Glossary of FATCA terms
Commercial Banking – Canada
The CRA administers tax laws for the government of Canada and for most provinces and territories.
FFI is the abbreviation for a foreign financial institution. It refers to a non-US financial institution. The FATCA legislation contains an extensive definition of FFI and includes entities such as banks, custodian institutions, investment funds and certain types of insurance companies.
Withholding certificates, also referred to as W forms, are US Internal Revenue Service (IRS) tax forms.
The W-9 form is a ‘request for taxpayer identification number and certification’. This US tax form can be provided by an account holder to confirm and certify their US status. The W-8 series forms can be used by foreign persons (including corporations) to certify their non-US status. The forms establish that one is a non-resident alien or foreign corporation, to avoid or reduce tax withholding from US source income. These forms will permit a non-US customer to self-certify their status under FATCA.
At HSBC Bank Canada, we are using the Declaration of Tax Residence for Entities (382KB, PDF): Download PDF: Link opens in a new window form with commercial account holders. It is a CRA designed form for the dual purposes to certify both the customer’s FATCA and CRS status. For more information on CRS, please visit the HSBC Common Reporting Standard site.
An IGA is an agreement between the US and specific countries to build FATCA compliance into the country’s legal framework so that the country can implement FATCA. An IGA, and related domestic legislation and guidelines, will require financial institutions to provide the information on US accounts which they hold either:
- directly to the IRS
- or to the local tax authority of the resident country or jurisdiction (such as the Canada Revenue Agency).
The IRS is the United States government agency responsible for tax collection and tax law enforcement.
A non-financial foreign entity (NFFE) is a non-US incorporated/established entity that does not meet the definition of an FFI and includes:
- listed or privately held operating or trading businesses
- professional service firms
- certain entities with a passive trade (ie, not an operating or trading business)
- charitable organizations.
A US IRS-specific term: tax identification number.
For an individual this would be their US social security number, for an entity their employer identification number.
The term ‘specified US person’ means any US person other than:
- a corporation the stock of which is regularly traded on one or more established securities markets for a calendar year;
- any corporation which is a member of the same expanded affiliated group as a corporation the stock of which is regularly traded on one or more established securities markets for the calendar year;
- any organization exempt from taxation under US federal tax law or an individual retirement plan;
- the United States or any wholly owned agency or instrumentality thereof;
- any state, the District of Columbia, any US territory, any political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing;
- any bank incorporated and doing business under the laws of the United States (including laws relating to the District of Columbia) or of any state thereof;
- any real estate investment trust;
- any regulated investment company, or any entity registered with the Securities Exchange Commission under the Investment Company Act of 1940;
- any common trust fund;
- any trust that is exempt from tax or is deemed a charitable trust;
- a dealer in securities, commodities, or derivative financial instruments that is registered as such under the laws of the United States or any state;
- a broker;
- any tax exempt trust under a tax exempt or public school annuity plan or governmental plan.
The term ‘US person’ means:
- a citizen or resident of the United States
- a partnership created or organized in the United States or under the law of the United States or of any state, or the District of Columbia
- a corporation created or organized in the United States or under the law of the United States or of any state, or the District of Columbia
- any estate or trust other than a foreign estate or foreign trust (see Internal Revenue Code section 7701(a)(31) for the definition of a foreign estate and a foreign trust)
- a person that meets the substantial presence test
- any other person that is not a foreign person.
The term "Controlling Person" means the natural person who exercises control over the Entity. For non-trust Entities, whether an individual is a "Controlling Person" is generally determined by reference to a 25% level of ownership. In the case of a trust, the term "Controlling Person" means the settlor (grantor), the trustees, the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust and in the case of a legal arrangement other than a trust, such term means persons in equivalent or similar positions.
The term ‘US citizen’ means:
- an individual born in the United States
- an individual who has a parent who is a US citizen
- a former alien who has been naturalised as a US citizen
- an individual born in Puerto Rico
- an individual born in Guam
- an individual born in the US Virgin Islands.
In certain circumstances, a 30% withholding tax applies under FATCA on US income in respect of non-compliant financial institutions.
(Page last updated September 2018)