Canada and U.S. Sign IGA to Implement FATCA
The long-awaited agreement between Canada and the U.S. was made official on February 5, 2014. The signed intergovernmental agreement (IGA) will implement the Foreign Account Tax Compliance Act (FATCA).
Canada has signed the IGA under the Model 1 approach, which requires foreign financial institutions (FFI’s) to report FATCA information to their home country tax authority. In this case, FFI’s will report relevant information to the Canada Revenue Agency (CRA) who will then subsequently provide the information to the IRS, pursuant to the income tax treaty that is currently in place between the U.S. and Canada.
Canada is one of the many countries that have decided to come on board the FATCA train. Some notable countries that have previously signed an IGA with the U.S. include Switzerland, Germany, Italy, France, the United Kingdom and the Cayman Islands.
Despite the ongoing speculation, it is unlikely that there will be any further delays in the FATCA deadline, which currently stands as July 1, 2014. The IRS has also issued an updated version of Publication 5118, the “FATCA User Guide,” which details the online registration process for FFI’s.
If you as an individual hold a foreign bank account, it is important that you consult your tax adviser as the penalties for noncompliance can be significant.
Author:Kathy Sikora |[email protected]
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