August 23, 2023: An Important notice from the Canada Revenue Agency
Interim treatment of NEW First Home Savings Accounts (FHSA) under Part XVIII
The FHSAs are under consideration for being added to the list of the excluded accounts described in Annex II of the Agreement. These accounts do not need to be reviewed, identified or reported at this time.
What does this notice mean for U.S. citizens living in Canada?
On August 23, 2023 the Canada Revenue Agency released its latest guidelines for how financial institutions should interpret the Canada/US FATCA IGA. The guidelines are updated annually to reflect changes (which include) evolving financial products. The Canadian “FHSA” “FHSA” (First Home Savings Account) was introduced in 2023. My recommendation is that U.S. citizens living in Canada should have an FHSA.
The good news is that the FHSA accounts will join other accounts under Annex II which are NOT required to be reported BY FINANCIAL INSTITUTIONS under the FATCA IGAs! The FHSA should be reported by individuals on IRS Form 8938 with their tax returns when the Form 8938 is required!
In other words, U.S. citizens living in Canada can expect that FHSA accounts will NOT be reported to the Canada Revenue Agency and then the IRS.
The text from the guidelines – Section 5.6 (go directly to the bottom) – includes:
Products that are not financial accounts
5.6 The definition of financial account does not include any account, product, or arrangement identified as excluded from the definition of financial account in Annex II of the Agreement. The following accounts are listed in Annex II and are not to be treated as financial accounts:
– registered retirement savings plans (RRSPs);
– registered retirement income funds (RRIFs);
– pooled registered pension plans (PRPPs);
– registered pension plans (RPPs);
– tax-free savings accounts (TFSAs);
– registered disability savings plans (RDSPs);
– registered education savings plans (RESPs);
– deferred profit-sharing plans (DPSPs);
– AgriInvest accounts – as defined under “NISA Fund No. 2” and “net income stabilization account” in subsection 248(1) of the ITA, including Quebec’s Agri-Quebec Program as prescribed in section 5503 of the ITR;
– eligible funeral arrangements;
– escrow accounts – accounts maintained in Canada established in connection with any of the following:
– a court order or judgment;
– a sale, exchange, or lease of real or immovable property or of personal or movable property, provided that the account satisfies the following requirements:
– – the account is funded solely with a down payment, earnest money, deposit in an amount appropriate to secure an obligation directly related to the transaction, or a similar payment, or is funded with a financial asset that is deposited into the account in connection with the sale, exchange, or lease of the property;
–the account is established and used solely to secure the obligation of the purchaser to pay the purchase price for the property, the seller to pay any contingent liability, or the lessor or lessee to pay any amount owing for any damages relating to the leased property as agreed under the lease;
— the assets of the account, including the income earned thereon, will be paid or otherwise distributed for the benefit of the purchaser, the seller, the lessor, or the lessee (including to satisfy such person’s obligation) when the property is sold, exchanged, or surrendered, or when the lease terminates;
— the account is not a margin or similar account established in connection with a sale or exchange of a financial asset; and
— the account is not associated with a credit card account;
— an obligation of a financial institution servicing a loan secured by real or immovable property to set aside a portion of a payment solely to facilitate the payment of taxes or insurance related to the real or immovable property at a later time; or
— an obligation of a financial institution solely to facilitate the payment of taxes at a later time;
— an account maintained in Canada and excluded from the definition of financial account under an agreement between the U.S. and another partner jurisdiction to facilitate the implementation of FATCA, provided that such account is subject to the same requirements and oversight under the laws of such other partner jurisdiction as it would be if it were established in that partner jurisdiction and maintained by a partner jurisdiction financial institution in that partner jurisdiction.
Important notice
Interim treatment of NEW First Home Savings Accounts (FHSA) under Part XVIII
The FHSAs are under consideration for being added to the list of the excluded accounts described in Annex II of the Agreement. These accounts do not need to be reviewed, identified or reported at this time.
Have a question? Contact John Richardson, Citizenship Solutions.
The Reality of U.S. Citizenship Abroad
My name is John Richardson. I am a Toronto based lawyer – member of the Bar of Ontario. This means that, any counselling session you have with me will be governed by the rules of “lawyer client” privilege. This means that:
“What’s said in my office, stays in my office.”
The U.S. imposes complex rules and life restrictions on its citizens wherever they live. These restrictions are becoming more and more difficult for those U.S. citizens who choose to live outside the United States.
FATCA is the mechanism to enforce those “complex rules and life restrictions” on Americans abroad. As a result, many U.S. citizens abroad are renouncing their U.S. citizenship. Although this is very sad. It is also the reality.
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