6 March 2012 Ministerial Correspondence 2011-0431621M4 - FBAR Filing Requirements

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: The impact on U.S.-Canadian citizens, residing in Canada, in respect of U.S. income tax and FBAR reporting requirements.

Position: General comments provided.

Reasons: These requirements are a matter of U.S. domestic policy.

March 6, 2012

XXXXXXXXXX

Dear XXXXXXXXXX :

Thank you for your correspondence regarding income tax and reporting requirements imposed by the U.S. government. I apologize for the delay in replying.

You mention that the U.S. filing requirements, such as the requirement to file the Report of Foreign Bank and Financial Accounts (FBAR), are issues that directly affect large numbers of dual citizens of Canada and the United States who, like you, have only distant links to the United States and limited knowledge of their reporting obligations to the Internal Revenue Service (IRS).

I assure you that the Government of Canada shares the concerns of Canadians regarding this situation and raised these concerns with the U.S. government. However, Canada respects the sovereign right of the United States to tax its citizens and residents and to require information that it considers necessary to verify the amount of tax owed. Canada also respects the U.S. government's authority to charge penalties if an individual does not comply and understands that the U.S. government's requirements for filing annual tax returns and the FBAR have been in place for many years. As a U.S. citizen, you can address your concerns to the U.S. government, as these reporting requirements are a matter of U.S. domestic policy.

The Canada-United States tax treaty also recognizes the right of the U.S. government to tax its citizens and resident aliens. When both countries have the right to tax the income of a Canadian resident, the resident can claim a foreign tax credit as relief from double taxation. The treaty has a provision that requires the Canada Revenue Agency (CRA) to assist in collecting certain U.S. taxes and penalties. Nevertheless, the provision does not include the collection of penalties related to the FBAR. In addition, the CRA will not collect any debts owing to the IRS by individuals who were Canadian citizens even if they were also U.S. citizens when their debts arose.

The IRS continues to provide information on the filing responsibilities for U.S. citizens or dual citizens residing outside of the United States, including a fact sheet issued in December 2011, available at www.irs.gov/newsroom/article/0,,id=250788,00.html. In the circumstances described in this fact sheet, the IRS may reduce the penalties for failing to meet income tax and FBAR requirements in the case of dual citizens of Canada and the United States residing in Canada.

You can find more details on FBAR filing requirements at www.irs.gov/businesses/small/article/0,,id=210244,00.html.

I appreciate the opportunity to address your concerns and trust that the information I have provided is helpful.

Yours sincerely,

Gail Shea, P.C., M.P.
Minister of National Revenue

Philip Thompson
613-957-2113
2011-043162