On March 22, 2017, the Canada Revenue Agency (CRA) issued the long awaited "Guidance on the Common Reporting Standard". The Common Reporting Standard (CRS), which is formally referred to as "Standard for Automatic Exchange of Financial Account Information in Tax Matters", is contained in under Part XIX of the Income Tax Act (the Act).
Within the publication are various commentaries that cross-reference the U.S. Foreign Account Tax Compliance Act (FATCA) contained in Part XVIII of the Act in the implementation of CRS. Of note is the recognition that for the purposes of Part XVIII, non-reporting financial institutions are listed in Annex II of the IGA and are identified as exempt beneficial owners or deemed-compliant financial institutions. Since CRS does not contain the concepts of exempt beneficial owners and deemed-compliant financial institutions, certain Canadian financial institutions that do not have obligations under Part XVIII will have obligations under Part XIX. Moreover, charities, religious organizations and other types of non-profit organizations can be treated differently for the purposes of Part XVIII and Part XIX. That is, for the purposes of Part XVIII these entities are non-reporting financial institutions, while under Part XIX these entities can be active NFEs or financial institutions. In addition, Part XVIII and IGA use the term "non-financial foreign entity" (NFFE) which excludes U.S. entities, whereas for the purposes of Part XIX, a U.S. entity that is not a financial institution is a NFE. Lastly, under Part XIX, a financial institution is required to review all individual accounts and so certain accounts that were not required to be reviewed under Part XVIII because of a de minimus exception may have to be reviewed under Part XIX.
The CRA's guidance follows the publication of draft legislative proposals and explanatory notes on July 29, 2016.
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