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Foreign Account Tax Compliance Act

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.

FATCA Update in Canada

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?

FATCA rationale

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.

Who or what is a U.S. person for U.S. tax purposes?

  • A citizen of the U.S., including an individual born in the U.S. but resident in another country, who has not renounced U.S. citizenship;
  • A lawful resident of the U.S., including a U.S. green card holder;
  • A person residing in the U.S.
  • Certain persons who spend a significant number of days in the U.S. each year. (For example, 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 than U.S. taxpayers. Similar relief is provided under many other treaties with the U.S.)
  • U.S. corporations, U.S. estates and U.S. trusts.

FATCA fundamentals and international tax compliance

In its original form, FATCA would have required foreign (non-U.S.) financial institutions (FFIs) to either:

  • enter into agreements with the IRS and report information about financial accounts held by U.S. taxpayers -- or held by foreign entities in which U.S. taxpayers hold an ownership interest -- directly to the IRS, or
  • face punitive U.S. withholding tax on U.S.-source payments.

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

Context

RBC understands the objectives of FATCA and the U.S. government's concerns about tax evasion.

Action

RBC has worked with industry associations, governments and regulators to carefully analyze and make recommendations related to FATCA requirements.

Client Focus

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

Phase 1 – 2014

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.

Phase 2 – 2014–2016

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.

 

Vous êtes sur : FAQ

General FAQs

Expand What is FATCA?

Expand What is the impact of FATCA?

Expand What are the consequences to a Foreign Financial Institution of not complying with FATCA?

Expand When will FATCA apply?

Expand Is RBC FATCA compliant?

Expand Does RBC agree with FATCA?

 

Client FAQs

Expand What is a U.S. person?

Expand I am not a U.S. person. What does FATCA mean for me?

Expand I am a U.S. person. What does FATCA mean for me?

Expand 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?

Expand How are joint accounts treated, where one of the owners is identified as a U.S. Person?

Expand Does FATCA apply to life insurance policies?

Expand Where can I find FATCA information provided by the IRS?

Expand What information is RBC required to report about its U.S Reportable Accounts?

Expand Can my Relationship Manager or Financial Planner at RBC advise me on how FATCA affects me?

Expand Are other financial institutions complying with FATCA?

Expand I am a client of more than one RBC business. Will RBC businesses share my FATCA-related information and documentation?

Expand What authority does RBC have to provide my account information to my local tax authority or directly to the IRS?