US law could erase privacy protections – are you affected?
Many small business owners in Canada have business partners or family members with U.S. citizenship or dual citizenship. On January 1st, 2014, a U.S. law, the Foreign Account Tax Compliance Act (FATCA) is set to erase certain privacy protections now taken for granted in Canada. You could be affected if you are:
- A U.S. citizen living in Canada,
- A Canadian/U.S. dual-citizen living in Canada
- A Canadian citizen connected through family or business to a U.S. citizen living in Canada
- You have money or assets held in a Canadian bank
Two practical effects FATCA could have:
- Loss of privacy pertaining to information held in Canadian accounts
- New potentially onerous filing obligations with the United States Internal Revenue Service (IRS)
Canadian banks are obligated to protect personal information in Canada under The Personal Information Protection and Electronic Documents Act (PIPEDA). However, on January 1st, 2014, FATCA will demand that Canadian banks hand over to the IRS personal information found in Canadian bank accounts linked to U.S. citizenship. Should a Canadian citizen’s information be found there as well, it too will be turned over. Canadian banks have said they will cooperate with the IRS.
While FATCA aims to bring U.S. citizens living abroad into tax compliance, it is likely to have unintended consequences. Along with a loss of privacy for citizens outside of the United States, there will also be new filing obligations to manage, red tape to overcome and extra accounting costs incurred.
- To inquire about the interaction of Canadian laws, FATCA and the IRS, please contact the office of the Privacy Commissioner of Canada.
- To understand IRS-mandated filing implications please speak with your accountant.
- To understand how your financial institution will hand over your information when requested by the IRS please contact your bank.
Should you have other questions, please contact a business counsellor at 1-888-234-2232 or firstname.lastname@example.org.