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
That’s worth a good tweet:
BancdelAsteroideB612 @BancB612 · 29s30 seconds ago
Hej! @TankesmedjanP3 #FATCAinfo What can you swap 4 this? Madde’s green card? http://bit.ly/1rNir6x
Re:
https://isaacbrocksociety.ca/2014/10/24/fatcainfo-twitterers-tweet-to-swedish-radio-whatever-you-think-that-sweden-that-tax-haven-could-use-for-fatca-reciprocity/
I am beyond shocked if this is true! That being said Virginia Jeker posted the following comment on the FATCA discussion thread not long after Michael’s comment:
“Hi – I do not prepare forms as part of my practice, but checked w. a colleague who does so and who is familiar w. W8BEN-E. He says as below re the Form W8 BEN-E. It is unclear from Michaels’ post if the Bank itself is requiring listings re each of the condo owners. Apparently such info is NOT required for the W8 BEN-E.
“Michael should not go bananas on this issue.
“His checking the form W-8Ben-E as per any of the following (whichever is appropriate)
will take care of his organization’s obligation. No personal or additional information is required.
“Part XXVI
or
Part XXII
“Information reporting as per FATCA has been implemented in Canada as law since the country literally signed the IGA Model 1 with the US on February 5, 2014. People should understand and now consider the regime of reporting as a norm. FATCA is not going anywhere as a matter of fact will continue conceiving other legislations such as GATCA which is now growing out of its crib days!”
If I were Michael my question would remain: What does “checking the form W-8Ben-E mean?” and why should it be required at all in the instance he is describing?
Strike that last tweet, try this
Hej! @TankesmedjanP3 #FATCAinfo Madde’s green card http://bit.ly/1xXIZFd swapped 4 this info at your böstadsrätt4ening? https://isaacbrocksociety.ca/2015/01/27/are-strata-corporations-the-next-target-of-canadian-banks-fatca-zeal/
Re:
https://isaacbrocksociety.ca/2014/10/24/fatcainfo-twitterers-tweet-to-swedish-radio-whatever-you-think-that-sweden-that-tax-haven-could-use-for-fatca-reciprocity/
@Muzzled, Not only the form W8Ben, but apparently the Bank is wanting to get information on the strata owners. Suppose you have 8 unit strata Corporation. That means if one of the owners is US, according to US rules, he must file extra tax forms to the IRS–because he is more than 10% owner of the strata corporation.
So a snowbird with an apartment in Florida and a home base in a Canadian condo could make the list.
The more overboard and ridiculous this gets, the more hope there is for reform.
@Petros, this is not mere supposition, I know of a situation where three members of a family (not US Persons so far as we know) own 3 units in a Strata in Jamaica. There are only three other units. We do not know (nor do we want to know) the detailed status of the other three owners and are not therefore in any position to inform any bank about them. Period. We do not wish to become involved in any such complications. The investors I know may be forced to dump their investments …. or maybe some sort of rule can be added to the Incorporation Documents forbidding any US Person to own a unit in the Condo. These are real life issues that FATCA is giving rise to.
The bank needs to be told to FATCA OFF.
Strata Corporations can hide their money under the mattress and their Americans in the attic.
@Petros
There are indeed some frightening historical parallels to what is beginning to happen to US Persons worldwide:
http://www.ushmm.org/wlc/en/article.php?ModuleId=10005681
http://www.ushmm.org/wlc/en/article.php?ModuleId=10007459
Well, I thought my reference to keeping Americans in the attic was only in conformity with Godwin’s Law in a very cryptic and veiled sort of way. I guess Deckard1138 has me pegged.
@Petros
Ah yes, Godwin’s Law. I wonder what Godwin would make of FATCA and CBT 😉
Godwin’s law according to Wikipedia is: “As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1”
We could add a corollary: “As governments become more and more totalitarian, the probability of them acting like Nazis or Hitler approaches 1”
I’ve on several occasions brought up the reporting requirements of US strata council members should any of them have bank signing authority, but the prospect of a strata corporation having to identify whether any strata owners are US taxpayers is beyond my imagination. Perhaps Michael would like to discuss this with the executive director for the BC Condominium Homeowners Association who wrote this piece in the Times Colonist concerning reporting obligations for US persons after I’d contacted him over the issue:
“U.S. citizens who live in Canada also have personal obligations of reporting to the Internal Revenue Service in the U.S., even though they are residents of Canada. It is important to understand that the sale of a principal residence in Canada is not tax exempt for U.S. citizens.
There’s more. If you have a U.S. citizen on your strata council who is also an authorized signing officer on your trust funds, that person is also required to report on their U.S. tax return whether they have any foreign bank or investment accounts.
The U.S. Bank Secrecy Act requires them to file a Report of Foreign Bank and Financial Accounts if they have a financial interest in, signature authority or other authority over one or more accounts in a foreign country, and the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
While these are the personal issues of the U.S. citizen, the strata corporation may discover the release of the financial information of the strata corporation to a foreign government is in conflict with our privacy legislation.
Canadian strata corporations do not report to the IRS, so before any information of the strata corporation is released or published as part of the U.S. return, the strata corporation should seek advice on the risk of the release of personal information to a foreign government.
For more information, U.S. citizens may wish to go to americansabroad.org.”
Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him by email or write c/o At Home, Times Colonist, 2621 Douglas St., Victoria, B.C. V8W 2N4. The association’s website is choa.bc.ca.
– See more at: http://www.timescolonist.com/condo-smarts-tale-of-two-tax-men-and-strata-corporations-1.178211#sthash.74JJIeSZ.dpuf
I don’t know whether ownership of foreign strata corporation counts as falling under PFIC. If it does, then “US person” owners of condos are screwed.
Petros, you are right. Anyone who is US person on the Board of the non-profit who controls 10% or more must file 5471. I am not 100% sure about PFIC 8621.. That is just “normal” under FATCA IGA.
To me it seems the bigger problem is whether the condo board will violate PIPEDA if they request info on condo owners? Condo boards are non-profits. As I understand it, an owner of a condo is not included as part of the corporation. The bank is way out of bounds here.
The boundaries are written in Washington has spoken.
Will we see ‘restrictive covenant’ rules in Canadian (and other non-UR) real estate contexts such as that in the posts above about strata and condos where the discrimination rests on US national origin, US birthplace, US parentage, and any one of the other myriad of indicia (ex. greencard) in which those the US deems to be ‘taxable persons’ living outside the US are now to be winnowed out and restricted or rejected due to FATCA?
Caveat, I am NOT suggesting that this situation is equal in gravity to the infamous US practice of racially based restrictive covenants in the following examples below, but I merely point out that the US government is now the direct cause of discrimination in contexts which have nothing to do with any possible US economic connection or tax assessed – and the basis on which the discrimination rests is a completely non-economic non-taxable event – birthplace, parentage, national origin, dual status via naturalization, etc.
http://www.bostonfairhousing.org/timeline/1920s1948-Restrictive-Covenants.html
http://wbhsi.net/~wendyplotkin/DeedsWeb/philpott.html
The further these kinds of repercussions of FATCA spread and contaminate our ordinary legal local lives outside the US, the further opportunities to embarass the Harper for asserting their unqualified ‘respect’ for US extraterritorial economic aggression – which in the condo and strata examples show is now intruding into non-US real estate and housing contexts.
@Tricia – Whether or not the Condo Member is a Member of the Board, Condo owners ARE members of the Condo Corporation (with a fixed fractional share of the Corporation associated with their unit) and thus with rights to Vote at meetings in accordance with that fractional interest and to use Common facilities and so on. This could get nasty I suspect.
The world and OECD have a huge boner for “Beneficial Owners”
It is back-propaganda directed at USA and others.
THey are fixed on assets of owners rather than income of owners (which is normally taxed).
@nervous investor
I am still not so sure. It should be relevant as to the % of the corporation the SH owns.
If it is under 10%, I have my doubts. I know for certain one has to at least have 10% or more before having to file a 5471.
An owner whose unit entitlement share of the strata corporation’s contingency reserve and other cash assets exceeds $10,000 should report those accounts on FBAR’s, no?
In most Canadian cases, there’s nothing to worry about. Most (maybe all) condo corporations are non-financial foreign entities. Most have no owner with greater than a 10% interest (called a “substantial interest”). In these cases, the condo corporation would not need to identify any US owner.
There are some very corporations with very few owners. In some cases, the corporation’s directors would have to ask the people with greater than 10% interests whether they are US persons. They would have to be listed on the W-8BEN-E.
I’m not saying FATCA is fine. I’m just trying to clarify what the rules are. At least in this case, they’re not THAT stupid.
Please do not refer to this as professional advice..
@Kevyn
Thanks for clarifying. I was pretty sure about that 10% !
The condo corporation itself might be fine with regards to FATCA, but if there are fewer than 10 owners, then a U.S. Person owner is screwed in any one of several non-FATCA ways:
1. The corp. could be a PFIC, as mentioned above. Oh happy happy joy joy, good old Form 8621 and insane calculations when you sell.
2. If there’s 10 or fewer owners, the corp. could be a CFC. Then it won’t be a PFIC (26 USC 1297(d)). But you have no way to determine if it’s a CFC in the first place without knowing the U.S. person status of all the other owners. That means you can’t figure out whether you have a Category 5 filing obligation for Form 5471, and even if you just go ahead and assume you do, it’d impossible for you to fill out Schedule B properly.
3. The corp. could be a CFC one year but then no longer be a CFC (a 10% U.S. Person owner sells, a U.S. citizen/LPR owner renounces/abandons status, a neighbour who met the U.S. substantial presence test in your earlier years of ownership takes fewer vacations in the US this year, new shares are issued for additional units pushing all owners below the 10% threshold, or something.) Again, except in the “new shares” case it’s impossible for you to know this without invading your neighbours’ privacy. Also I have zero clue what happens here with respect to potential PFIC status, read 1297(d) and 1298(b)(1) and have fun figuring it out or paying someone who’s qualified to figure it out for you.
4. The corp. could be a foreign partnership (either by Form 8832 “check the box” election or because the IRS looks at the potential unlimited liability of owners of a strata corporation and concludes the default classification should be a partnership under 26 CFR 301.7701-3(b)(2)). Not a corporation means it’s definitely not a PFIC nor a CFC. But if there’s 10 or fewer units then you have similar problems as #2: without knowing the U.S. Person status of all your neighbours, you can’t properly fill out Form 8865 Schedule A, and you can’t figure out whether you have an ongoing Category 2 filing obligation.
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.