Frequently asked questions about FATCA
Commercial Banking – Canada
What is FATCA?
FATCA stands for the Foreign Account Tax Compliance Act. It is a new piece of legislation to help counter tax evasion in the US.
Introduced by the United States Department of Treasury (Treasury) and the US Internal Revenue Service (IRS), the purpose of FATCA is to encourage better tax compliance by preventing US persons (see glossary) from using banks and other financial institutions to avoid US taxation on their income and assets.
A significant number of countries worldwide are expected to sign inter-governmental agreements (IGAs) relating to FATCA compliance with the United States government. These IGAs will result in the FATCA legislation becoming part of these countries’ local laws (please refer to the glossary for IGA definition).
Canada has entered into an IGA with the US and introduced legislation to make the IGA part of the laws of Canada. The Canada–United States Enhanced Tax Information Exchange Agreement Implementation Act is legislation that has been introduced by Canada in order to comply with FATCA.
What is the impact of FATCA?
On an annual basis, banks and other financial institutions will be required to report information on financial accounts held directly or indirectly by US persons.
HSBC is committed to being fully FATCA compliant in all countries and jurisdictions where we operate. We will therefore be reviewing our existing customer base to confirm the FATCA statuses of our customers and where necessary we may have to contact our customers for further information and documentation.
How do I know if I am affected?
FATCA legislation will affect both personal and commercial banking customers who are treated as a US person (see glossary) for US tax purposes. The FATCA legislation will also affect certain types of businesses with US owners.
The term ‘US person’ includes the following (but is not limited to):
- a citizen of the US, including an individual born in the US but resident in another country (who has not given up their US citizenship)
- a person residing in the US, including US green card holders
- certain persons who spend a significant number of days in the US each year
- US corporations, US partnerships, US estates and US trusts.
For more information regarding FATCA, please visit the IRS website: External site: Link opens in an overlay or the Canada Revenue Agency website: External site: Link opens in an overlay, or contact a tax professional.
When will the FATCA legislation become effective?
The FATCA legislation became effective on 1 July 2014.
HSBC is committed to being fully FATCA compliant in all countries and jurisdictions where we operate, in accordance with the legislative timeline.
Is HSBC the only bank to be affected by FATCA?
No. Generally, all banks and other financial institutions are affected by FATCA, however their approach to adopting FATCA may differ. HSBC is committed to being fully FATCA compliant in all countries and jurisdictions where we operate.
What does HSBC have to do to comply with FATCA?
To comply with FATCA, HSBC will:
- conduct a review of new and existing customers to identify those that are reportable under FATCA
- classify commercial banking customers according to the FATCA legislation (for example, as US persons, foreign financial institutions or non-financial foreign entities)
- report information to the Canada Revenue Agency (CRA) on all accounts held directly or indirectly by US persons.
In addition, HSBC may also need to report information about customers who do not provide the required documentation to us.
In certain circumstances when doing business with non-compliant financial institutions, HSBC may be required to apply 30% US withholding tax on certain types of US income paid to such customers.
Please refer to the glossary for the definitions of US persons, foreign financial institutions, non-financial foreign entities and withholding tax.
Is FATCA applicable to personal or business customers?
FATCA legislation will impact both personal and commercial banking customers who hold an account, policy or agreement with HSBC.
Is this the only time I will be contacted for this information?
We will try to limit the number of times we request this information from you. However, if you have multiple accounts with different members of the HSBC Group then you will receive more than one request for FATCA documentation.
In addition, any change in your account information may require you to supply alternative documentation to that currently held.
Am I only affected if I am a US company?
No. The impacts of FATCA are wider than just US companies. HSBC will be reaching out to many commercial banking customers globally to determine their status under FATCA. The aim of this exercise is to identify customers which are reportable under FATCA. We will be communicating with customers who need to take further action.
What do I need to do as a commercial banking customer?
In order to establish your tax status under FATCA, we may need you to provide additional information or documentation. This documentation could be an HSBC declaration or a US tax form from the IRS. We will be communicating with affected customers that need to complete these forms, detailing the required completion date.
Does FATCA replace existing US tax rules that I already follow?
FATCA does not replace the existing US tax regimes, it may however add additional requirements and complexity to the existing US tax rules you may already follow. Should you need further advice on your tax status or FATCA classification, you should contact a professional tax advisor.
Why has my other bank asked for different documentation than HSBC?
The way in which banks and other financial institutions collect information from their customers in order to confirm their tax status under FATCA may vary. This may mean that in some instances you are asked for different documentation from HSBC than from another bank.
HSBC cannot offer advice on your FATCA tax status or classification. If you need further support you should visit the IRS website: External site: Link opens in an overlay or the Canada Revenue Agency website: External site: Link opens in an overlay, or contact a professional tax advisor.
How frequently will I have to provide information for FATCA purposes?
FATCA is an ongoing process. If your account information changes, we may be required to contact you to obtain additional information or documentation so that we are able to update your account classification under FATCA.
Under what circumstances would HSBC need to report information about my account to the IRS or local tax authority?
The purpose of FATCA is to prevent US persons (see glossary) from using banks and other financial institutions to avoid US taxation on their global income and assets. In Canada, HSBC will therefore report information to the CRA on all accounts held directly or indirectly by US persons. In addition, HSBC may also need to report information about customers who do not provide the required documentation to us.
What information will HSBC report to the CRA?
The information reported to the CRA will depend on the FATCA classification of the customer. This information will typically be of a personal nature in relation to the substantial US owners of a business (for example, name, address, US taxpayer identification number), and of a financial nature (for example, account number, account balance, amounts paid into the account). We will be communicating with the affected customers in detail on these requirements.
What types of information and/or documents can I expect to supply to HSBC?
We will be communicating with the affected customers to provide full details of the information and documentation HSBC needs for FATCA purposes. Documents may include US tax forms (also referred to as withholding certificates or W forms) or self-declarations of FATCA status.
Please note that you may receive more than one request for documentation if you have multiple relationships with different members of the HSBC Group. It is important that you respond to all requests, even if you believe you have already supplied the requested information.
Please note that HSBC is unable to offer tax advice. For tax related questions, please contact a professional tax advisor or refer to the IRS website: External site: Link opens in an overlay or the Canada Revenue Agency website: External site: Link opens in an overlay.
What kind of documentation should a Passive NFFE complete?
These entities can typically use the Declaration of Tax Residence for Entities (382KB, PDF): Download PDF: Link opens in a new window to document non-US tax status.
If using U.S. tax documentation (W-8BEN-E) to document a Passive NFFE, please note that this form requires information on Substantial U.S. Owners whereas IGA countries such as Canada, require information on U.S. Controlling Persons. For FATCA purposes, if a W-8BEN-E is used to document a Passive NFFE, please identify US Controlling Persons instead of Substantial U.S. Owners.
What kind of documentation should a Trust complete?
In Canada, formal Trusts are generally considered either a Passive NFFE or in rare cases where the Trust is involved in an active business, an Active NFFE. The documentation that should be completed for a Trust would be the same as Passive NFFEs (above).
HSBC cannot offer any tax advice relating to Trusts, and we recommend customers contact a professional tax advisor to discuss their personal tax situation if needed.
Will HSBC supply me with all the forms I need to complete?
Yes. If HSBC requires further information from you, we will either send you the relevant forms or direct you to a website where you can download them.
When do I have to provide the requested information and/or documentation for FATCA?
In general, customers should supply the requested documentation and information by the date indicated within the communication.
What will HSBC do if I do not provide the information required under FATCA?
HSBC is committed to being fully FATCA compliant in all countries and jurisdictions where we operate.
The HSBC Group may not open new accounts or offer additional products and services to customers who choose not to comply with HSBC’s requests for documentation to establish a customer’s status under FATCA.
In addition, under Canadian regulations relating to FATCA, we will have to report your accounts to the CRA.
(Page last updated September 2018)