Oct 7, 2015
The Globe and Mail article “Court challenge of U.S. tax dragnet fails” covers a recent Federal Court of Canada decision that rules data collected from large Canadian banks by the Canadian Revenue Agency (CRA), which planned to share the information with the U.S. Internal Revenue Service (IRS), does not infringe the Canada-U.S. tax treaty.
The decision was instigated by a law suit filed in 2014, involving two individuals holding dual U.S.-Canadian citizenship. The dual citizens wanted to stop the CRA from transferring information of American citizens holding Canadian accounts to the IRS.
As discussed in the article, the transfer of information between Canada and the United States facilitates Canadian banks’ compliance with the U.S. Foreign Account Tax Compliance Act (FATCA). While FATCA is aimed at preventing Americans from using foreign bank accounts to evade U.S. taxes, it may also affect individuals who have dual U.S.-Canadian citizenship (who may not be aware they have to file U.S. tax returns).
The article taps into Osler insight on cross-border tax considerations, as stated in the excerpt below.
Matias Milet, a tax lawyer with Osler, Hoskin & Harcourt LLP, said U.S. citizens living in Canada who neglected to file U.S. tax returns, even if they would not owe U.S. taxes, were caught in the middle of an attempt by the IRS to go after Americans using offshore accounts, in Switzerland or other tax havens, to evade U.S. taxes.
But he said the deal Canada made with the U.S. made the disclosure obligations that would have been forced on Canadian banks much less onerous for the financial institutions. Britain made a similar deal.
If the deal were struck down by the court, the computer systems and compliance measures set up by Canadian banks to hand the data to the CRA would have to be scrapped: “It wouldn’t be the end of the world for them, but it would be a big compliance nightmare.”
Read the full article “Court challenge of U.S. tax dragnet fails”
Our Osler Tax Group has extensive experience in providing sophisticated solutions to our clients’ most complex and important taxation issues, including Canada-U.S. cross-border tax planning. You can access Group expertise through our Osler Updates, seminars, webinars and other client-tailored programs.