Glossary – Canada (English) – Retail Banking and Wealth Management

In order to comply with Canadian legislation relating to the Common Reporting Standard (“CRS”) and Foreign Account Tax Compliance Act (“FATCA”), HSBC must request information about account holders’ Tax Residency and U.S. Person status. If you open a new bank account, invest in new financial products or change your circumstances in some way, we will ask you to certify a number of details about yourself. This process is called “self-certification”. The Individual Tax Residency Self-Certification Form is an HSBC document that is provided by the account holder to certify their Tax Residency and U.S. Person status.

An IGA is an agreement between the U.S. and specific countries to build FATCA compliance into the country’s legal framework so that the country can implement FATCA. In Canada, the IGA and related Canadian legislation and guidelines require financial institutions to report accounts held by U.S. Persons to the CRA.

The IRS is the United States government agency responsible for tax collection and tax law enforcement.

The CRA administers tax laws for the Government of Canada and for most provinces and territories.

For individuals who are resident in Canada for tax purposes, the TIN is generally the individual’s Social Insurance Number. Outside Canada, a TIN is generally a tax number used in that jurisdiction to identify an individual or entity (or a functional equivalent in the absence of a TIN)

The term "U.S. Person" means:

1. a U.S. citizen or resident individual,
2. a partnership or corporation organized in the United States or under the laws of the United States or any State thereof,
3. a trust if
1. a court within the United States would have authority under applicable law to render orders or judgments concerning substantially all issues regarding administration of the trust, and
2. one or more U.S. persons have the authority to control all substantial decisions of the trust, or
4. an estate of a decedent that is a citizen or resident of the United States

Generally, Passive entities are defined under FATCA as entities, organizations or companies that are in receipt of passive income or hold passive assets and do not fall under any other FATCA classification. These entities do not carry on the business of a financial institution.

HSBC needs to understand the ownership of such entities to determine whether reporting under FATCA applies in respect of owners of Passive NFFE that are U.S. Controlling persons.

The (CRS) is a worldwide information-gathering and reporting requirement for financial institutions to help fight against tax evasion and protect the integrity of the tax system. Under Canadian legislation to implement the CRS, financial institutions are required to identify and report account holders who are “tax resident” outside Canada and the U.S. This information may then be shared by the CRA with different countries’ tax authorities.

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 "United States Citizen" means:

• An individual born in the United States
• An individual whose parent is a US citizen
• A former alien who has been naturalized as a US citizen
• An individual born in Puerto Rico
• An individual born in Guam, or
• An individual born in the US Virgin Islands

In certain circumstances, a 30% withholding tax applies under FATCA on US source income in respect of non-compliant financial institutions.