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The US Internal Revenue Service (IRS) has issued its long-awaited final regulations under the Foreign Account Tax Compliance Act (FATCA). FATCA, designed to police non-US investments, accounts and trust interests held by certain US persons, was initially enacted in March 2010 but is only beginning to take effect this year.
According to Gary Gartner, a US tax lawyer at Kaye Scholer LLP, FATCA will have a significant impact on Canadian financial institutions, banks and investment funds:
Many believe that FACTA simply is yet another layer of compliance being added to the US tax regime in order to combat the abuses of certain US taxpayers “hiding” assets in foreign accounts and foreign entities. However, despite its complexity, FATCA does provide the US Treasury with a highly effective tool in the crusade against foreign intermediaries aiding in, or ignoring obvious evidence of, such tax evasion. Any Canadian or other non-US entity earning any income from US sources likely will be impacted by FATCA to some degree, and should immediately begin taking steps to ensure timely compliance with these rules.
In a press release on the US Department of the Treasury website, US Deputy Secretary of the Treasury Neal Wolin is quoted saying:
These regulations give the Administration a powerful set of tools to combat offshore tax evasion effectively and efficiently. The final rules mark a critical milestone in international cooperation on these issues, and they provide important clarity for foreign and U.S. financial institutions.
Kaye Scholer has a client alert on their website outlining the impact of the regulations on Canadians.
- Tim Wilbur
