Information for individuals with accounts with Canadian financial institutions

I. Overview

This information is for individuals who hold financial accounts at Canadian financial institutions and who want to know how the intergovernmental agreement applies to them.

The intergovernmental agreement between Canada and the U.S. signed on February 5, 2014, is designed to improve tax compliance. To achieve this, it needs Canadian financial institutions to better understand the tax residency of their account holders in certain situations.

Under the agreement, Canadian financial institutions have to verify whether an account holder is a U.S. person for U.S. tax purposes (for example, a U.S. resident or a U.S. citizen). As a result, individuals may be asked to certify or clarify to their financial institution their U.S. tax status and/or produce documents such as a driver’s licence for any representation they make. Canadian financial institutions need this information from account holders to satisfy their obligations under Canadian law for enhanced tax reporting to the Canada Revenue Agency (CRA). The CRA exchanges the information it receives from Canadian financial institutions on U.S. residents and U.S. citizens with the U.S. Internal Revenue Service (IRS).

For more information on the agreement, see the Intergovernmental Agreement for the Enhanced Exchange of Tax Information under the Canada-U.S. Tax Convention.

II. Guidance on how a Canadian financial institution identifies accounts that must be reported to the U.S.

The agreement is strictly about government-to-government information sharing. If a financial institution applying the due diligence rules of the agreement determines that any of its account holders are U.S. persons, such as U.S. residents or U.S. citizens (including U.S. citizens who are residents or citizens of Canada), the financial institution must collect and report information on the account to the CRA in respect of that account holder. The CRA sends this information to the IRS under the existing provisions of the Canada-U.S. tax treaty on exchange of information. The information about the account holder that is collected and shared with the IRS includes the name, address, and, in most circumstances, the individual’s U.S. taxpayer identification number, and certain financial information about the account.

Under some circumstances, financial institutions may need to ask certain account holders for more information if their records show that the account holder may be a U.S. person. Financial institutions may also ask their clients to provide a self-certification to declare whether they are a U.S. person. Financial institutions are required to send to the CRA information on account holders who do not cooperate with requests for information. The information is similar to that information reported on U.S. account holders. The CRA then sends the information to the IRS.

The CRA has not developed a form for Canadian financial institutions to use in collecting information under the agreement. Instead, financial institutions can design solutions that are tailored to their particular businesses, as long as they get the required information.

The following questions and answers address questions individuals may have about their interactions with their financial institution.

My financial institution asked if I am a U.S. person for U.S. tax purposes. What does that mean?

In general, you are a U.S. person for U.S. tax purposes if you are a U.S. resident or a U.S. citizen.

A U.S. resident is not generally someone who has economic and social ties that are closer to Canada than the U.S.

I hold a U.S. green card. How does this affect my tax residency?

If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.

However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.

Why is U.S. citizenship relevant to U.S. taxation?

In Canada, your tax status is not generally determined by your citizenship(s). However, the U.S. tax system is based on both residency and citizenship. Since Canada has agreed to identify U.S. persons (U.S. residents and U.S. citizens) with certain financial accounts in Canada, your Canadian financial institution may ask whether you are a U.S. person.

Will my financial institution ask me if I was born in the U.S.?

A financial institution does not have to ask its account holders about their place of birth.

If a financial institution, applying the due diligence rules of the agreement to its accounts, finds records that have an unambiguous indication of a U.S. place of birth, the financial institution must treat the account as a reportable account or follow up with the account holder to obtain documentation that shows he or she is not a U.S. resident or a U.S. citizen.

Does the agreement require Canadian financial institutions to report to the CRA on any individuals who relinquished their U.S. citizenship?

No. Canadian financial institutions do not have to report on any individuals who have relinquished their U.S. citizenship and are not residents of the U.S.

Financial institutions may ask individuals who have relinquished their U.S. citizenship for documentation to this effect.

How does my financial institution determine if I am a U.S. person?

If you are a client at a financial institution as of June 30, 2014 and your account needs to be reviewed, your financial institution has to review certain information it already has, such as a U.S. address, for indications that you may be a U.S. person. If there is such an indication, your financial institution must seek to obtain or review certain information from you to verify whether you are a U.S. person.

If you are a new client at a financial institution after June 30, 2014, your financial institution may ask you to certify whether you are a U.S. person when you open your account. It will then confirm the reasonableness of this certification based on the information you provide when you open the account. Alternatively, your financial institution may follow a process similar to that described above for existing clients, based on a review of the information you provide when you open the account.

For both existing and new accounts, if the information associated with your account is later changed in a way that suggests you may be a U.S. person (for example, you change your address to a U.S. address), your financial institution must take steps that may include following up with you to reverify your status.

III. Other questions

If I have been given a tax identification number by the U.S. government, do I have to provide it to my financial institution?

A Canadian financial institution that maintains an account identified as belonging to a U.S. citizen or a U.S. resident has to report that person’s U.S. federal taxpayer identification number (TIN) when reporting information to the CRA. If you are a U.S. citizen or a U.S. resident, you have to give your U.S. TIN to your financial institution when they ask for it. Your U.S. TIN is generally your U.S. social security number.

What if I don’t cooperate with my financial institution?

If your Canadian financial institution has information in its records that shows that you may be a U.S. citizen or a U.S. resident and you have not given your financial institution enough information to clarify your status, it may have to report your account to the CRA as a U.S. account. If that’s the case, the CRA will exchange information about your account with the IRS.

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