank you for your reasoned comment. My issue is not with the US Person and their individual reporting nor with any reporting directly by the NON US Condo to the IRS (would not happen) but with the Bank’s requirement that forms and details of Members be obtained and supplied (both ways to Banks and Members) to determine whether this is an account for the Bank to report under FATCA. This costs in time and money for those who are NOT US Persons. Seems to me that the best thing is probably to alter the Incorporation documents to refuse to allow ANY person with US ness to own units … and certainly do not allow any such person tainted with US ness to serve on the Board or be a Bank signatory. Selah.
@Nervousinvestor
See Deckard’s comment here:
http://isaacbrocksociety.ca/2015/01/27/are-strata-corporations-the-next-target-of-canadian-banks-fatca-zeal/comment-page-1/#comment-5391660
and Badger’s comment here:
http://isaacbrocksociety.ca/2015/01/27/are-strata-corporations-the-next-target-of-canadian-banks-fatca-zeal/comment-page-1/#comment-5394406
It is quite obvious that “U.S.ness” is a form of contamination that has the potential to first infect and then effect every aspect of human society. In Deckard’s comment he notes the restrictions placed on the Jews during the Third Reich. The restrictions were completely unjustifiable. Notice how they proceeded one “law” at at time. (what could be more legitimate than that – Remember the “Battle Cry of the Condor” – FATCA is “U.S. law”.)
Restrictions on U.S. persons are completely justifiable.
In the case of FATCA, U.S. persons really ARE a threat to the societies where they live. The reason, as has been articulated time and time again is that:
U.S. citizens are being used by the U.S. as tools (via citizenship-based taxation) to extract capital from other countries and transfer that capital to the U.S. There are people who do not understand this. There are people who pretend to not understand this. But, at the end of the day U.S. citizens really are IN ACTUAL FACT a threat to any country where they may reside.
Eventually countries will be forced to protect themselves from what I would call the:
“U.S.ness Forced Extraction of Capital” and the compliance costs associated with having U.S. citizens as residents.
Who could have imagined even 5 years ago that the discussion on this thread was even taking place?Whether a real threat or not, this newly discovered “Condo Terror”, will make condo boards and developers want to avoid U.S. persons. Same for jobs, marriages, businesses, etc.
But, here is the most likely next step.
Special tax laws imposed on U.S. persons. These laws will be for the purpose of neutralizing the extraction of capital by U.S. tax laws. Simple example:
(the effect would be to produce a Canadian tax which can be used as a credit against a U.S. tax)
So, although U.S. citizens would still be allowed to own property, they will be subject to special tax rules. These rules are designed to protect the local tax base from the theft of capital by the U.S. Perfectly reasonable. Unfair to the U.S. person? Of course, but they can and should renounce.
On a positive side, I predict a whole new universe of financial products.
These will be designed to:
A. Provide products that give U.S. persons the opportunity to plan for retirement; and
B. Segregate U.S. persons from “free people” so that the “free people” cannot be harmed by the “U.S. contamination”
These new investment vehicles will be a welcome development.
Perhaps we will see Condominiums that are specifically for those who carry the disability of U.S. citizenship.
U.S. citizenship is now a disability and this opens up a whole new world of possible financial products for this group of disabled people.
We are witnessing the beginning. What’s important to note here is that by using FATCA and CBT to attack the tax base of other countries, the U.S. has created a situation where retaliation against U.S. persons is rational, necessary and completely justifiable.
If you don’t want to live in the USA you should renounce NOW. You won’t be able to have any kind of life as a U.S. citizen abroad!
The defensive measures taken to protect countries from “U.S. person contamination” will be incremental and significant. But, they will quickly add up to a world where “U.S. persons are subject to “economic quarantine”. I could also see them being barred from certain professions. For example, the legal profession. Do you really want a lawyer who is subject to FBAR on client trust accounts? Real Estate: Do you really want a broker who must report his trust accounts (with your money) to the IRS?
The implications are huge.
No doubt, some will view this prediction as extreme.
Consider this comment to be a “message in a bottle”. Read it again in 10 years.
And finally, (to echo some of the posters here):
If you want to stop this, then you support the people who are fighting on your behalf.
I am thinking of the stopfatca.ca legal challenge.
@Nervousinvestor
You write:
Agree completely – this is one more example of the “quarantine” described in my previous comment.
Also, another obvious step for countries is to simply stop accepting U.S. citizens as immigrants.
@USCitizenAbroad :- Or as long term tourists ….. or investors ….. even if family of Canadians (read Jamaicans or any other nationality you wish). Really complex when family inheritances are involved … or caring for elderly family ….. FATCA sucks. Definitely need Arvay to get the thing declared unconstitutional in Canada and for that to become the template for the rest of the world. OR for the US Legal Challenge to succeed or for the Republican party (with sensible Democrats) to overturn the insane legislation in Washington.
@USCitizenAbroad,
I don’t think you are exaggerating this one. Having done a fair bit of commenting on articles and blogs (one Canadian investment blog in particular), I’ve discovered that most Canadians are only sympathetic to a degree, if at all, and the most common reaction to our plight is – RENOUNCE. The investors (most high on US investments) are worried about the effect on themselves, not on us. If we can solve everyone’s problem by renouncing, then that is what we should do according to them. They do not care to understand the injustice as it is not directed towards them.
That’s the response of most homelanders as well — stop whining and renounce.
Honestly though, I think if it does manage to get to the point you describe, there will be outrage along with public protests much bigger and louder than the few small ones we’ve had in the past.
For the most part the one million deemed ‘US persons’ have not been forced out of their hiding spots, but when/if that happens, all hell will break loose. I really hope we don’t have to get to that point!
Please keep donating people, and if at all possible, come to the forum in Toronto next month.
Whatever the percent is, the person who signs the document must go around and get confirmation of the citizenships and birthplaces of every person in the organization, no?
After all of the persons have declared their citizenships (or, in this case their un citizenship), then the director can take his responsibility and sign the document under the threat of penalties from the rule-making country.
This should be part of the beneficial-owner jihad which is spreading the world and declaring either positive identification or un identification.
The vast majority of strata council officers are unpaid volunteers. They would be smart to stay well away from this hornet’s nest.
Many neighborhood harbors and common private road-maintenance organizations and other common areas can be called economic organizations, here. Each member is called a shareholder.
I guess we’ll have to prove our uncitizenships there, too. Each and every one.
Another topic ….. from http://cnsnews.com/news/article/ali-meyer/issa-irss-lerner-did-she-break-law-far-i-can-tell-yes-she-did#.U5i6J-fT4ck.twitter
Home » News
Issa on IRS’s Lerner: ‘Did She Break the Law? As Far As I Can Tell, Yes, She Did’
June 11, 2014 – 1:36 PM
By Ali Meyer
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Lois Lerner
Former IRS official Lois Lerner in a photo from May 22, 2013. (AP Photo/Carolyn Kaster)
(CNSNews.com) — Oversight Committee Chairman Darrell Issa (R-Calif.) said that former IRS official Lois Lerner “broke the law” when she sent a database containing legally protected information of tax-exempt organizations to the FBI several weeks before the 2010 midterm elections.
At the Capitol on Tuesday, CNSNews.com asked Issa, “Did Lois Lerner defy the law when she sent the database of sensitive taxpayer information of tax-exempt groups?”
Issa said, “You really want to rephrase your question. Did she break the law? As far as I can tell, yes, she did.”
The House Oversight and Government Reform Committee issued a press release on Monday, June 9, revealing that the IRS sent a 1.1-million page database containing legally protected taxpayer information of tax-exempt organizations to the FBI in October 2010, several weeks before the midterm elections.”