FATCA stands for the Foreign Account Tax Compliance Act.
FATCA is part of the U.S. HIRE Act, signed into law on March 18th, 2010 by President Obama. Virtually every financial institution in the world is affected by FATCA requirements.
Canada's Department of Finance announced on February 5, 2014 that Canada and the United States have signed an Inter-Governmental Agreement (IGA) to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA). Canada has since implemented legislative changes to require Canadian financial institutions to become FATCA compliant and this requirement is now part of Canadian tax law.
For more information:
You are on: What is FATCA?
The objective of this legislation is to identify U.S. persons who may evade U.S. taxes by placing assets in foreign (non-U.S.) accounts -- either directly or indirectly through certain foreign entities such as corporations or trusts.
In its original form, FATCA would have required foreign (non-U.S.) financial institutions (FFIs) to either:
To address privacy and regulatory concerns related to FATCA, many countries are negotiating intergovernmental agreements (IGAs) with the U.S. These IGA "partner countries" will enter into one of two standard model agreements, and implement laws to require financial institutions to collect and report information required by FATCA.
FFIs will comply with FATCA in one of three ways:
1) In countries with a Model 1 IGA, FFIs will comply under local legislation and report to their local tax authority; in turn, the local tax authority will exchange information with the Internal Revenue Service (IRS);
2) In countries with a Model 2 IGA, FFIs will comply with local legislation to enter into agreements with, and report directly to, the IRS;
3) In countries without an IGA, FFIs will enter into agreements with, and report directly to the IRS. (A 30% withholding tax will be deducted from U.S. source payments received by FFIs in non-IGA countries if they do not enter into agreements with the IRS.).
On January 17th, 2013, the U.S. Treasury and Internal Revenue Service released final FATCA regulations. These define the detailed requirements for U.S. financial institutions, and for foreign (non-U.S.) financial institutions that will enter into agreements directly with the IRS. Foreign financial institutions in countries entering into Model 1 IGAs with the U.S. will still require their local governments to release local legislation and guidance before they can fully finalize their requirements.
U.S. financial institutions are automatically required to comply with FATCA.
Note: the term U.S. Reportable Account is an account owned by a U.S. individual (person), U.S. entity, or a non-U.S. entity that has U.S. owners -- regardless of the currency of the account itself. FATCA applies to all types of financial accounts, including insurance, investments and business accounts.
RBC has analyzed the final regulations and IGAs in jurisdictions in which RBC operates to ensure compliance in these jurisdictions. RBC will continue to update its FATCA information for clients as final details are known.
You are on: RBC's Approach
RBC understands the objectives of FATCA and the U.S. government's concerns about tax evasion.
RBC has worked with industry associations, governments and regulators to carefully analyze and make recommendations related to FATCA requirements.
RBC earns the right to be our clients' first choice. We take our clients' privacy seriously and comply with privacy rules in all jurisdictions. Our goal is to minimize the impact of these new rules on client service.
You are on: The Road Ahead
The first phase includes new account opening procedures to identify U.S. Reportable Accounts. These procedures have been in place startomg July 1st, 2014 for all U.S. and non-U.S. financial institutions.
The second phase includes the identification and reporting of certain pre-existing U.S. Reportable Accounts opened prior to July 1st, 2014. This phase is expected to be completed between 2014 and 2016.