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As you may be aware, the Canada Revenue Agency (CRA) implemented Part XVIII and Part XIX under the Income Tax Act, relating to the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) in 2014 and 2017 respectively, for the purposes of implementing transparency and effective exchange of information for tax purposes (U.S. and jurisdictions with commitments to the OECD).
While there are minor updates each year, more substantial changes were implemented in 2020. Some impact FATCA, others CRS and some effect both. This article outlines the key changes that Computershare will be making effective January 1, 2021.
1. FATCA and CRS Updates
Obtaining self-certifications upon account opening
Shareholders/Participants are required to provide completed FATCA and CRS self-certifications by day one of account opening.
- If one or both completed self-certifications are not provided, account opening requests will be rejected, and forms will be solicited.
- If completed forms are provided, Computershare has 90 days from the account opening to assess and validate the forms. If the form(s) are deemed invalid or if there is some ambiguity in the responses, the accounts will remain uncertified and new forms will be solicited. The account holder will be required to complete and return forms as soon as feasible.
The CRA has advised that as of January 1, 2021, financial institutions that fail to obtain self-certifications when required, may be liable for a penalty of up to $2,500 for each such failure under subsection 162(7) of the Income Tax Act (ITA).
In order to satisfy the CRA requirement, in addition to the above changes to our processes, Computershare will be doing annual solicitations (in the fall) to solicit for uncertified accounts, in an attempt to obtain the information required. Note: Solicitations will not be done for Computershare Plan Managers clients.
In addition, there are changes specific to Computershare Plan Managers clients:
- Current web functionality for self-certification only includes FATCA. Computershare is enhancing web features and functionality for participants to be able to certify for CRS.
- As financial institutions are required to obtain self-certifications at the time of account opening, in order to gain access to accounts/transactions, participants will be required to certify themselves via the web on their initial login, once they receive their welcome pack and web PIN.
- In the event non-certified participants contact the Computershare call center, they will be given the same directions to go on the web and certify themselves before they are able to access account details and/or request transactions.
- A follow-up procedure will be implemented for new participants (as of January 1, 2021) who do not certify themselves for an extended period of time.
- Computershare will run a report to identify new participants who have not certified themselves on a semi-annual basis; respective funds will be returned to clients.
2. FATCA Updates
Reporting undocumented accounts
In prior years, Computershare reported to the CRA for FATCA reporting purposes:
- U.S. certified accounts, and
- All uncertified accounts
Starting in the 2021calendar year, we are only required to report:
- U.S. certified accounts, and
- Uncertified accounts with U.S. indicia
3. CRS Updates
Introduction of the Citizenship and Residency by Investment (CBI/RBI) Rules
- CBI/RBI schemes are offered by a number of jurisdictions, allowing foreign individuals to obtain citizenship/temporary/permanent residence rights on the basis on local investments or against a flat fee.
- Global tax authorities are concerned that identity cards and other documentation obtained through CBI/RBI schemes can be misused to misrepresent an individual’s jurisdiction(s) of tax residence.
- As such, Computershare is required to take into account the results of the OECD’s risk analysis on the CBI/RBI schemes and take appropriate measures to ascertain the tax residency of individuals claiming residency in such countries.
- If a self-certification form is completed and returned to Computershare with any of these such jurisdictions noted, the following additional information may be requested to ensure the self-certification provided is correct and reliable:
- Did you obtain residence rights under the CBI/RBI schemes?
- Do you hold residence rights in any other jurisdictions?
- Have you spent more than 90 days in any jurisdictions during the previous year?
- In which jurisdictions have you filed personal income tax returns during the previous year?
If you have questions about these changes, please contact your Relationship Manager.