Taxation

The Foreign Account Tax Compliance Act (FATCA) is United States (U.S.) legislation that was passed in 2010 that requires non-U.S. financial institutions to identify and report information to the U.S. Internal Revenue Service (IRS) on certain financial accounts held outside the U.S. by U.S. persons, including U.S. entities.

On February 5, 2014, the Canadian government signed The Canada-U.S. Enhanced Tax Information Exchange Agreement or Intergovernmental Agreement (IGA). The IGA is intended to improve tax compliance in both countries through enhanced information sharing between the two governments, and to provide the U.S. government with information similar to that required under FATCA.

On June 27, 2014, Part XVIII was added to the Income Tax Act(Canada), implementing the IGA and reporting obligations in Canada.

Under the IGA and the Income Tax Act, Canadian financial institutions* are required to report any reportable accounts to the Canada Revenue Agency (CRA). CRA then shares that information with the IRS under the information sharing provisions contained in the IGA.

More information can be found on these websites:

Impact of the FATCA requirements for Sun Life

As of July 1, 2014, Canadian financial institutions* are required to identify accounts opened by U.S. persons and entities, and provide information about those accounts to the CRA on an annual basis. The first report was sent before May 1, 2015 for the year ended December 31, 2014.

Not all financial accounts are subject to FATCA requirements. For example, term life insurance and registered accounts (e.g. RRSPs, RRIFs, and TFSAs) are not subject to review or report.

Information for advisors

For any covered financial account opened with a financial institution in Canada on or after July 1, 2014, the client is required to certify whether they are a U.S resident for tax purposes (including a U.S. citizen). If they are signing on behalf of an entity, they have to certify whether the entity is a U.S. resident for tax purposes, or if the entity's controlling persons are U.S. residents for tax purposes. If the account is confirmed as reportable, the client's name, address, and U.S. Taxpayer Identification Number (TIN) are some of the details the financial institution must report to the CRA as required by Canadian law.

For more information about who would meet the definition of a U.S. person, please refer to: U.S. citizens and resident aliens abroad.

* includes insurance companies, trust companies, investment dealers and banks

The Common Reporting Standard (CRS) was created to help countries fight international tax evasion and to ensure more effective tax compliance around the world. Under Part XIX (Common Reporting Standard - CRS) of the Income Tax Act (Canada), Canadian financial institutions* must collect client financial account information and determine whether that information must be reported to the Canada Revenue Agency (CRA). Under the CRS, the CRA may share client account information reported to it with the tax authorities of the government(s) where the client is resident.

Impact of the CRS requirements for Sun Life Financial

Effective July 1, 2017, Canadian financial institutions* are required to identify accounts opened by persons or entities who are residents of foreign jurisdictions for tax purposes, and to provide information about those accounts to the CRA on an annual basis. The first report must be sent by May 1, 2018 for the year ending December 31, 2017.

Not all financial accounts are subject to CRS requirements. For example, term life insurance and registered accounts (e.g. RRSPs, RRIFs, and TFSAs) are not subject to review or report.

A key difference between the CRS and FATCA is that the monetary thresholds applicable to FATCA don't apply to the CRS.

Information for advisors

An individual client (or someone acting for an entity client) opening a financial account on or after July 1, 2017 will certify whether they (or the controlling person(s) of the entity opening the account) are a resident for tax purposes of any jurisdiction other than Canada and the U.S. If there are no controlling persons for an entity, a senior official is required to respond to the self-certification question. All Canadian financial institutions* are required to determine the tax residency status of clients with financial accounts to which the CRS applies. If the account is confirmed as reportable, the client's (and/or the entity's controlling persons') name, address, and Tax Identification Number (TIN) are some of the details the financial institution will report as required by Canadian law.

Self-certification

Residency is the basis on which most countries tax individuals and entities. Generally, an individual is subject to the tax laws of the jurisdiction of which they are a resident. It is possible to be a resident of more than one jurisdiction for tax purposes. A resident of a jurisdiction may also include a non-citizen who holds a permanent residency card. An individual may also be a resident of a jurisdiction based on the type of visa the individual holds. Every country has their own rules to determine whether a person is a resident of their country and subject to their tax rules. Those rules and the application of them can be very complicated. It is recommended that a professional tax advisor, who is knowledgeable about the rules applicable to the country in question, be consulted.

For more information about:

More information can be found on these websites:

  • Canadian Life and Health Insurance Association website:Canadian Life and Health Insurance Association website: Enhanced Financial Account Information Reporting to CRA on Insurance and Annuity Contracts

FATCA/CRS - general - inquire (log-in required)