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Details

  • Service: Tax, International Tax Services
  • Industry: Financial Services
  • Type: Business and industry issue
  • Date: 1/29/2014

Take Action to Avoid FATCA Penalties 

If your Canadian multinational company has US source income, including intercompany payments from a US subsidiary, it must provide information required by the recently introduced US Foreign Account Tax Compliance Act (FATCA). Even if non-US companies in your corporate group do not have US source income, you will need to determine their status under FATCA. Failure to comply may result in a 30% US withholding “penalty” on your US source income.

Take Action to Avoid FATCA Penalties
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Since the withholding is a penalty rather than a tax, it cannot be reduced by a tax treaty nor is it eligible for a foreign tax credit on your Canadian tax return. You may also face trouble dealing with banks and other financial institutions in Canada and other countries, whose FATCA compliance requirements include gathering certain information from their clients.

 

Canada and US signed the intergovernmental agreement (IGA) on February 5, 2014. Under the IGA, Canadian financial institutions will report the information to the CRA, which will pass on the relevant information on US account holders to the IRS. The FATCA withholding rules and information gathering requirements take effect June 30, 2014. Canadian companies should take action now to ensure compliance. 

 

KPMG in Canada’s experienced, multidisciplinary team of tax and advisory professionals can help your multinational Canadian company meet its FATCA requirements. We provide FATCA advice to a wide range of financial services and general business organizations and can assist you in determining the FATCA categories for entities in your organization. To discuss any aspect of FATCA, please contact your KPMG adviser.

 

 Contact

Russell W. Crawford

Russell W. Crawford

Partner, Tax

604-691-3516

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