Is this what CRA, Banks & Compliance Industries have not been Upfront about? IOW, "US Persons" in Canada "Screwed"
http://t.co/Roy2tWwvLZ
— U.S. Expat Canada (@USExpatCanada) August 29, 2014
I just came across a rather disturbing bit of information that destroys any sense of security we’ve derived from the statements that “CRA will not collect taxes from anyone who was a Canadian at the time the tax was incurred.”
The author claims that Canadian Financial Institutions are not signed on to the Tax Treaty and that the IRS can take the information received from the CRA, contact the bank directly and ask the bank to collect penalties (not taxes and interest?) from the account holder and remit to IRS.
This doesn’t sound correct to me as the IGA may allow the banks to give info to CRA but I’m not aware that the IGA nullifies PIPEDA, which would still stand. If the argument is made that the “Treaty” trumps domestic law, and they can get away with applying that, we are in serious trouble. Allison’s arguments become very important and the government should have listened.
This position seems to depend upon a relationship between a Canadian bank that has branches in the US:
“IRS will go with a demand to collect penalties from the account holder’s information they have received from CRA to Canadian Banks operating in the USA, namely RBC, TD, HSBC etc. Once the USA branch of Canadian Banks gets the demand letter from IRS, they will forward it to respective Canadian Branch where the account holder has account with the banks. As far as bank operation goes, they will either collect and remit the penalties on behalf of IRS or freeze the account until the penalties are paid.
If Canadian banks don’t comply with IRS demand, any payment coming to them from the U.S. will be subject to 30% withholding tax on gross income. They will be also forced out of doing business in U.S. capital markets and markets that conclude contracts in U.S. dollars, 1.e. the commodity or petroleum market.
U.S. persons now must comply with USA tax laws, or risk the discovery by the CRA and IRS which can make their life miserable and wealth diminished.”
If this is truly the case, why haven’t the compliance community/politicians pointed this out? Is this a willful omission on their part? This information comes from a company in Vancouver “Cross Border Tax Service.”
Those of you in the legal community, please weigh in on whether a subsidiary branch of a Canadian bank in the US can force the Canadian parent company to collect/withhold. It sounds rather tenuous to me yet as we have seen in the last few days, they seem to be able to do whatever they want.
Here is the article.
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