IFIC Comments on the U.S. Foreign Account Tax Compliance Act (FATCA)

June 9, 2011

TORONTO – The Investment Funds Institute of Canada (IFIC) submitted a comment letter to the United States Department of the Treasury and the Internal Revenue Service (IRS) in response to their Notice 2011-34, which was published on April 8, 2011; related to the implementation of the Foreign Account Tax Compliance Act (FATCA).

In its comment letter to the IRS and U.S. Treasury, IFIC identified a number of issues that it will continue to work on with Treasury and the IRS.

The comment letter identifies the following issues:

- Treatment of Canadian registered plans – IFIC submitted that foreign retirement plans, including Canadian registered and other similar plans, should be exempt from potential characterization as U.S. accounts;
- Definition of the term “documented U.S. account” – Comments were provided regarding how current practices by mutual funds could be incorporated into FATCA to identify U.S. persons for tax purposes;
- Aggregating accounts – To ensure understanding and agreement upon how the aggregation protocols would impact Canadian mutual fund account reporting for FATCA; IFIC provided comments on specific scenarios and asked the IRS to confirm that our interpretations are correct;
- Private banking account – IFIC noted that a mutual fund will never have its own private banking department, nor will it have its own employees or officers; so this provision of the notice should not apply to mutual funds. It was also noted that the definition of private banking is very broad and IFIC suggested that the definition be narrowed to a defined dollar amount on accounts with a value of $500,000 or more;
- W-8BEN – To properly document that a client is not a U.S. person for tax purposes, a Form W-8BEN may be required. These forms generally expire the third full year after the client signs it, and thus may need to be replaced. This ‘refreshing’ of the form is not consistent with the FATCA system for establishing the client’s U.S. tax status for accounts valued at less than $500,000 so a request is being made that the form not have to be ‘refreshed’;
- Certification standard – Standard wording was proposed for the certification process; and
- Treatment of new accounts – There appears to be inconsistent treatment in the Notices issued by Treasury and the IRS regarding certain information that must be obtained for new and existing accounts.

IFIC will continue to discuss these matters with U.S. Treasury and the IRS in order to achieve a resolution that is acceptable to all parties.

IFIC’s comment letter is available on the IFIC website at www.ific.ca.

IFIC is the national association of the investment funds industry. Membership consists of mutual fund companies, retail distributors and industry affiliates.

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For more information contact:
Laurie Gillett
Senior Manager, Communications
The Investment Funds Institute of Canada (IFIC) U.S. Foreign Account Tax Complia
Phone: 416-309-2317
Email: lgillett@ific.ca
Website: www.ific.ca

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