The United States and Canada announced on February 5, 2014, that they have signed an Intergovernmental Agreement (IGA) to improve international tax compliance and to implement the US Foreign Account Tax Compliance Act (FATCA). The IGA must be ratified under Canadian laws before it comes into force. This implementing legislation was released concurrently with the IGA and is expected to be introduced in Parliament over the coming months.
The IGA is a Model I Reciprocal Agreement, meaning that financial institutions in each country will report specific information to their own governments, which will then automatically exchange that information annually on a reciprocal basis.
The IGA builds on Canada's commitment to improve international tax compliance and mutual assistance in tax matters through the automatic exchange of information, as set out in the 1980 Canada-US Income Tax Convention (the Convention). Through the IGA, the United States and Canada will cooperate to reduce tax evasion and build a stronger, more stable, and more accountable, global financial system.
The IGA, in line with the OECD's efforts to strengthen cooperation in tax matters, strives to effectively combat offshore tax evasion.
By signing the IGA, Canada has become one of the latest countries to enter into an intergovernmental agreement with the United States.
To date, the US has concluded IGAs with 22 countries including the largest European Union countries and, most recently, countries traditionally considered to be offshore financial centres. At least 12 more IGAs are pending, demonstrating the growing global momentum behind FATCA and strong support from the world's most important economies.