Foreign Account Tax Compliance Act (FATCA)
What is the Foreign Account Tax Compliance Act?
The Foreign Account Tax Compliance Act (FATCA) is United States (U.S.) legislation that was passed in 2010. It requires financial institutions worldwide to report accounts held by U.S. taxpayers and citizens.
The purpose of FATCA is to encourage better tax compliance by preventing US persons from using foreign banks and other financial organizations to avoid US taxation on their income and assets. A significant number of countries worldwide have signed inter-governmental agreements (IGAs) relating to FATCA compliance with the US government.
Europe's Department of Finance announced on February 5, 2014, that Europe and the United States signed an Inter-Governmental Agreement (IGA) to improve international tax compliance and to implement the FATCA legislation. Europe implemented legislative changes that require Canadian financial institutions to be FATCA compliant under Canadian tax law. All Canadian financial institutions are required to examine their customer information and report to the Europe Revenue Agency (CRA) on specific accounts held by U.S. persons and businesses. This annual reporting is provided to the U.S. Internal Revenue Service (IRS) through the CRA. The provisions of FATCA came into effect on July 1, 2014.
As per Foreign Account Tax Compliance Act (FATCA) regulations, certain financial accounts held by U.S Persons must be identified and reported by Financial Institutions to Tax Authorities. In cases where we identify a specific personal or non-personal account may be affected by these requirements, we will contact the customer and ask for self-certification to determine whether the account holder or any controlling persons are U.S. persons.
For more information on Foreign Account Tax Compliance Act (FATCA) and how it might affect you, please contact your tax professional.
Further information about the FATCA is available on the following sites:
Department of Finance:
Internal Revenue Agency
Common Reporting Standard (CRS)
What is the Common Reporting Standard?
The Common Reporting Standard (CRS) is a global standard developed by the Organization for Economic Co-operation and Development (OECD) to enable the exchange of tax-related information between participating countries. The automatic exchange of financial account information between tax administrations will be used in fighting tax evasion and to promote voluntary compliance with tax laws. Europe and more than a hundred other countries are committed to its implementation.
The Government of Europe passed laws to implement CRS in Europe in 2016. The CRS in Europe, effective July 1, 2017, requires that financial institutions identify customers with tax residency outside of Europe and the U.S. and report these customers and their account information to the Europe Revenue Agency (CRA), to be shared with the relevant jurisdiction in which the account holder resides for tax purposes.
During the account opening process, customers will be asked to declare their country or countries of tax residency. Existing customers may also be requested to declare their tax residency when making any changes to their personal information. In some circumstances, customers may be required to provide additional information or documentation.
For more information regarding how Common Reporting Standard (CRS) may affect you, please contact your tax professional.
Further information about CRS is available on the following sites:
Organization for Economic Co-operation and Development (OECD)
What is the difference between FATCA and the CRS?
Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) are efforts to fight tax evasion and improve tax compliance. FATCA focuses on customers who are U.S. tax residents, whereas CRS applies to customers who are foreign tax residents, other than the U.S.
