FATCA - Canada signs IGA with United States; text of IGA between United States, Hungary 

February 5:  The Treasury Department today posted text of the intergovernmental agreements (IGAs) between the United States and Canada and between the United States and Hungary under the U.S. law known as “FATCA” (Foreign Account Tax Compliance Act).

According to a Treasury Department release, Canada and Hungary both signed reciprocal Model 1 IGAs—meaning that the United States will also provide tax information to these governments regarding individuals and entities from their jurisdictions with accounts in the United States.

Canada IGA

According to today’s release from Canada’s Department of Finance, the FATCA rules had raised a number of concerns in Canada—among both dual Canada-United States citizens and Canadian financial institutions. The IGA is intended to address these concerns and provide that:


  • Under the agreement, financial institutions in Canada will not report any information directly to the IRS. Rather, relevant information on accounts held by U.S. residents and U.S. citizens (including U.S. citizens who are residents or citizens of Canada) will be reported to the Canada Revenue Agency (CRA). The CRA will then exchange the information with the IRS through the existing provisions and safeguards of the Canada-United States income tax treaty (consistent with Canada's privacy laws).
  • The IRS will provide the CRA with enhanced and increased information on certain accounts of Canadian residents held at U.S. financial institutions.
  • Significant exemptions and relief have been obtained. For instance, certain accounts are exempt from FATCA and will not be reportable. These include Registered Retirement Savings Plans, Registered Retirement Income Funds, Registered Disability Savings Plans, Tax-Free Savings Accounts, and others. In addition, smaller deposit-taking institutions, such as credit unions, with assets of less than $175 million will be exempt.
  • The 30% FATCA withholding tax will not apply to clients of Canadian financial institutions, and can apply to a Canadian financial institution only if the financial institution is in significant and long-term non-compliance with its obligations under the agreement.
  • Draft legislation to implement the IGA will be released in Canada for comment shortly.



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