Section 274

Obligation to comply independent of FATCA

6.1 Reporting financial institutions must comply with verification and due diligence procedures under Part XIX in connection with the accounts they maintain. This is the case regardless of whether the financial institution is subject to other regulatory requirements, such as having to complete due diligence related to AML/KYC and Part XVIII. The required procedures under Part XIX are, in many respects, determined by whether a particular account is:

• an individual or an entity account;
• a preexisting or a new account; or
• a lower value or a high value preexisting individual account.

Overview of collection and search obligations

6.2 Due diligence is required to identify reportable accounts. Financial institutions are required to take certain actions, such as collecting information and/or reviewing information in their possession to determine whether to treat an account as a reportable account. These requirements result in a financial institution having to:

• search for certain indicia linked to an account holder (see paragraph 7.24 for a list of indicia); and/or
• request that account holders self-certify their residence status.

Responsibility of the account holder to determine residence

6.5 A financial institution can be asked to clarify the rules for determining the residence status of a reportable person. Depending on the situation, these rules can be complex, and financial institutions are not expected to provide information on all aspects of tax residency. If an account holder asks for such a clarification, a financial institution can refer the account holder to seek professional tax advice or to review information available at the CRA and the OECD. It is the responsibility of account holders to determine where they are resident for tax purposes.

FI can rely on accessible documentation collected and maintained by an agent, e.g., fund advisor

6.8 A financial institution can rely on documentation collected by an agent (including an insurance advisor, a banking consultant, a fund advisor for mutual funds, pooled funds, hedge funds, or a private equity group) of the financial institution. The agent can retain the documentation as part of an information system maintained for one or more financial institutions provided that, under the system, any financial institution on behalf of which the agent retains documentation can easily access the data regarding the nature of the documentation, the information contained in the documentation (including a copy of the documentation itself) and its validity, and must allow such financial institution to easily transmit data, either directly into an electronic system or by providing such information to the agent, regarding any facts of which it becomes aware that can affect the reliability of the documentation. Where the agent retains the documentation as part of an information system maintained on behalf of multiple financial institutions, an account will only be a new account to the extent that it is a new account to the agent as the status of a financial account as a new account is determined by reference to whether it is new to the agent (for example, a fund manager), and not by whether it is new to the financial institution (for example, a fund managed by the fund manager).

6.9 … The agent must have a system in effect to ensure that any information it receives regarding facts that affect the reliability of the documentation or the status assigned to the customer are provided to all financial institutions for which the agent retains the documentation. …

Application to fund managers

6.10 …Under the [above] provisions … an investment fund can rely on documentation collected by a fund manager as agent for the fund. Further, a fund manager can retain the documentation as part of an information system maintained for multiple reporting financial institutions as long as all the reporting financial institutions for which the fund manager retains the documentation can easily access the data and information related to the documentation, update the data for facts that can affect the reliability of the documentation and establish how and when data has been transmitted to the fund manager. This allows a fund manager to undertake the due diligence procedures for the customer and use this information for all financial accounts maintained for the customer by the funds that the fund manager manages. …

No requirement to use the CRA self-certification forms

6.22 Combined self-certification forms have also been developed by the CRA to assist financial institutions that are required to comply with both Part XVIII and Part XIX:

• RC518, Declaration of Tax Residence for Individuals – Part XVIII and Part XIX of the Income Tax Act
• RC519, Declaration of Tax Residence for Entities – Part XVIII and Part XIX of the Income Tax Act

6.23 While these forms are not prescribed (i.e., they are not required to be used), financial institutions are encouraged to use them. Financial institutions that develop their own forms must ensure that their forms appropriately capture all the proper attestations and information required by Part XIX and Part XVIII.