When the Foreign Account Tax Compliance Act (FATCA) taxes effect in July, Canadian financial institutions will report to the Canadian Revenue Agency (CRA), not the US Internal Revenue Service. This follows a February 5 announcement stating the two nations had signed a tax information-sharing agreement, under the Canada-US Tax Convention.
FATCA was adopted in efforts to combat tax evasion by US taxpayers. It requires international financial institutes to report account information of US clients to the IRS, or face penalties for non-compliance. In this new agreement, Canadian institutes will still report that information, but will do so to their own revenue agency. The CRA will ensure that the gathering, use, and exchange of information is in-line with Canadian privacy laws.
Canadian financial institutions will have to file an information return by May 2 of each year. The agreement requires institute’s to start reporting in 2015.