U.S. Foreign Account Tax Compliance Act (FATCA): Potential Compliance Issues For Canadian Life Insurers And Latest Updates On Implementation Process

What is FATCA?

FATCA describes certain provisions of the United States Hiring Incentives to Restore Employment (HIRE) Act, which was signed into law by President Obama in March 2010. The HIRE Act includes revised portions of the Foreign Account Tax Compliance Act of 2009, a bill first introduced in the U.S. House and Senate in October 2009 but never enacted, and adds new sections 1471-1474 to the United States Internal Revenue Code. In general terms, FATCA is a revenue-generating measure that targets American offshore tax evasion by broadening required disclosure and reporting by foreign financial institutions (FFIs) in respect of U.S. accountholders. This article provides an overview of FATCA and the very significant compliance issues it presents for Canadian life insurers, together with an update on the process of implementation of FATCA.