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An Overview of Canada - US Enhanced Tax Information Exchange Agreement & U.S. FATCA

Release Date: 06/20/2014
Staff Reference: Peggy McFarland

Agreement and FATCA Overview

FATCA1 is U.S. tax legislation enacted in 2010 to provide the Internal Revenue Service (IRS) increased ability to detect tax evasion by U.S. persons through the use of financial accounts at foreign (i.e., non-U.S.) financial institutions (FIs).

The U.S. has negotiated and is negotiating agreements with countries across the globe to facilitate the exchange of tax related information. The “Agreement”2 with Canada was signed on February 5, 2014 and Canadian FIs are required to comply under Canadian federal legislation. Canadian FIs are required to identify and document account holders of financial accounts covered by the Agreement and report certain information about financial accounts held by a U.S. Person to the Canada Revenue Agency (CRA). Under the Agreement, the CRA is required to provide to the IRS, on an automatic basis, information on financial accounts held by U.S. Persons.

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1Foreign Account Tax Compliance Act.
2The full name of the Agreement is “Agreement Between the Government of the United States of America and the Government of Canada to Improve International Tax Compliance through Enhanced Exchange of Information under the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital”.