While we wait for Bill C-31, the Economic Action Plan 2014 Act, No. 1, to pass through the Senate on its way to becoming law, the deadline for compliance with the United States’ Foreign Account Tax Compliance Act (FATCA) is only two weeks away. In February, the Canadian and US governments signed an intergovernmental agreement to govern the exchange of information required under FATCA, and Bill C-31 will make changes to the Canadian Income Tax Act to formally implement the requirements, but the American authorities say there won’t be any more extensions—July 1 is the date designated financial institutions in Canada will be required to begin collecting the extended information.
There are numerous concerns associated with FATCA, to the point that even the Canadian Bankers’ Association opposed the law, but with the intergovernmental agreement and Bill C-31 to integrate it into Canadian law, the best an affected individual or organization can do is prepare.
First that means understanding whether FATCA applies to you or your organization—whether you are a “US person” or your organization has US investments.
Second, if FATCA applies to you, you’ll have to figure out what information you’ll be required to share with the Canada Revenue Agency.
Third, you’ll have to ensure that you comply with privacy laws with the information you share.
Canada’s Privacy Commissioner, Chantal Bernier, recently spoke to the Senate committee currently reviewing Bill C-31. She affirmed the need for privacy protection with respect to FATCA compliance:
I would like to note that there is a long-established practice of information-sharing between nations for the purposes of taxation enforcement. This isn’t a new concept. That said, we would expect that this and all information-sharing activities be undertaken in a way which respects privacy. This means we expect that CRA will meet its obligations under the Privacy Act in carrying out its FATCA-related responsibilities.
Further, we expect private-sector organizations, such as financial institutions, that would become legally required to collect customers’ personal information and disclose it to CRA, to also comply with their obligations under the Personal Information Protection and Electronic Documents Act.
These obligations include limiting the amount of personal information collected to only that which is necessary and safeguarding it appropriately. To that end, education and outreach to institutions affected by this new reporting requirement will be crucial to ensure that information collection is appropriate, limited and done in the most privacy-sensitive manner possible.
The CRA offers a handy information sheet on its website, but if you’re worried or think you have reason to worry about unexpected taxation or the privacy of your information, you should probably talk to a tax expert to understand how the law will affect you.