Canada: Final FATCA Regulations Provide Some Relief

Final regulations under FATCA were released on January 18, 2013. The final regulations contain a number of taxpayer favorable changes from the proposed regulations released in February of last year. They narrow the categories of foreign financial entities (“FFIs”) who will be required to enter into agreements with the IRS to monitor and report on their US account holders, expand and clarify exemptions for foreign governments and foreign pension plans, expand grandfathered instruments and provide other important guidance. Major changes to prior guidance include:

  • Relief for private trusts and holding companies. Private trusts and personal holding companies are exempted from treatment as FFIs as long as they are not managed by another FFI, such as a professional investment manager or trust company FFI (see below). Where such an entity is professionally managed, it will be treated as an FFI. But an entity that functions or holds itself out to customers as a collective investment vehicle, mutual fund, private equity fund or similar mainstream investment vehicle established with an investment strategy of investing, reinvesting or trading in financial assets is treated as an FFI even if it is not managed by another FFI. Unlike the final regulations, the proposed regulations treated all investment entities as FFIs and broadly defined an investment entity to include any entity engaged primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, swaps or interests in such financial assets.

  • Additional relief for professionally managed trusts and personal holding companies. The final regulations make it much more likely that a professionally managed personal holding company or trust could qualify as an “owner certified deemed compliant FFI” and avoid the need to enter into an FFI Agreement with the IRS. Under the proposed regulations, in order for an entity to qualify as an owner certified deemed compliant FFI the entity was prohibited from having any debt outstanding in excess of $50,000. The final regulations eliminate that prohibition and instead require that the entity provide its withholding agent (which would typically be the professional investment manager or trust company) with information on any US holders of its debt obligations (as well as its equity).

  • Foreign investment advisors and fund managers are now treated as FFIs. The final regulations expand the definition of an “investment entity” that is treated as an FFI to include one that provides financial services to customers, such as individual or collective portfolio management or otherwise, investing, administering, or managing funds or money on behalf of other persons, regardless of whether the entity itself holds any financial assets.

  • Expanded exemption for foreign pension plans. Under the final regulations, a payment made to a qualifying retirement fund is treated as being made to an exempt beneficial owner regardless of whether the pension fund is the beneficial owner of the payment under local law. As under the proposed regulations, a retirement fund that qualifies for benefits under a US treaty (or would qualify if it derived US source income) is treated as an exempt beneficial owner. Thus, Canadian retirement funds should qualify as exempt beneficial owners. Exemption of non-treaty-country retirement funds was also clarified.

  • Exception for foreign governments, their political subdivisions and controlled entities. The final regulations expressly exempt these entities, using definitions taken from Internal Revenue Code section 892 (exemption for foreign governments).

  • Commercial activities exception. The final FATCA regulations carve out certain commercial activities conducted by otherwise exempt beneficial owners. The carveout applies to payments on obligations held in connection with a commercial financial activity of a type engaged in by an insurance company, custodial institution or depository institution.

  • Expanded grandfathering of existing obligations. The FATCA withholding requirements generally apply to US source FDAP payments made after December 31, 2013, and to payments of gross proceeds on US positions that give rise to US source interest or dividends made after December 31, 2016. The final regulations provided grandfather relief for obligations outstanding before January 1, 2014. Further grandfathering is provided for: (i) dividend equivalent payments subject to section 871(m) where the payments are made on an instrument that is executed on or before the date that is six months after the date on which final regulations are issued subjecting such obligations to the provisions of section 871(m); (ii) foreign passthrough payments made on an obligation that was issued on or before the date that is six months after the date on which final regulations are issued subjecting such obligations to FATCA withholding; and (iii) payments made with respect to collateral posted on a grandfathered obligation.

  • FATCA Registration Portal. FFIs entering into a FFI agreement with the IRS will use an online portal to register. The portal should be operating by July 15, 2013. By registering through the portal, the FFI can obtain a “global intermediary identification number (“GIIN”) that it can use to certify to withholding agents that it is a participating FFI. FFIs located in a country that has entered into a FATCA intergovernmental agreement (“IGA”) with the US may also use the online portal to obtain a GIIN and to be listed as a registered deemed compliant FFI before the IGA has been fully ratified in the FFI’s country of residence. The last date on which an FFI can register to ensure its inclusion on the December 2013 list (and avoid being subject to withholding beginning January, 2014) is October 15, 2013. The IRS is also discussing the possibility that other governments with which the IRS has entered into an IGA may use the IRS FATCA portal to manage their own internal reporting requirements.

The Canadian Department of Finance announced last November that negotiations are being held between Canada and the United States on a FATCA IGA and it is widely expected that one will be completed this year. That agreement should effectively exempt Canadian FFIs from having to enter into FFI agreements with the IRS, though the agreement would provide for Canada to impose information reporting obligations on Canadian FFIs. Canadian FFIs should still anticipate the need to register on the FATCA registration portal by October 15, 2013, in order to obtain a GIIN and be added to the list of registered deemed compliant FFIs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.