As part of a worldwide crackdown on tax evasion co-ordinated by the Organization for Economic Cooperation and Development (OECD), over 100 countries have committed to “automatic exchange of information” about bank accounts and accounts at other financial institutions including investment dealers. Generally, any person in one country who has an account at a financial institution in another country can expect to have this information disclosed to their home country.
In Canada, the legislation to implement this “Common Reporting Standard” is included in Bill C-29, the 2016 Budget second bill currently before Parliament, which is expected to be enacted in December. New sections 270-281 will be added to the Income Tax Act. Generally, Canadian financial institutions will be required to report any accounts over a certain size owned by non-residents, and will be required to ask all their account holders to identify whether they are resident in Canada, or whether the real (beneficial) owner of the account (or of the account owner) is resident in Canada.
Non-residents’ accounts will thus be reported to the CRA, which starting 2018 will automatically provide this information to the countries of which the account owners are resident. In general, for an existing client, the institution will not be required to inquire as to residence status if all accounts total less than US$250,000 as of June 30, 2017. New clients will be required to “self-certify” as to where they are resident for tax purposes. (This description is highly simplified. There are many special rules and exceptions.)
For example, if a resident of Italy has $1 million in a Canadian investment account, the CRA will automatically report that to the Italian tax authorities.
Each country in the system will enact similar legislation, so Canadian residents with accounts in foreign countries will find that this information is reported to the CRA. If they are not reporting the account and the income earned in it, they will find themselves subject to harsh penalties.
These rules are similar to the Canada-US “FATCA” rules, but on a global scale.
Not only is Swiss banking secrecy a thing of the past, but all international banking secrecy is pretty much gone. There is nothing wrong with having a bank account or investment account overseas, as long as you report the account (if you have total foreign property costing over $100,000) and report the income from it!
