Under the U.S. Foreign Account Tax Compliance Act (FATCA), Canadian banks and certain other non-U.S. entities must allow with new rules of withholding and information collecting requirements that take effect on June 30, 2014. In respect of FATCA compliance, the rules are being put together in Canada and have implications for confidentiality of taxpayer information.
Among other items, the FATCA rules contain the requirement for registration as participating foreign financial institutions. While information sharing is an essential portion of the FATCA rules there is also a necessity to assure taxpayer privacy where this is a legal concern. The possible choices are that Canadian financial institutions themselves will be needed to submit direct information to the IRS, or alternatively that the information could first be sent to the Canadian authorities and then submitted by the authorities to the IRS. For determining the procedures, confidentialness of the information will be a key factor.
