FIs reporting under the Common Reporting Standard (CRS) must start acting soon.
As of July 1, 2017, reporting financial institutions that must report under the CRS rules will have to be ready to request CRS self-certifications from new customers that open a qualifying financial account. As a result, financial institutions must identify all products and accounts that will be subject to the CRS rules, and ensure that they have procedures in place to request self-certifications for any new accounts, as well as for accounts where they identify any change in circumstances. These requests should be included as part of the on-boarding processes for new accounts.
Reporting financial institutions should also begin to plan their approach to completing due diligence procedures on certain qualifying pre-existing individual and entity accounts before 2020 (or, in some cases, 2019).
Canada's CRS rules require reporting financial institutions to identify accounts held by tax residents of jurisdictions outside of Canada and the United States (including persons with dual or multiple tax residency) and report specific information relating to these accounts directly to the CRA each year. Under these rules, financial institutions must report information such as account balances, interest, dividends received and proceeds from the sale of financial assets. Individuals and certain entities, including corporations, trusts, partnerships, joint ventures and other Canadian resident entities that are not considered Canadian financial institutions, are generally required to self-certify under these rules to any reporting financial institution with which they hold a financial account.
A reporting financial institution must file a prescribed information return with the CRA by May 1 of each year, starting May 1, 2018. This return must provide information relating to reportable accounts that it maintained at any time during the preceding calendar year and after June 30, 2017.
Canada's CRS rules include concepts that are largely drawn from the U.S.-based Foreign Account Tax Compliance Act (FATCA), which has a similar focus on financial accounts and the financial institutions that maintain them. As a result, Canadian financial institutions may be able to leverage certain aspects of the systems they currently have in place to meet the Canadian rules that require them to comply with FATCA.
For more details see TaxNewsFlash-Canada 2016-40, "Canadian FIs - Start Collecting Non-Resident Account Details" and TaxNewsFlash-Canada 2017-18, "FIs - CRA Gives Details on CRS Approach for 2017".
For new accounts that are opened after June 30, 2017, reporting financial institutions are generally required to collect self-certifications to identify whether an account is reportable. Financial institutions must be ready to request self-certifications on these accounts and, once received, to validate the information provided.
For this purpose, the CRA has created self-certification forms that can be used by financial institutions that do not wish to create their own forms. Financial institutions will need to determine whether they wish to use CRS only forms or whether they wish to use combined CRS/FATCA forms beginning July 1, 2017.
A reporting financial institution is also required to carry out specific due diligence procedures on pre-existing individual and entity accounts that were opened before July 1, 2017. Among other things, a reporting financial institutions generally must review its customer files for indicators of account holders with foreign tax residency and attempt to confirm with the account holders whether they are in fact residents of those jurisdictions.
Reporting financial institutions must complete enhanced due diligence procedures before 2019 for pre-existing individual accounts with an aggregate balance or value that exceeds US$1 million on June 30, 2017. For all other types of accounts, due diligence procedures generally must be completed before 2020.
For more information, please contact your KPMG adviser.
Information is current to June 20, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500