Canadian Court Notes Decision Against FATCA Agreement Challenge

Ottawa, September 16, 2015 -- A decision was issued today by the Honourable Luc Martineau of the Federal Court in file T-1736-14:

Under the Intergovernmental Agreement signed between Canada and the United States [IGA], which facilitates the compliance of Canadian financial institutions with the US Foreign Account Tax Compliance Act [FATCA], Canada commits to requiring certain Canadian financial institutions to apply specific procedures to identify and disclose information relating to reportable accounts. If Canada meets its obligations in this regard, and if the reporting Canadian financial institutions comply with certain requirements, the US will treat those institutions as complying with FATCA. Financial institutions that do not comply with FATCA reporting requirements will be subject to a thirty percent withholding tax. Pursuant to the Canada-United States Enhanced Tax Information Exchange Agreement Implementation Act, and sections 263 to 269 of the ITA [the impugned provisions], the exchange scheme provided for in the IGA has force of law in Canada.

The Court concludes that the collection and automatic disclosure of personal and accountholder information relating to US reportable accounts from Canadian financial institutions is legally authorized by the impugned provisions, is not inconsistent with the provisions of the Convention between the United States and Canada with Respect to Taxes on Income and Capital, and does not otherwise violate section 241 of the ITA, as alleged by the two plaintiffs who possess dual citizenship and have never worked or filed taxes in the US. The declaratory and injunctive relief requested by the plaintiffs in their motion for summary judgment is denied, without prejudice to their right to pursue their claim that the impugned provisions are ultra vires or inoperative because they are unconstitutional or otherwise unjustifiably infringe their Charter rights.

The decision is available in English only, as delay of its issuance would be prejudicial to the public interest. A French language summary of the conclusions is available. A certified translation will be provided at the earliest possible time.

A copy of the decision can be obtained via the Web site of the Federal Court: http://cas-ncr-nter03.cas-satj.gc.ca/portal/page/portal/fc_cf_en/Index