I just got this letter from my bank telling me that I’ll need to complete some US tax form called a W8BEN-E? Do you know anything about this? Why would I need to file these as a Canadian corporation? Also what is FATCA?
We have seen a lot of these letters from banks requesting that their clients complete the W8BEN-E forms or other similar types of requests. The reason for this relates to an intergovernmental agreement (IGA) that was signed and entered into between the Canadian and U.S. governments in 2014. Better known as FATCA, which stands for Foreign Account Tax Compliance Act, the agreement requires Canadian financial institutions to report certain account information relating to US persons or reportable accounts. For non- US persons, such as your business, you generally will need to complete form W8-BEN-E which is certifying that you are not a US person. There are a few reasons why banks are sending these out to Canadian corporate clients. The first is that their is potential of them having US shareholders, them conducting business in the US or some other reason that could make them a reportable entity under FATCA. The other reason, which is more applicable to your company, is that because you own US securities as a foreign person, you would typically be subject to 30% withholding on US dividends, for example. But by filing his form and certifying that you are a non-US person (and a Canadian), article X of the US-Canada tax treaty allows for a reduced withholding rate of 15% on these US dividends.
FATCA is quite complex; however, in your situation, we should just need to file the W8BEN-E and move forward as usual.
Happy New Year
*Please note that the W8BEN-E has recently changed and become more complex due to FATCA and as a result, it’s always recommended that you contact a cross-border tax specialist when completing and filing forms with the IRS