The U.S. Treasury Department and the Canadian government both announced today that Canada and the United States have signed an intergovernmental agreement (IGA) to implement the provisions of FATCA. The agreement is a "Model I" agreement, which provides for direct information exchange between the U.S. and Canada, with each government collecting from its local financial institutions the relevant information on account holders who are taxpayers of the other country. It had been reported that Canada was seeking to limit its disclosure obligations to account holders who are U.S. residents, but unfortunately the IGA does impose reporting obligations on Canada with respect to U.S. citizens resident in Canada. The main beneficiaries of the IGA are Canadian financial institutions (FFIs) who will be spared the need to enter into individual FATCA FFI Agreements with the IRS. Canadian FFIs still need to register through the IRS web portal for FATCA to obtain a global intermediary identification number (GIIN) to avoid the withholding rules on U.S. source payments that go into effect on July 1st of this year. The necessary Canadian statutory provisions to give effect to the agreement have been released in draft form.
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