Common reporting standard

Since July 1, 2017, the Common Reporting Standard requires financial institutions to gather and disclose certain information to the Canada Revenue Agency (CRA) with respect to reportable accounts for which the account holder has tax residency in a jurisdiction other than Canada or the United States.

The guidelines found in this international standard have been included in the Income Tax Act (ITA) and are intended to prevent tax evasion. By applying this standard, Canada joins forces with approximately one hundred tax authorities worldwide committed to recording reportable accounts and automatically exchanging information regarding financial accounts.

This standard, drawn up by the Organisation for Economic Co-operation and Development (OECD), has been approved by the G20 Ministers of Finance.

What does "tax residency" mean?

Tax residency is a status that would subject a person to taxes in a given jurisdiction.

A common misconception is that the civic address of an individual or an entity determines their country of tax residency. However, residency for tax purposes is based on a complex set of criteria. In fact, an individual or an entity may have tax residency in more than one country.

National Bank must ask all individuals, businesses and other entities to declare their country(ies) of residence for tax purposes when opening an account, whether it is a bank account, an investment account or an insurance policy. National Bank may ask you to provide certain documents and information to comply with CRA requirements.

For legal reasons, financial institutions and their clients must disclose the required information set out in the new standard. Clients who refuse to comply may be subject to penalties under the law and may have their account reported to the CRA.

Any change in a client's residency status for tax purposes must also be reported to National Bank within 30 to 90 days, depending on the type of documentation provided.

National Bank gathers all of the required information to comply with legislation on identifying reportable accounts.

The Bank will send this information to the CRA through an annual reporting.

The CRA will then share this information with the tax authority of the country where the account holder (whether an individual, business or other entity) is a tax resident.

This information is only exchanged between tax authorities of jurisdictions that signed the multilateral competent authority agreement for the automatic exchange of information.

What is a "reportable account"?

A "reportable account" is any financial account held by an individual, a business or most entities with tax residency within a jurisdiction subject to the new standard.

These include:

• Bank accounts
• Guaranteed investment certificate (GIC)
• Personal lines of credit accounts
• Mortgage lines of credit
• Mutual funds
• Some life insurance policies
• Securities brokerage accounts
• Custodial accounts
• Annuity contracts (including segregated fund contracts)

Not included:

• Most plans registered with the CRA (including RRSPs, RRIFs, RESPs, RPPs, PRPPs and RDSPs)
• TFSAs, estate and escrow accounts.