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.
- 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)”.
Here’s the QI standards for Canada (including a list of what form of identification a QI can accept in order to verify your withholding status):
Thank you for your intriguing account of your trip to the bank. What business is it of a bank manager to speculate about someone’s US tax compliance, with or without a CLN? A little bit of knowledge is going to be a dangerous thing for our bank managers, it seems.
With all the false-positives and negatives, and inconsistencies in enforcing FATCA, Dick Harvey’s brainchild is going to become a complete free-for-all. How can anyone delude themselves into believing this could actually work? I’m looking forward with great anticipation for when this thing goes off the rails and watching all the contortions the US Treasury Department will go through in trying to keep it from doing so.
It will get derailed, once courts in Canada, and several countries try to make it their business in an determination of possible citizenship to foreign country, the entire house of cards will collapse. This is why this lawsuit bringing a Canadian Charter challenge is vitally important.
I can also confirm what Edelweiss stated above, i.e. the QI program is at least 10 years old and has nothing to do with FATCA. If you have no US source income, there’s no need to fill out any Wxxx forms.
@Duke of Devon
“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 a broker has a W9 from a customer, that customer has “admitted” to being a US person. The bank will therefore not deduct anything, because the assumption is that that customer will file US tax forms and the US source income will be declared accordingly. Instead, the bank will pass on information on that US source income to the IRS (if I remember correctly, Form 1099-DIV).
This is how it works in my experience: The person filling out W9 or W8BEN: 15% of dividend will be withheld as US tax. No withholdings on US stock trades, except very small trading floor taxes (pennies a trades). Those who have filled out W9 will have their trades reported to the IRS. Stock sale do not generate taxes unless there is a capital gain–which is reported in one’s taxes. Brokers cannot know how much tax should be paid, so normally there is no withholding.
Those who do not fill out W9 or W8BEN: 30% withholding on dividends. I am not sure what will happen with trades–30% of sales of stocks is likely now that FATCA is in place. That’s a risk no one can take. So I don’t trade on US markets–period.
As for those who say this letter has nothing to do with FATCA, who are you kidding? How did I open this account pre-FATCA without providing the QI information and why do they so desperately need/want it now? –They have created a case number and called me on the telephone. Post-FATCA regulations require that FFIs do their due diligence to learn who their US persons are.
Yes, you have it right. The W9 has the SS No. or TIN No., so the info goes directly to the IRS on 1099-DIV (also 1099-INT for any interest income) and is supplied to the account holder for filing the tax return with the IRS. An NRA fills out a W8-BEN for US source income, which is then taxed at the source if applicable depending on tax treaties. For example, for Japanese citizens resident in Japan who file a W8, dividends are taxed at 10% and there is no withholding or US reporting for interest and capital gains.
Also, I’ve never had to renew every three years the W9 or W8BEN. This is absolutely new with FATCA. As a US person in Canada, I filled out W9 only once when opening the account. My wife filled out W8BEN once when opening the account. The reason for renewing it every three years? Perhaps to eliminate snowbirds. But this is new.
As far as I know TD Waterhouse doesn’t require renewing W8BEN every three years–not yet.
Atticus: Thank you so much for telling your story about your bank visit! Full of very useful information for us all.
My own recent experience at the bank involved looking over my husband’s shoulder while he applied for an RBC Direct Investing Account. I already knew what I was going to see thanks to a posting here at Brock. Sure enough buried on something like page 6 of the application was a blank line for one’s citizenship and, directly below it, a blank line for one’s place of birth. No explanation about why this information was needed. It constitutes a trap for the uninitiated. How many people are falling into it each and every day? The thought makes me absolutely livid.
I don’t doubt your experience in Canada, but the 3-year rule on W8 has been in place for a long time, at least 20-25 years. I was a US person resident in Japan for more than 35 years before finally naturalising and relinquishing, and my wife has always been an NRA as far as US taxes, but we have always maintained the bulk of our savings in the US (for one thing, it eliminated the need for me to file FBARs). For such purposes I only supplied a SSN (the W9 is only if your dealing with an FFI; if your a US person overseas dealing with a US FI, just the SSN is required). But for at least the past 20 (and I think more like 25) years, my wife has been filing a W8 every 3 years. Technically the W8 remains valid indefinitely if a TIN is supplied, but even with a TIN the brokerage required a new form every 3 years. The instructions on the W8 do not seem country-specific, although the withholding rates are.
No doubt FATCA is going to change some things in this regard, but in our specific case we haven’t seen anything yet. In fact, my US financial advisor keeps asking me to introduce others in Japan to invest with him in the US!
Re: “we have always maintained the bulk of our savings in the US (for one thing, it eliminated the need for me to file FBARs).”
And “my US financial advisor keeps asking me to introduce others in Japan to invest with him in the US!”
You may not live inside the economic Berlin Wall, but the U.S. has been effective in ensuring your money does. Same with my niece’s partner. He’s an American who lives and works in Canada, but he instantly ships all his money into a U.S. bank to avoid hassles with the IRS.
Yes, I realise that they effectively ‘encouraged’ (ie., coerced) us to keep all our financial assets in the US. Now that I’ve relinquished, we’re moving it all back to Japan (for better or worse).
I have to say, though, that of me it was fortuitous. No worry about FBARs, no stock dealings or investments of any other kind in Japan, etc, has made it a lot easier to file my US taxes. Thankfully, I will be completely finished with my final filing next year.
@Muzzled, I am still shocked and disgusted at this birth place witch hunt. They all seem SO complacent. It is extremely offensive that my birthplace or anyone else’s is questioned for banking purposes or for any other purpose. There is something repulsive about standing there and having all this questioning going on, realizing they are digging through birth place “evidence” and “flagging” those of a certain national origin. This is utterly disgusting to me. I wanted badly to say “So, I have a CLN, does that mean I am now as Canadian as you are?” That’s what Harper sold when he went along with this IGA. SOME Canadians are more Canadian than others. It’s humiliating. How far is this going to go I want to know? Will it stop with banks or will I be required in the future to prove I am not of U.S. origin for other business purposes? The fact that the people working in my bank seemed to have this very laid back attitude about what we were engaging in just saddened me. FATCA “Persons of U.S. origin suspected criminal until we say you are not.” I wanted to fling that CLN at them but, didn’t of course. I wanted to say “Here, I gave up my citizenship so I could be treated like a law abiding Canadian, happy now?” I did not get the impression they thought there was a thing wrong about what they were doing….that’s a huge problem for me. There’s a lot wrong with it. They would never do this to Canadians of any other national origin, if they did there would be a huge outcry. Fundamentally this is a Charter violation. I am being treated less than and very differently due to my national orign, in fact being treated as a criminal, investigated with zero evidence of wrong doing based on birth place and everyone in my family linked to me is too. I have never done an illegal thing at my bank yet accounts like mine unless I have taken the drastic steps to renounce are “flagged” I have made up my mind that after we are able to move all our accounts and I will have a meeting with the bank manager and say the reason was I don’t appreciate being discriminated against because of my birth place. This is Canada?
I wonder if other Canadians would be alarmed if they were ferreting out everyone born in the U.S, or with other telling “connections” in order to give them huge interest rate benefits or other perks not available to anyone else? Would they then see this as unfair and discriminatory?
Right on, Atticus. No other minority would be treated like this, and everything else you said.
Sad thing is that other canadians won’t even realize they may have signed off on something that can harm them. Alot of people say… rights this… rights that… but don’t really understand… even though there is a piece of paper with your rights… if u don’t pay attention & make sure your rights are protected… no one will protect u
I have found they bury nonsense at the bank… I switched my safety box & there was a little sentence buried in my new contract… about privacy… I found it because they screwed up my last contract so I looked to make sure it was done right… the teller said sign here… there… I wanted to be polite & not waste their time… so I was signing away… until I found a sentence I refused to sign… they crossed it out with some bs that I am sure they made up cause it made no sense
Yesterday I attempted to open a bank account online (here in Germany). They ask the following questions (my answers follow).
1. First citizenship. German.
2. Second citizenship. None.
3. Are you a US citizen. No.
4. Are you a US resident for tax purposes. No.
5. Country of birth. USA.
Because of question 5., I was not allowed to proceed with the account opening procedure.
notamused: I have copied your experience into a file of addenda should we be required to send any further information regarding our already-submitted United Nations Human Rights Complaint. What happened to you is exactly why CBT *must* be declared illegal by *all* countries of the world. Thank you for sharing it.
@Notamused, you were clearly being discriminated against.
Once you said NO to question 3, 4, it should have been all done.
The only exception I would make and I do this for illustration here on Brock is that you do have a second citizenship weither you like it or not and comes with your first, you are also a citizen of the European Union. So you are dual because that is specified within German Law.
What is not specified and defined in German law or any other nations law is dual citizenship with other countries other than with Commonwealth Citizenship……
I suspect that the country of birth issue is because of the compliance industry. The spirit of the law was never to ask COB but only look if COB came up on documents provided.
I live in another EU Country with friends in other EU Countries in particular the Netherlands.
I have noticed that there is a wide path of FIs that are not asking Country of Birth. They ask, citizenship (all), tax residence (all) and they are done which is proportional.
If someone presents an Irish Passport showing Dallas Texas USA as place of birth, it is reasonable under IGAs to ask why are you not a USC? It is then both reasonable and proportional to reply I am not a USC because I relinquished when I became Irish. It should then stop there.
Again, the compliance industry and the compliance industry software people are a major part of the problem.
@Muzzled, have you gone to the NS&I (UK) website and copied the clearly discriminatory practice of not allowing UK Resident USC from opening various NS&I products. Remember NS&I is part of HM Government.
No problem, and thank you for all your efforts.
Yes, I find it discriminatory, since the only issue is my country of birth. My wife (also German) is contacting them about it, as it was intended to be a joint account.
George: Thank you for the suggestion of the NS&I website. I will include that as well. Hopefully, our Complaint will be dealt with without the need of further information from us but if more evidence of abuse against us is required we will be ready with a fist full.
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