On March 10, 2022, the Canada Revenue Agency (CRA) published revisions to its Guidance on the Canada-U.S. Enhanced Tax Information Exchange Agreement (the Agreement). This guidance is meant to assist financial institutions (FIs) with their due diligence and reporting obligations under the Agreement.
Below is a quick summary of some of the updates, but be sure to review the entire set of changes and rules here:
Electronic Signature (see chapter 8). An FI can accept an electronic form including the electronic signature of the account holder (or authorized person). The account holder must acknowledge by signature or other means that the certification is correct. This information must be in electronically readable format and the signature can be numeric, character-based, or biometric as long as it is unique to the person and a record can be kept. However, in order for the CRA to accept the electronic signature, it must be provided in one of three ways:
Where the account holder sends personal information, including the electronic signature using the electronic address most recently provided by the account holder to the FI,
Where the account holder is in person and in the presence of the FI (e.g., by using a stylus or tablet), or
Where the account holder uses an access controlled, secured electronic location, such as a secure website that is accessible to the account holder only because the location of the secure website has been made known to the account holder and access has been granted by the FI.
Chapter 5 has been moved and renumbered to chapter 10. As such, all other chapters have been renumbered accordingly.
Account held by a deceased U.S. person must be reported as a closed account in the year that the FI is informed of the death (see chapter 5).
Canadian Taxpayer Identification Numbers (TINs) are not required to be reported on a self-certification unless the account holder is a specified U.S. person. (see chapters 8 and 9).
Anti-Avoidance Provision (see chapter 12). Examples include an FI that did not create any electronic records for lower value accounts, with the intention that an electronic search would not yield any results. Here, in the absence of a commercial reason, it may be reasonable to view that these arrangements were established to avoid the relevant accounts being reported. As such, the obligations under the Agreement must apply to those lower value accounts and they are not exempt. See chapter 12 for the rules and other examples.
New administrative procedures applicable to multiple financial institution structures will apply beginning on January 1, 2023. This means that there is no requirement to remediate existing accounts except when there is a change in circumstances that occurs after January 1, 2023 (see chapter 10).
There is a new cut-off date for FIs that cease to be deemed-compliant in order to become reporting Canadian FIs. The relevant cut-off date for reviewing accounts will be the beginning of the following reportable period. If the reporting period begins on January 1, 2021, then the reporting FI is required to apply the new account due diligence procedures for any financial account opened on or after January 1, 2022. The first reporting year would be January 1, 2022 to December 31, 2022 and any U.S reportable accounts would have to be reported before May 2, 2023 (see chapter 11).
There is a new cut-off date for FIs that cease to be deemed-compliant with no reporting obligation under the Agreement to become a deemed-compliant FFI with limited reporting obligation under the Agreement. The relevant cut-off date for reviewing accounts will be at the beginning of the following reportable period. Similar to the above paragraph, if the reportable period began on January 1, 2021, then the FI must undertake account identification procedures to identify non-resident accounts held by specified U.S. persons only with respect to new accounts opened on or after January 1, 2022. The first reporting year would be January 1, 2022 to December 31, 2022 and any U.S. reportable accounts would have to be reported before May 2, 2023. (see chapter 11).