OTTAWA, Feb 5 (Reuters) - Canada has signed a tax-information sharing agreement with the U.S. Treasury Department ahead of a new U.S. law that will crack down on offshore tax avoidance, senior Canadian finance officials said on Wednesday.
The agreement, which is one of 22 so-called intergovernmental agreements (IGA) between Washington and individual countries, comes ahead of the implementation in the United States in July of the Foreign Account Tax Compliance Act (FATCA).
FATCA would have forced Canadian banks to hand over information to the U.S. tax-collecting Internal Revenue Service (IRS) on U.S. citizens’ accounts worth more than $50,000.
Instead, the IGA allows Canadian tax authorities to collect information from the country’s banks and share it with the IRS under an existing bilateral tax treaty.
The Canadian officials told reporters in a briefing session that the agreement addresses serious privacy concerns they had with the original FATCA, which would have also imposed a 30 percent withholding tax on foreign businesses that do not comply with the law.
The IGA also narrows the scope of information required to be collected from account holders in Canada, the officials said. Some smaller financial institutions will be exempt as well as certain registered savings vehicles such as Canadian registered retirement savings plans.
Banks will start collecting information in July of this year and the Canada Revenue Service will begin reporting to the IRS in 2015.