cross-posted from the ADCSovereightyblog
Which will come first: A decision in the FATCA legal challenge or the first exchange of info? http://t.co/SZGJz5NwiX via @legalpost
— Citizenship Lawyer (@ExpatriationLaw) August 26, 2015
Note the final sentence:
“This is big stuff and it’s right around the corner,” Berg says. “And in light of the federal election, the decision may have electoral consequences.”
Originally posted on Financial Post
The first exchange of information under the U.S. Foreign Account Tax Compliance Act (FATCA) is scheduled to happen next month — unless a legal challenge of the domestic legislation enabling FATCA puts a stop to it.
The plaintiffs, two dual Canadian-U.S. citizens, claim that the legislation contravenes the U.S.-Canada Treaty, and that the treaty prohibits the exchange of information required by FATCA. The Federal Court of Canada has committed to issuing its decision in the case before Sept. 15, just a few weeks before Canadians elect new federal government.
“If the courts hold for the plaintiff, the planned implementation of CRS is also in jeopardy because it is modeled on FATCA,” says Roy Berg, director of U.S. tax law with Moodys Gartner Tax Law LLP in Calgary.
CRS, or the common reporting standard, is a proposed tax information exchange system that would swap financial data between more than 60…
View original 165 more words
The Canadian IGA has this to say about the handling of the information that is to be exchanged:
Art. 3. 7. All information exchanged shall be subject to the confidentiality and other protections provided for in the Convention, including the provisions limiting the use of the information exchanged. pg. 12.
Now I am not sure how this allows the U.S. to be able to disseminate this information to other U.S. government agencies that have nothing to do with tax enforcement. And yet that is exactly what politicians like Schumer are calling for. Of course with the “Last In Time rule” they would easily be allowed to do such an thing and that would leave it up to Canada to lodge a complaint. I don’t think that Canada would though because that would risk being willing to become non-compliant with FATCA if the U.S. refused to stop.
A bank staffer here in NZ (after quite a few drinks!) said it was technically not feasible to turn over documents of known or unknown US persons to the IRS, that they will likely just give IRS full blown access to ALL their banking data and let the IRS do the hunting. Of course this would be violently denied in public circles!
@ pukekonz
Seriously? They’d dump ALL their data on the IRS? Wouldn’t that end up with lawsuits being filed by those with no U.S. taint? Did NZ’s bank privacy act (I presume they have one) get wadded up and tossed in a dustbin?
@recalcitrantexpat: Thank you for your excellent analysis of the differences between the CRS and FATCA.
@GetMikey: Welcome to this forum! It’s good to hear that Americans in the U.S. are learning that the fate of expats today may be *their* fate tomorrow. Please help us spread the word in the U.S.!
@pukekonz
I know someone who used to be an auditor for the CRA.
I asked what limits existed on the exchange of info that has been going on for decades between CRA/IRS, supposedly on “temporary” residents
“We gave them whatever they asked for.”
@GetMikey
Not to my knowledge but there is an effort to have some Accidentals talk to a journalist who is following the birthright citizenship issue…..
@recalcitrantexpat, anyone who believes the IRS will not share information it gets from FATCA IGAs with other US agencies is certainly naive. The US plays by its own rules and won’t let a little clause in a tax treaty stop it, since the IGA itself violates the US/Canada tax treaty.
@AnonAnon- I agree with you. U.S. tax treaties are basically worthless period. The “Last In Time Rule” allows the U.S. to unilaterally change every tax treaty. So this means that from the perspective of the none U.S. country all the treaties are built on sinking sand.
http://blog.intltaxcounselors.com/last-in-time-rule-voids-most-of-us-canada-tax-treaty/
The IGA’s have no value to any other country because the only reference point for the IGA are the Treasury Regulations. I’d like to see a U.S. court grant standing to a foreign country that wanted to say U.S. tax law is unfair under the treaty that the U.S. wrote.
@EmBee they made it sound like they would simply open a backdoor into their systems. I am sure there are laws against this and exposing all NZ citizens data to the IRS, but here in NZ such entities tend to do what they want on the down low, and even if caught out keep doing it until someone kicks up a stink. If a stink is kicked up then they’ll just spin it as working closely with our strong allies to help them track down criminals and terrorists, etc etc
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recalcitrantexpat says
August 26, 2015 at 11:34 am
“Contrary to what Mr. Berg says, the CRS and FATCA/CBT are not the same thing. FATCA is a unilateral U.S. law that was enacted in support of CBT. U.S. CBT is a feature of U.S. tax law where no U.S. citizen/Green Card holder or even a Snow bird who commits the error of staying in the U.S. too long are deemed to be U.S. persons and thus subject to U.S. tax and investment restrictions even if they are not resident in the U.S. The U.S. will not sign any tax treaty that does not include what is called the, Savings Clause. This clause spells out clearly that all people who the U.S. has determined are U.S. persons and are resident in the other country are considered to be also tax resident in the U.S. Basically the U.S. reserves the right to define the word residency in a way that is contrary to what anyone in any country would consider to be the normal meaning of residency, which is actual physical presence. Basically U.S. territory goes wherever the U.S. person goes.”
The IGA only asked about UScitizen and resident individual. Previous IGA used US person for tax purposes. If IGA is overturned the banks will be forced to use the US person for tax purposes. EMbee & Blaze (saved by if you were told that becoming a Canadian citizen you renounced US citizenship) would then be a US person for tax purposes.
I am pretty certain that for ex US citizens (depends on date of being ex US citizen) the exit taxes has to be done to be considered a non US person.
This Candian USA tax treaty
“Article IV
Residence
1. For the purposes of this Convention, the term “resident” of a Contracting State means any person that, under the laws of that State, is liable to tax therein by reason of that person’s domicile, residence, citizenship, place of management, place of incorporation or any other criterion of a similar nature, but in the case of an estate or trust, only to the extent that income derived by the estate or trust is liable to tax in that State, either in its hands or in the hands of its beneficiaries. For the purposes of this paragraph, an individual who is not a resident of Canada under this paragraph and who is a United States citizen or an alien admitted to the United States for permanent residence (a “green card” holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States, and that individual’s personal and economic relations are closer to the United States than to any third State. The term “resident” of a Contracting State is understood to include:
http://www.fin.gc.ca/treaties-conventions/usa_-eng.asp
additionally from Canada government
“IRS Publication 519 states that the U.S. domestic rules that determine if a non-U.S. citizen is a U.S. resident do not override tax treaty definitions of residency. If you are considered a resident of Canada and the U.S. under each country’s laws and the Canada–U.S. tax treaty considers you a resident of Canada, the U.S. has to treat you as a non-resident taxpayer and you should not identify yourself as a U.S. resident to your Canadian financial institution.”
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html#q2-5
If you do not plan to go to USA you do not have to do exit taxes. Of course if IGA is overturned you go to the original rules,
The bank may prefer to do this pay Canadian fines then have a 30% withholding.
“19. Does the agreement require Canadian financial institutions to report to the CRA on any individuals who relinquished their U.S. citizenship?
No. Canadian financial institutions do not have to report on any individuals who have relinquished their U.S. citizenship and are not residents of the U.S.
Financial institutions may ask individuals who have relinquished their U.S. citizenship for documentation to this effect.”
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html#q2-5