Foreign Account Tax Compliance Act (FATCA)

Answering Member Questions about FATCA

Similar to all other Canadian financial institutions, WFCU Credit Union is required to implement procedures to conform to legislated reporting requirements.  Following is a FAQ on the requirements for the Foreign Account Tax Compliance Act or FATCA.

What is FATCA?
FATCA is the acronym for the Foreign Account Tax Compliance Act, a U.S. law that came into law in 2010. FATCA is part of the U.S. Internal Revenue Code, the U.S. equivalent of Canada’s Income Tax Act. Under the law, foreign financial institutions, including Canadian credit unions and banks, face a withholding tax of 30% on U.S.-source payments if they don’t report certain information about U.S. account holders to the IRS.

So the Credit Union reports information to the IRS?
No. To do so would violate Canadian law, such as privacy laws.

What does the Credit Union do to comply with FATCA?
The Credit Union does not comply with FATCA, which is a U.S. law. The Credit Union complies with the Income Tax Act, much in the same way that the Credit Union currently complies with other reporting requirements.

Since reporting to the IRS directly would violate Canadian law, the Canadian and U.S. governments entered into an intergovernmental agreement, or IGA for short.

To implement its responsibilities under the IGA, Canada made changes to the Income Tax Act to require Canadian financial institutions to report information about accounts held by U.S. persons to the Canada Revenue Agency (CRA). The CRA is then responsible for sharing this information with the IRS. In return, Canada will receive similar information from the IRS about Canadian account holders at U.S. financial institutions.

What does this mean for me?
If there’s an indication that you qualify as a U.S. person, (e.g., you have a U.S. mailing address), we may ask you to certify in writing that you are or aren’t a U.S. person. We may also ask you for documentation, such as a driver’s licence or passport, to confirm your certification.

If you are a U.S. person, the Credit Union is required to report your account to the CRA if the total balance of all of your accounts at the Credit Union, except registered accounts, exceeds:

• $50,000 USD equivalent for a personal account; or
• $250,000 USD equivalent for a business account (e.g., partnership; corporation; unincorporated association), as of June 30, 2014.

The information included in the report will be your name, address, U.S. taxpayer identification number (e.g., social security number), social insurance or business number, account number, and account balance.

I spend a lot of time in the U.S and have a U.S. mailing address when I do. Am I a U.S. person?
Many Canadians spend months in the U.S. to attend school or to live during the winter, but are not U.S. persons.

If you are not a U.S. citizen (e.g., do not hold a U.S. passport) and are not considered a U.S. resident for tax purposes, the Credit Union will ask you to certify in writing that you aren’t a U.S. person and provide supporting documentation.

What if I’m not sure whether or not I’m a U.S. resident for U.S. tax purposes?
The Credit Union cannot help you determine whether you are a U.S. person. If you have doubts, you can contact a qualified professional (e.g., accountant versed in U.S. tax law).

What if I refuse to provide information to the Credit Union about whether or not I’m a U.S. person?
The Credit Union is required by law to ask you for this information. If you refuse to provide some or all of the requested information, the Credit Union may have to report your account to the CRA.

I have more questions. Where can I get more information?
The CRA has published a detailed FAQ that’s available on its website: http://www.cra-arc.gc.ca/

July 2014

 

Find Branch/ATM

Enter address, postal code or branch name