As part of its 2015 Federal Budget announcements, Canada committed to implementing the "Common Reporting Standard" (CRS) promulgated by the Organization for Economic Co-operation and Development (OECD). While the OECD's efforts to facilitate information reporting via the CRS and Canada's corresponding implementation of such a regime will certainly have lasting impact, let us not forget about the progenitor of information exchange and its looming deadlines: FATCA.
Based on an Intergovernmental Agreement signed by Canada and the United States in early February of 2014, financial institutions across Canada are required to review their accounts and submit information with respect to "US reportable accounts" (generally accounts held or controlled by US persons subject to certain monetary thresholds) to the CRA. Failure to provide accurate or timely information with respect to US reportable accounts may lead to a withholding imposed upon the financial institution itself by the United States. The CRA is obligated to forward this information to the IRS by the end of September 2015. 1
To ease this inundating FATCA compliance burden imposed on financial institutions, the CRA will implement FATCA in phases, whereby information reporting starts out modestly (at least when compared to the default rules that apply under US law) and ramps up to its full scope within the next several years. Notwithstanding this meager consolation prize, Canadian financial institutions must remain vigilant and meet key upcoming deadlines outlined below. 2
1. Reporting Deadlines
2014
| Regarding | Information to be reported to the CRA before May 2, 2015 |
Each specified US person,
either:
|
|
2015
All information listed for 2014, plus:
| Regarding | Information to be reported to the CRA before May 2, 2016 |
| Custodial accounts | Total gross amount of:
|
| Depository accounts | Total gross amount of interest paid or credited to the account during the year. |
| Other accounts | Total gross amount paid or credited to account holder with respect to the account, including aggregate amount of redemption payments made to account holder, during the year. |
2016
All information listed for 2014 and 2015, plus:
| Regarding | Information to be reported to the CRA before May 2, 2017 |
| Custodial accounts | Total gross proceeds from sale or redemption of property paid or credited to the account during the year. |
2. Review Procedures
In addition to these reporting deadlines, financial institutions must review pre-existing individual and entity accounts to determine whether they are US reportable accounts according to a separate set of deadlines:
Review Procedure Deadlines
| Regarding | Account required to be reviewed by |
| Pre-existing individual lower value accounts (balance/value < $1,000,000 USD as of June 30, 2014 | June 30, 2016 |
| Pre-existing individual high value accounts (balance/value > $1,000,000 USD as of June 30, 2014) 4 | June 30, 2015 |
| Pre-existing entity accounts with a balance/value > $250,000 USD by June 30, 2014 5 | June 30, 2016 |
The lion's share of the compliance burden associated with FATCA lies in gathering and reviewing required information. But before planning for future ventures (e.g., CRS), financial institutions must complete the task at hand.
Footnotes
1. Agreement Between the Government of Canada and the Government of the United States of America to Improve International Tax Compliance through Enhanced Exchange of Information under the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital, US-Can., art. 3, 5, Feb. 5, 2014.
2. Select charts reproduced from Guidance on enhanced financial accounts information reporting, Canada Revenue Agency, available at http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/gdnc-eng.html (last visited Apr. 24, 2015).
3. Only required for a holder of a preexisting account for 2014-2016 if the TIN is held in the financial institution's records; if not, the individual's date of birth (if known).
4. If a high value account is identified as a US reportable account in 2014, the account information must be submitted by May 1, 2015. If a high value account is identified as a US reportable account between January 1, 2015 and July 1, 2015 information with respect to 2015 only (not 2014) must be submitted by May 1, 2016.
5. If a pre-existing entity account has a balance or value of $250,000 USD or less as of June 30, 2014, but subsequently exceeds $1,000,000 USD, the account must be reviewed by June 30 of the year following the year in which the balance or value exceeds $1,000,000 USD.
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