Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act (FATCA) is a law that was passed in the United States to ensure U.S. Persons are taxed on their worldwide income regardless of where they live.  FATCA aims to combat U.S. tax evasion by U.S. Persons with financial assets outside of the United States.  

How does it work?
The Canadian government, along with many other governments worldwide, entered into an Intergovernmental Agreement (IGA) with the U.S. to establish a simplified reported process.  

Financial institutions across Canada are required by law to identify Reportable Accounts held by U.S. Persons (individuals and entities) that should be reported, and then securely report the required information to the Canada Revenue Agency (CRA).  Once CRA has received the information, it will then exchange the information with the Internal Revenue Service (IRS) through the existing provisions of the Canada-U.S. Tax Convention, which is consistent with Canada’s privacy laws.

What is a U.S. Person?
Under U.S. tax law, you are considered a U.S. Person if you are:
  • A citizen of the United States (including an individual born in the U.S. but who is a resident in another country, who has not renounced their U.S. citizenship);
  • A lawful resident of the U.S. (including a U.S. green card holder);
  • A person who resides in the U.S.

You may also be considered a U.S. Person if you spend a significant number of days each year in the U.S.  On this basis, some Canadian “snowbirds” may be considered U.S. Persons.  However, the Canada-U.S. tax treaty allows them to claim benefits to be treated as Canadian rather the U.S. taxpayers.  Other treaties with the U.S. provide similar relief.  If you are unsure of your U.S. tax status, contact the CRA or your tax advisor.

For more information about U.S. Persons and their U.S. tax obligations, visit the IRS website:

https://www.irs.gov/individuals/international-taxpayers 
https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca 

I am not a U.S. Person.  What does FATCA mean for me?
In most cases, FATCA should have little impact.  If you have an existing account and there is an indication that you may be a U.S. Person, or if you are opening a new account, ACU may ask you to provide additional information or documentation to demonstrate that you are not a U.S. Person.

What should I do if I’m asked to provide ACU with information?
As ACU is legally obligated to collect certain information for FATCA purposes to identify U.S. Persons and report their Reportable Accounts to CRA, members should complete the Declaration of Tax Residence form and provide other documentation or information as requested to allow ACU to report accurately.

I am a U.S. citizen but have not lived in the U.S. for years and do not pay U.S. taxes.  Why does this apply to me?
A U.S. citizen who lives outside the United States falls within the definition of a U.S. Person for U.S. tax purposes, and must file a U.S. tax return.  U.S. taxpayers may also have other U.S. reporting obligations.  Canadian financial institutions are required to identify the accounts of U.S. Persons and report them to CRA annually.  It is important that you consult with a tax advisor to understand your U.S. reporting obligations.

Can ACU employees help members by explaining the conditions for which a person is considered to have U.S. tax reporting obligations?
ACU employees are not able to provide legal or regulatory advice as it pertains to FATCA or any other tax matters.  It is the responsibility of the member to determine whether or not they have a U.S. tax obligation.

Members should check with CRA or speak with their tax advisor if they are unsure of their tax obligations.

Should I be concerned about the confidentiality of my personal information?
Financial institutions that request information solely for the purposes of FATCA are not permitted to use the information for any other purpose.  The information will be provided to CRA in accordance with FATCA legislation.  Information exchanged between CRA and the IRS is subject to confidentiality rules and the United States must also ensure the protection of personal data.  

If you have concerns about the confidentiality of your personal information, please contact CRA.  

If you have received any correspondence regarding FATCA from Aldergrove Credit Union, and have any questions or concerns, please use the contact information provided to you.

Does FATCA apply to insurance policies?
Yes, FATCA applies to all types of financial accounts, including life insurance policies with a cash value and annuity contracts.

Are other financial institutions complying with FATCA?
Most financial institutions around the world are affected by FATCA. The majority of financial institutions in Canada are legally obligated to comply with FATCA procedures to identify and report Reportable Accounts to CRA.
 
Where can I find more information about FATCA?
For more information about FATCA, please visit the IRS website - https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca

 

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