Canadian financial institutions will be subject to the Organisation
for Economic Co-operation and Development's (OECD)
Common Reporting Standard as of July 1, 2017
with the first exchanges of financial account information beginning
in 2018. The CRS, known formally as the Standard for
Automatic Exchange of Financial Account Information in Tax Matters,
was developed by the OECD and approved in July 2014 as a global
standard for the automatic exchange of financial account
information. Over 90 jurisdictions have undertaken to join
the CRS, which is intended to address tax evasion and to improve
international tax compliance.
The CRS will require the Canada Revenue Agency (CRA) to provide
information to foreign tax authorities about accounts held in
Canada by residents of their jurisdictions. Consequently,
Canadian financial institutions will be required to identify
accounts held by non-Canadian residents and report certain
information pertaining to these accounts to the CRA. The CRS
is based on the US Foreign Account Tax Compliance
Act(FATCA). It would
therefore allow Canadian financial institutions to base CRS
compliance partially on existing FATCA compliance procedures.
However, it is expected that the volume of data that would be
reported under CRS would be significantly greater than that
reported under FATCA.
The CRS applies to custodial institutions, depositary
institutions, investment entities and certain specified insurance
companies. These may include mutual funds, exchange traded
funds, hedge funds, venture capital funds, leveraged buy-out funds
and similar investment vehicles. The financial information
that must be reported under CRS with respect to reportable accounts
includes interest, dividends, account balance or value, income from
certain insurance products, sales proceeds from financial assets,
other income generated from assets held in the account or payments
made with respect to the account and the account holder's
taxpayer identification number. CRS requires financial
institutions to look through certain passive entities to report on
the relevant controlling persons and would apply to accounts held
not only by individuals, but also by entities such as trusts and
On June 2, 2015, Canada signed the Multilateral Competent Authority
Agreement (the MCAA) and became one of more than
60 state signatories, including Germany, the UK and France, to the
MCAA. The MCAA allows for a coordinated arrangement for the
automatic exchange of financial account information with other
jurisdictions. The Government of Canada announced in Annex 5.1 of its 2015 Budget
released on April 21, 2015 that it expects draft legislation
implementing the CRS to be proposed in the coming months.
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.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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