Foreign Account Tax Compliance Act

FATCA - Foreign Account Tax Compliance Act
This article was written by a Canadian Financial Planner with over 20 years specializing in non-residency. If you would like no-cost assistance or advice about Canadian Non-Residency, non-residency taxation, or other issues Click Here.

Updated: January 7, 2018

The USA, Canada and Mexico are sharing information on bank and investment account holders. If you hold a Bank Account in one of those countries, your home country may soon know all about it. If you have an Investment Account, your home country may soon learn all about it.

If you are a Canadian, using a USA mailing address, your account information may be shared with the IRS in the USA, no matter where you live. Many Canadians use a USA mail forwarding service and this USA address makes you reportable to the IRS.

In 2010, the US passed the Foreign Account Tax Compliance Act (FATCA) which required foreign financial institutions to share information on US residents who had accounts in foreign countries. Then they began negotiating with foreign countries to get these countries to comply. 

On November 19, 2012, Mexico and the United States signed an Intergovernmental Agreement (IGA). The agreement includes reciprocal reporting obligations between the United States and Mexico.

On February 5, 2014, Canada and the USA signed an Agreement on how they will co-operate and share information.

Update: Canada expects to initiate the Common Reporting Standard (CRS) in 2018. Mexico joined in 2017. This has far reaching implications for Canadian snowbirds in Mexico. Read More about CRS.

How does that affect Americans and Canadians in Mexico?

Accounts Held in the USA

If you are anyone with a Canadian Mailing Address… or a Canadian telephone number… on accounts held in the USA, they are reportable to the Canada Revenue Agency (CRA).

Accounts Held in Canada

If you are anyone with a USA Mailing Address… or a USA telephone number… on accounts held in Canada, they are reportable to the IRS. If you have a Canadian account and were born in the USA or have a USA phone number on the account, it is reportable to the USA if the account meets certain other criteria.

If you are an American, read FACTA Rules for Americans

If you are Canadian, read FACTA Rules for Canadians

Your SSN or SIN

Your Social Security Number (SSN, in the USA), or your Social Insurance Number (SIN, in Canada) will be collected by banks, insurance companies and financial institutions if they don’t already have them. FATCA requires that they have a process in place by January 2017 to provide this information.  

The U.S. and Eritrea are the only countries in the world that tax on the basis of citizenship rather than residency. Most other countries, including Canada, tax based on residency rather than citizenship. But the U.S. tax system treats all citizens as U.S. residents for tax purposes no matter where they live, and requires them to file taxes with the U.S. government. Usually they are given credit for the taxes paid in their country of residency, so many U.S. persons living in Canada end up paying no U.S. tax at all, but they are still required to file U.S. tax returns every year.

Disclaimer:  FATCA is complex. Do not rely on this information for decision making. You are advised to consult with a tax specialist or financial advisor familiar with jurisdictional tax issues.

Contact a Canadian financial advisor for free advice

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