The U.S. Foreign Account Tax Compliance Act (FATCA)

FATCA Objective

The Foreign Account Tax Com pliance Act (FATCA) is a global regulatory framework, introduced by the United States (U.S.). The intent of FATCA is to discourage tax evasion by U.S. tax payers who have placed assets in accounts outside the U.S. – either directly or indirectly through foreign entities such as trusts and corporations. Under FATCA, all entities regardless of their country of incorporation or jurisdiction must be classified according to specified criteria outlined in the regulations.

The provisions of FATCA come into effect on July 1, 2014, which will require CIBC to document and classify all entity accounts in order to report accounts owned or controlled by U.S. taxpayers.


Intergovernmental Agreement (Canada and the U.S.)

Account information is intended to be reported directly to the U.S. Internal Revenue Service (IRS), however, to address privacy and regulatory concerns related to FATCA, Canada and the U.S. have signed an intergovernmental agreement under the longstanding Canada-U.S. Tax Convention. FATCA partnering countries will implement laws to require financial institutions to collect and report the information required by FATCA directly to the local tax authority. Under the Canadian legislation enacted in furtherance of the intergovernmental agreement, Canadian financial institutions are required to provide information relating to U.S. reportable accounts and payments made to non-participating foreign financial institutions (NPFFIs). In Canada, this means that the information will be reported to the Canada Revenue Agency (CRA), instead of directly to the IRS. CIBC and its subsidiaries will meet all FATCA obligations, in accordance with local law.


What is the impact to our clients?

FATCA applies to all CIBC Capital Markets clients, as many are required to register with the IRS and all must be classified for FATCA purposes. A client’s documentation obligations are primarily driven by its classification as a U.S. withholding agent (USWA), foreign financial institution (FFI) or non-financial foreign entity (NFFE). For more information on registration for FATCA on the U.S. Internal Revenue Service (IRS) portal and list of entity classifications, refer to the IRS website.


Starting July 1st, 2014, CIBC Capital Markets will request that all entity clients complete or provide either a W-8 form for non-U.S. entities or W-9 form for U.S. entities.


The privacy of our clients is of the utmost importance to CIBC. We are committed to keeping clients' corporate information, confidential, secure, and private. In complying with FATCA, we will adhere to applicable privacy laws while maintaining high standards of client privacy and client service at all times. The information presented above is provided only as an overview for informational purposes and is not intended to serve as legal or tax advice. For specific FATCA-related questions, contact the IRS or your professional tax advisor.


What is the impact to the CIBC Capital Markets business?

CIBC intends to be a participating foreign financial institution (PFFI) by registering with the IRS and complying with certain obligations set forth in the Regulations; as such Capital Markets will be requesting W-8/W-9 IRS tax forms from our entity clients in order to meet FATCA account due diligence, withholding and reporting requirements.

Account Due Diligence Capital Markets will:

  • Collect and maintain certain documentation for all entity client accounts
  • Amend onboarding processes to capture the FATCA classification of new account holders
  • Conduct a one-time remediation to collect documentation for FATCA classification of pre-existing account holders

Withholding –Capital Markets will:

  • Identify payments derived from sources within the United States that are considered withholdable under FATCA
  • Apply 30% tax on withholdable payments made to entity clients that are NPFFIs and do not qualify for a FATCA withholding exemption

Reporting –Capital Markets will:

  • Report annually on select information for U.S. accounts and payments to non-participating FFIs to the CRA starting in 2015

What are the implications of non-compliance?

As a participating FFI, CIBC will be required under FATCA to withhold 30% on certain payments made to NPFFIs. To avoid being withheld upon, clients must comply with the measures outlined by the IRS and provide the necessary information to CIBC upon request.