LM has posed the following query to readers. It is another true life scenario in which the Canadian government and Canadian banks have put certain Canadian citizens at risk by promising to expose them to the US Federal government.
OK Brocker folks, I have a situation and need support /answers / information.
I invest with a Canadian FFI (for example, RBC-Dominion) and just got a W-8BEN from them that “has to be” filled out and signed; otherwise, they will no longer allow me to trade/invest with them. I spoke with my investment counselors associate (who knows my situation totally and has discussed much about FATCA with me) and told her I found it outrageous that I should be required to sign a US IRS form to say to my Cdn investment firm that I am not a US citizen. They (the FFI) got this exact same information from me back in 2013 via a “Substitute W-8BEN” when I transferred all my accounts there and I would be happy to sign an additional “Substitute W-8BEN” from them now. I’d even be willing to provide a copy of my CLN.
My recollection is that the IGA includes wording that allows Canadian FFIs to use their own equivalent of a W-8BEN (in this case, the “Substitute W-8BEN” with a page heading of XYZ Wealth Mgmt, ABCD Securities”) rather than the actual US form (which has, at the top “Department of the Treasury, Internal Revenue Service”, so that any signature is “under penalty of perjury” to the US).
I don’t intend to perjure myself or in any way lie, but is it required, under Cdn law now, that I must sign a US legal document to prove that I am not a US citizen to my Canadian financial institution? I would hate to lose my investment advisor of many years but this has really angered me and I’m sure I am not the only one who will be getting this document to sign now that the FFIs are beginning to look more thoroughly at “established” accounts.
Any advice / information / links to the part of the IGA stating that FFIs are not required to use the US form / etc would be very greatly appreciated.
LM: The portion of the IGA you are looking for is p. 21 paragraph 4a) (1). This states that banks will ask customers to fill out either an IRS Form W-8 or a similar form.
I guess these same rules apply if you have Social Security Income.
w8 is just the non US person W9 (I think it is called). without one, 30% withholding tax is taken rather then 15% for non US person or nothing if you are US person and tax compliant. Other countries would do the same if they had multiple levels of withholding tax and such a complicated mobius loop of tax law.
PS ans as others have said already, it only applies to US investments.
First of all, I neglected to mention in my post above that we are Canadians, living in Singapore. We will be returning to Canada in 2016 though, and so are very interested in all the IB discussions, and Canadian issues and politics.
@ND: We got the money back from the FI, as they had not yet submitted it to the IRS. I saw immediately that the funds deposited were approx a third less than what I was expecting, so was on top of it right away. I really feel for you and the IRS. It took us five years to finally settle with them, and I think we’re done now, after going through a long, costly and painful OVDI process. I can’t imagine what fighting with them for nine years must be like!
Thank you for the correction, I was unaware that the W8-BEN predates FATCA. To me they all happened at about the same time, so I thought the W8-BEN was part of FATCA.
@Petros: I wouldn’t have known that the banks are required by law to tell you what information they have on you. I really don’t know if the same applies here in Singapore, and it really didn’t occur to me to force the issue, we simply took them at their word, which is likely the way I would have reacted had the same happened in Canada. I couldn’t agree more with your statement
“The fact that the banks are demanding W8-BEN and will refuse to trade for you is CYA on their part. Banks have become strident and insolent as result of FATCA.”
We have had absolutely NO choice in completing the W8-BEN, even though the FI we deal with now, has no knowledge of us ever having anything to do with the US.
Since W8-BEN only applies to US investments, a brokerage firm that threatens to close or freeze an account is doing CYA. They can just simply say to the client that their earnings in US investments will likely be subject to 30% withholdings. This is why I say that FATCA (and the Tory co-operation with FATCA) has caused CDN banking institutions to become insolent.
@DJ, PIPEDA is a Canadian law and only applies to doing business in Canada. It is not like FATCA in its scope.
And insolent is not how any business should behave, especially banks, where the relationship is built on the trust that your money’s safe with them.
LM please see my reply to your query on the ‘Election Day’ thread in case it got lost.
section 7.12 and 7.13 explain what self certification means and subsequent sections detail what forms it can take.
Should a Canadian be forced to fill out W-8BEN to avoid losing her right to trade in her Canadian brokerage account?
She should do everything she can–including but not limited to refusing to sign the W-8BEN–to goad the broker into closing her account. Then she will have suffered a real, tangible harm and can present herself to Arvay and the court as a credible witness.
“We got the money back from the FI, as they had not yet submitted it to the IRS. I saw immediately that the funds deposited were approx a third less than what I was expecting, so was on top of it right away.”
Wow, you’re lucky. I saw immediately what Ameritrade had done, but they told me they couldn’t refund it. I had been filing US returns, compliantly with the law as far as I could tell. Ameritrade reported the withholding on Form 1099.
I simply declared the amount of withholding and claimed a refund. The IRS refused to tell me what they were mad about. In 2012 there were news reports of the Treasury Inspector General’s report to Congress: IRS employees participated in identity theft. Since that time I’ve gradually figured out what happened. IRS data entry clerk Monica Hernandez stole withholding from victims’ Forms 1099. Some IRS employee altered records of my returns, fabricating claims of foreign tax credits which had no basis, instead of my actual claims of withholding. Things still continue to get worse.
In 2013, then-US Assistant Attorney General for Taxation, Kathryn Kenneally, reported to Congress about Stolen Identity Refund Fraud and said that the IRS always makes good to SIRF victims but the feeling of violation is still a problem. Well in fact the IRS doesn’t make good to SIRF victims when the embezzlers are IRS employees. Guess which US Assistant Attorney General for Taxation opposed our refund suits in Court of Federal Claims and Court of Appeals for the Federal Circuit.
The US Department of Justice and courts are even more corrupt than the IRS is.
Thank you for all this advice. Questions have been forwarded to my adviser and his associate (both of whom, as noted before, know much about FATCA and are quite sympathetic – – but they work for thie FFI and don’t have control of “Head Office”). I will be pursuing this as much as I can. I do not have any direct US investments. As this unfolds, I will post here. Again, I really appreciate your comments and suggestions
This is also the case in France. Having renounced U.S. citizenship, I have received requests from 4 of my banks to sign American forms since I was born in the U.S. One of the banks says it will withhold 30% on U.S. investments if I don’t sign, two of the banks say they will just hand over my account information if I do not sign, and one of the banks hasn’t said what it will do.
I have sent letters to two of the banks explaining that it is against the first article of the French constitution to discriminate based on national origin. (Since I am no longer a U.S. citizen, the only reason they are asking me to sign the U.S. forms is because of my birthplace, i.e. my national origin.) I have yet to hear back. I suppose they will ignore my complaints and simply hand over the data to the U.S. authorities anyway without informing me, which will leave me with no recourse.
“I have sent letters to two of the banks”
Not three? One is threatening to withhold and two are threatening to hand over information.
“it is against the first article of the French constitution to discriminate based on national origin. (Since I am no longer a U.S. citizen, the only reason they are asking me to sign the U.S. forms is because of my birthplace, i.e. my national origin.)”
Excellent. Though the banks could have an escape route, if one threatens to withhold 30% from all French citizens regardless of national origin, and two threaten to turn over information of all French citizens regardless of national origin.
“I suppose they will ignore my complaints and simply hand over the data to the U.S. authorities anyway without informing me, which will leave me with no recourse.”
Are there statutory damages at least? Does France have small claims courts? Assume the banks will close your accounts after you sue them, but maybe you could get 1,000 euro from each bank who discriminates against you by national origin?
HI All – it took a couple weeks but at least my own situation seems to have been resolved RE not wanting to sign a standard US Treasury W8-BEN.
After receiving the mailing from my investment company basically demanding that I fill in this US Treasury form or lose access to investing with this firm, I phoned and spoke with my broker’s assistant who, as I said before, knows much about FATCA, knows I’ve renounced US citizenship and knows I’ve been fighting FATCA in Canada (and is sympathetic). She agreed that it was distinctly bizarre that clients had to sign such a foreign form (under possible penalty of perjury in this foreign country) when the Cdn investment firm already had a substitute W8-BEN substitute form (which I had signed about 2 years ago) with the same information (under possible penalty of perjury in Canada).
Anyway, I pushed this associate to push my questions further up the line of authority. She was not too hopeful. Yet, 10 days later she wrote “It looks as though the forms that we currently have on file for you (Application for US Withholding Tax Reduction) will do the trick to satisfy head office along with a review that [Broker] will complete & submit. I will know if the restriction has been lifted in a day or two.” She wouldn’t provide any further info about what others might want to request if faced with this scenario other than it was “an internal process that wouldn’t make any sense to anyone outside of the firm.”
So do not hesitate to make noise and (respectfully) push against this demand. Yes, staying away from US investments (as I have fully done since renunciation) is needed to avoid US withholding complications but even if you do this, it is a decision whether or not you will agree to put your signature on a US form for the provision of information to your non-US investment firm. Options should be (and probably are) available, you just have to buck the very routine paper-practice/form…..
“under possible penalty of perjury in this foreign country”
When talking about US tax forms, that isn’t a problem.
The IRS first informed me by phone in September 2010 that I have to sign preprinted declarations without alteration regardless of whether they’re true or not. Subsequently the IRS accepted my known perjured declarations.
The IRS further coerced me by written settlement in November 2011 to sign preprinted declarations without alteration, even when the IRS had already been informed twice of reasons why those would be perjured. For example Japanese government agencies and court know that a 源泉徴収票 (equivalent to T-4 and W-2) was false and incorrect, and the IRS had been informed twice, but nonetheless the IRS required me to attach it to a refiled 1040 and declare it to be true and correct. I listed known perjuries a third time in a cover letter accompanying the refiled returns. The IRS confirmed in writing that my perjuries complied with their needs.
26 USC section 7206(1) and section 7207 punish willful perjury, not unwillful perjury. As long as you know that the IRS requires you to commit perjury unwillfully, you can comply safely.
The IRS never directed me to IRB 2005-14, but in 2015 I found it by accident. The requirement to commit perjury has the force of legal regulations.
“Yes, staying away from US investments (as I have fully done since renunciation) is needed to avoid US withholding complications”
It’s not complicated at all. The lawfully correct amount of US taxes now is higher than when I was a citizen, but I don’t have to file a return. I did file W-8BEN. US payers withhold the correct percentages from US sourced interest and dividends and they’re no longer refundable, but they’re correct and I don’t have to calculate or report anything.
“if anyone needs to fill out a IRS 4506-T”
You should ALWAYS file two forms 4506-T each year, one for a transcript of account and one for a transcript of withholding (forms 1099, 1042-S etc.).
If you wait until the time you discover you need it, it will be too late. 4506-T only lets you get the most recent three years of transcripts. If you learn that the IRS mishandled your account four years ago, you can’t get a transcript any more. Get them every year whether you need them or not, and keep them.
I removed the comment above yours, which you’re referring to, as it was from a troller encouraging people to go to a commercial site (not the IRS site) if they need to fill in a IRS 4506-T. But thanks for your comment providing information about the 4506-T, which I’ll leave up.